Russia's 2009 oil output hits new high after 2008 collapse

Russian oil output grew by around 1.5 % in 2009 to a new post-Soviet high, putting the world's largest crude producer on an upward trend again after a 2008 blip, when production fell for the first time in a decade.
Energy ministry data showed the country extracted 9.925 mm bpd last year, a record since the collapse of the Soviet Union, up from 9.78 mm bpd in 2008 and 9.87 mm bpd in 2007.

The resumption in growth came as a surprise. At the end of 2008 analysts had largely expected the decline to continue due to a lack of new greenfield developments and a sharp drop in crude prices. But as crude prices recovered and oil majors such as Rosneft sped up the development of East Siberian fields to fill Russia's first pipeline to the Pacific, output outpaced expectations and growth is expected to continue.
Analysts now say Russia will produce 1.1 % more oil in 2010 as fields in East Siberia pump enough crude to mask a decline in mature deposits further west. Russia is currently producing more oil than traditional world leader Saudi Arabia, which has reined in output to comply with OPEC cuts.

The recovery in oil prices has allowed non-OPEC member Russia to grab increased market share and revive drilling activity while reducing costs after a ruble devaluation versus other currencies at the beginning of 2009. Russian pipeline oil exports stood at 4.28 mm bpd in December, bringing the annual average exports in 2009 to 4.24 mm bpd, up from 4.19 mm bpd in 2008 but still down from 4.43 mm bpd in 2007.
Traders expect exports to remain largely flat over the coming years as Russia modernises its refineries to process more crude at home and export more refined products. One trend that will become evident over the next year will be increased supplies of crude via the new Kozmino oil terminal on the Pacific as Russia is keen to exploit Asian markets and reduce its supplies to Europe.

While the government is unlikely to further slash taxes for the oil industry, which together with gas brings over 60 %of budget revenues, it will also likely refrain from raising the tax burden on the industry, which allowed Russia to weather last year's financial storm.
Russia will become increasingly dependant on East Siberian deposits in future and as a sign of their growing importance, the government set a zero export duty for 13 fields in the region from Dec. 1. JP Morgan analysts forecast East Siberia would account for 2.3 % of Russia's crude output in 2010, up from about 1.1 % in 2009.

Rosneft Chief Executive Sergei Bogdanchikov forecasts his company's own output will rise between 4 % and 5 % in 2010.
The long-term challenge for Russia, analysts say, will be to replace depleted reserves in West Siberia, Russia's oil Eldorado for the past three decades.