Look forward to former glories – the Former Soviet Union

11 December 2016

The region encompassing the Former Soviet Union is rich in natural resources. GlobalData examines the figures underpinning a bright future for an oil and gas powerhouse.

A total of 24 crude and natural gas projects are expected to start operations in the Former Soviet Union (FSU) by 2025.

Russia is the dominant force in the region, with the highest number of planned projects (23), with the only other undertaking being in Kazakhstan.

Division of spoils

Rosneft Oil Company is expected to lead the FSU in terms of operatorship in the planned projects. The company is expected to operate nine, eight of which will be conventional crude projects. Lukoil and Gazprom jointly occupy the second position with three projects each.

Russian giant

Key planned projects in the FSU are expected to contribute 2.1 million barrels of oil per day (mmbd) to the global crude production in 2025, and 10.4 billion cubic feet a day (bcfd) to the global gas production. Russia accounts for most of the planned oil and gas production in the FSU with Gazprom contributing the highest oil and gas production in the region by 2025. The company’s key planned assets are expected to contribute 1.7 million barrels of oil equivalent a day (mmboed) of production in 2025.

This is followed by Rosneft Oil Company and Lukoil Oil Company, which expect 693,500 barrels of oil equivalent a day (mboed) and 224,200mboed respectively.

New frontiers

In the FSU, key planned projects are expected to come online with a total capital expenditure (capex) of $148.1 billion, of which $63.7 billion is expected to be spent between 2016 and 2025. Russia is expected to lead the region with a capex of $31.7 billion during 2016–2025, $6.0 billion of which will be spent on the Kovyktinskoye project alone.

Gazprom will have the highest capex among all the companies in the FSU. The company is expected to spend a total of $19.1 billion on key planned projects over the next decade. Major undeveloped discoveries in the FSU include Pobeda, in the West Siberian Basin of Russia, and Absheron, in the Caspian Basin of Azerbaijan.

Record year for Russian crude

The positive outlook for the Former Soviet Union comes on the back of an incredibly productive year for Russia. In 2016, it smashed crude oil production records two months running and, with plenty of new wells opening, output is set to soar. November’s OPEC deal to cap production could put a dampener on this field day, however.

Production has been on the rise in response to a weaker rouble, but the country set a new record in October 2016, raising average daily production by 0.1% to 11.2 million barrels (MMbbl) – the highest since the mid-1980s. Post-Soviet production records were also broken in September, when they reached 11.1MMbbl. The daily record means Russian crude production for October exceeded 47 million tons.

The increase comes at an interesting time for Russia after the OPEC deal in November to curb global crude output to 32.5–33.0MMbbl a day – marking the first agreement of its kind since the crash of 2008. Although Russia is not an OPEC member, Energy Minister Alexander Novak told Bloomberg that Russia would consider capping production at the recent record levels. “Undoubtedly, September would be the month that objectively would suit us best,” he said. 

Non-OPEC countries could be invited to join in the deal after production ceilings for each member nation are agreed.

Two major players were the driving force behind the increase. Rosneft raised its production by 0.1% and Lukoil’s output rose by 0.9%, while Surgutneftegaz lowered to 0.3%.

The increase has been driven not only by the falling rouble, but also the opening of fresh oilfields in northern Russia and the Caspian Sea. Rosneft and Gazprom Neft began producing from a joint venture in East Messoyakha in September, while Lukoil began test production from a second well at its Caspian Filanovsky deposit.

The future’s bright in the FSU.

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