Drop of oil extraction and export in Russia

Updated September 3, 2008

   In August, 2008 Russia’s oil extraction continued falling - the level is 0,4% less as compared to July. Though the oil refining is growing in Russia, the export falls as well, despite the August price drop both in Russia and at the external market. The drop of oil extraction is compensated partly by means of gas extraction growth provided mainly by the independent producers, while in August Gazprom continued increasing export of energy resources.

   On September, 2 the Central Dispatch Service of Fuel and Energy Sector (CDS FES) published the latest data on extraction and export of the Russian energy resources. Oil extraction continues falling: within eight months of 2008, 325,15 million tons of oil was extracted, or 0,6% less as compared to the analogical period of the previous year. In August, 2008 the extracted oil totaled 41,53 million tons, or 0,8% less as compared to August of the previous year, and 0,4% less as compared to July, 2008. Within eight months of 2008, the export of oil fell by 5,8% and settled at 136,26 million tons. In August, the fall of export was 4,5% to August, 2007 and 4,8% to July, 2008.

   On the background of the world prices’ cut, the export falls because of the high profitability of Russia’s internal market, as the experts explain. "Since the beginning of 2008, the oil companies take interest in the Russian internal market rather than in the export deliveries despite the relatively high internal prices", the director for development and marketing of Kortes IC Pavel Strokov declared. The drop of oil export is explained partly by the growth of oil refining within Russia. According to the data of the CDS FES, in August, 2008, oil supplies in the refineries grew to 20,419 million tons, or by 5,7% as compared to August, 2007.

   Thus, Mr. Strokov underlined that the export of oil products was regulated by means of the same market mechanisms: when it is favorable to sell at the internal market, the export falls. According to him, the export fall could reach higher levels, but "the Russian internal market is inflexible", and the excess amount of oil products would result in the price cut. The expert marked that the export fall takes place on the background of prices drop, and underlined the role of the record high export tax on oil that came into effect on August, 1. According to him, the growth of the tax and the drop of the world prices resulted already in the fall of the high oil price by almost 40%, to RUR 6 800-7 000 per ton with delivery in September. The price fall for oil products continues as well. In July-August, the wholesale prices lost almost 20%, and in August the retail prices for low octane gasoline started falling also.

   As opposed to the fall of oil extraction, the CDS fixed the growth of gas extraction and export in Russia. Within eight months of 2008, 443,90 bcm of gas was extracted in Russia, or 3,1% more as compared to the analogical period of the previous year. In August, 48,16 bcm of gas was extracted (1,6% more as compared to August, 2007, but 2,09% less than in July, 2008). As compared to the low indices of the previous year, the export of gas grew considerably. Within eight months of 2008, the export totaled 111,1 bcm of gas, or 16,4% more as compared to eight months of 2007. In August the export started falling and settled at 11,1 bcm of gas, or 3,29% less than in August, 2007, and 14,35% less than in July.