Russia boosted oil output to a record high in June, maintaining its position as the world's top oil producer, although analysts warned of problems ahead. Energy Ministry data showed on Friday that Russia's June oil output rose 0.5 percent to 10.13 million barrels per day, up from 10.08 million bpd in May and surpassing the previous record of 10.12 million bpd, set in March. Year-on-year oil production rose 2.4 percent in June, according to the preliminary data. Exports dropped 4.1 percent from last month and 4.2 percent from a year earlier. Russian output, which held above 10 million bpd for the 10th straight month, was higher than that of Saudi Arabia, which held supply steady at 8.28 million bpd in June. Industry experts have expressed doubts that Russia will continue to ramp up oil production as mature fields become depleted and few new deposits are being put on stream. The country's tough business environment is also cited as hindering further growth. "We expect slower growth in the second half of the year due to uncertainties such as taxation, investment and licensing policy," Troika Dialog analyst Valery Nesterov said.
Bashneft led the monthly growth, raising output by 1.6 percent to 280,000 bpd. Production gained 20 percent on the year since billionaire Vladimir Yevtushenkov agreed to buy the producer last year. Rosneft, the country's biggest oil producer, pumped 2.26 million bpd, up 0.2 percent from last month and down 1.2 percent from a year earlier. "It is difficult to gauge the trend by one month, but so far we can say that Russia's oil output is flat at plateau," said Alexander Bespalov, an oil analyst with Alfa Bank. "Most likely output will be flat this year and will afterward depend on greenfield development," he said, referring to work at new oil deposits. Nesterov said Rosneft, which is responsible for one-fifth of the country's oil output, was again the main contributor to the growth thanks to a production boost from its new Vankor field in the Arctic.
"Consolidated production at Rosneft [including its stakes in other companies] was up a healthy 9.5 percent year on year," he said. June was the last month when East Siberian oil fields enjoyed zero export duties. From July 1, the oil from the fields is levied with an export fee, although smaller than for the rest of the country. Some ministries, including the Finance Ministry, have also proposed increasing the extraction tax for oil and gas fields. "The government is very inconsistent with its tax policy and regulations in foreign investments. This will hinder output growth," Nesterov said. Gas production continued its decline alongside falling demand in Europe and at home because of high summer temperatures. The country's overall gas output fell to 1.49 billion cubic meters per day in June from 1.65 bcm per day in May.
Gazprom signaled last month that gas demand has been falling since May and said its 2010 output target of 519 bcm was under threat. The company cut production in June to 1.12 bcm per day from 1.28 bcm per day in May, the data showed. "In 2009 gas production started to rebound, thus we expect a further decrease of year-on-year growth rates in July," Alexander Nazarov, a senior analyst at IFC Metropol, wrote in a note. "We also note the possibility that Gazprom may further lower its 2010 gas production and export projections, if demand for the gas does not rebound."
