Output Still Climbing While Oil Exports Fall

Russian oil output edged up in December to bring the year-on-year growth to 2.3 percent, but pipeline exports edged down in 2007 as oil firms sent more crude for domestic refining.

Industry and Energy Ministry data showed on Thursday that December crude and gas condensate production rose by 0.2 percent from November to 9.87 million barrels per day, bringing the annual average output to 491.481 million tons or 9.87 million bpd.

The figure is 2.3 percent higher than Russia's 2006 oil production, which was 480.481 million tons, or 9.65 million bpd.

In 2006, production rose by 2.2 percent, down from 2.7 percent in 2005, which became the first year of modest production growth following impressive spikes in previous years, including 9 percent in 2004 and a record 11 percent in 2003.

The government and analysts have predicted a slowdown in growth starting from 2006 as west Siberian fields are facing depletion while east Siberian fields are not yet ready to bring more barrels to world markets.

In 2007, the growth was mainly supported by the Sakhalin-1 field, developed by U.S. oil major ExxonMobil.

In 2008, the neighboring project Sakhalin-2 project, led by gas export monopoly Gazprom and Royal Dutch Shell, should add around 100,000 bpd to the country's overall production as it starts a new development phase.

The data also showed that oil exports via the system of pipeline monopoly Transneft, which go mainly to Europe, fell by 0.5 percent to 220.597 million tons, or 4.43 million bpd, versus 221.726 million tons in 2006.

All additional barrels produced were sent to domestic refineries, as the current tax system encourages exports of refined products rather than crude oil.

It also often makes more profitable sales of refined products on the domestic market, where demand for high-quality gasoline and diesel is being spurred by the rising number of modern cars.

Exports to Asian markets from Sakhalin increased mainly due to the Sakhalin-1 project. The data showed exports bypassing Transneft rose to 19.3 million tons from 11.3 million in 2006.

Gas output by Gazprom also edged down to 549.597 billion cubic meters from 550.482 bcm in 2006.