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. Last Updated: 07/27/2016

Oil Output Grows 6% And Keeps on Climbing

The past year has seen a slight, but steady, increase in Russia's crude oil production, and first quarter figures point to even more barrels in 2001, new Energy Ministry figures show.

Oil companies say they are reaping the benefits of restructuring begun in the late 1990s. But their ability to maintain or increase output will depend in part on how much cash they have on hand to put toward investment. This, in turn, depends on the price of oil, which has fallen in recent months.

The 2000 production year witnessed no major shake-ups in the industry, with LUKoil keeping its title as Russia's leading oil producer. Compared with 1999, the company's output grew by 2 percent to 1.425 million barrels per day.

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Russia as a whole saw its oil production increase 5.9 percent in 2000 to 6.4 million barrels per day, according to Energy Ministry figures released Friday.

But preliminary figures for this year are even brighter. The Energy Ministry estimates that Russia will produce 593 million barrels in the first quarter, which would be a 4.5 percent increase from the same period last year.

The three top companies, LUKoil, Yukos and Surgutneftegaz, are expected to retain their rankings in 2001.

"It was everything we expected," said Polina Bolshakova, an oil analyst at Troika Dialog. "And oil production throughout Russia will continue to increase this year, but now it's difficult to say exactly how much."

Tyumen Oil Co., or TNK, posted the biggest increase — 33 percent. But this can be attributed more to TNK's acquisitions of Chernogorneft and Kondpetroleum. If these new sources of oil are ignored, TNK's production growth comes to 7 percent, Bolshakova said.

No. 2 Yukos had the biggest production increase, 10.9 percent. Much of the incremental oil production came from fields in Western Siberia that are operated by affiliate Yuganskneftegaz.

"We also made it a priority to completely reform the company along the Western model," said Yukos spokesman Andrei Krasnov. "Other oil companies have done this in bits and pieces, a field here, a refinery there, but only we have totally adopted it."

In 1998, Yukos began to invest heavily in new technologies and worker training, a decision that is only beginning to pay off, Krasnov said. The oil giant also decided to keep the top management Russian, while retaining foreign experts a couple of steps down the ladder.

Sibneft saw a 5 percent increase in 1999, but production increased by 20 percent in 2000.Sibneft spokesman Nick Halliwell attributes this to a thorough restructuring.

"We are hiving off some of our social assets and trying to decrease overall production costs," Halliwell said. "We are not only concerned about producing more oil, we are concerned about producing it efficiently."