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. Last Updated: 07/27/2016

Yukos, Taxes Take Toll on March Oil Output

bloombergProduction has fallen since September's post-Soviet high of 9.42 million bpd.
Oil output was flat in March versus February, extending a spell of stagnation to six months that has followed five years of impressive growth, Industry and Energy Ministry figures showed Monday.

Released as oil prices struck a record high on supply concerns, the monthly data showed that production by the world's No. 2 oil exporter was unchanged at 9.33 million barrels per day in March.

The figures provided further confirmation that the Kremlin's breakup of oil major Yukos, as well as high marginal taxation on oil producers, had sapped the oil industry's ability to respond to booming global demand, analysts said.

"Oil companies, and we are referring to all of them, are neither immune nor insensitive to the 'above-ground' uncertainties that are currently delaying investment commitments," said Renaissance Capital oil analyst Adam Landes.

"We must stress that the difficulties are manmade, and not geological. Russia faces no resource constraint to grow its output considerably further, in our view. Yet without investment, there can be no production growth," he added.

March oil exports via state pipeline monopoly Transneft, including oil in transit from Kazakhstan and Azerbaijan, were also almost unchanged at 4.41 million bpd after having jumped in February near the all-time high of 4.37 million bpd.

Having risen to a new post-Soviet high of 9.42 million bpd last September, production has since fallen due to seasonal factors and the Yukos crisis.

Year-on-year growth in March was 4.2 percent. In January through March 2005, growth was 4.6 percent versus the same period of 2004, below the government's most pessimistic forecast of 5 percent for this year.

The International Energy Agency has said that Russia's oil output boom was slowing quickly mainly because of Yukos. The IEA has reduced its Russian oil growth forecast for 2005 to 3.8 percent from the previous 5 percent. Russian oil output grew by 9 percent in 2004 and by a record 11 percent in 2003.

"The government's 2005 forecast looks ambitious, given the loss of production seen since last summer," Landes said.

Oil is the engine of Russia's economy, and a slowdown in output growth could torpedo President Vladimir Putin's goal of doubling gross domestic product by early in the next decade.

Last month, the Industry and Energy Ministry said it expected growth to resume in the second quarter of 2005 to reach a new post-Soviet high of 9.58 million bpd in April through June.

"Such a feat would require the industry adding as much daily production as it did in the second quarter last year, a period of rather extraordinary growth, some 312,000 bpd of incremental production was seen between March and June 2004," Landes said. "Given what has happened to Yukos and the slowdown in evidence elsewhere, this is fairly impossible," he added.

The export data also showed that Yukos shipped abroad only one 60,000-ton cargo in March as it was squeezed out from its traditional routes by Rosneft.