The Russian Economy Ministry forecasts Russian hydrocarbons output and exports to drop significantly in 2022, as Russian energy producers grapple with the impact of the invasion of Ukraine and western sanctions.
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The ministry's forecasts reflect how the consequences of the invasion are reshaping the Russian energy sector.
Its base-case scenario includes oil output falling 9.3% on year in 2022 to 475.3 million mt, according to a forecast for Russia's socio-economic development published on the ministry website May 18. This is equivalent to about 9.55 million b/d.
Oil output forecasts are being affected by European buyers shying away from Russian oil purchases and Western companies winding down their cooperation with Russian partners.
The ministry said that it expects Russian oil exports to slide 1.2% to 228.3 million mt and Russian oil products exports to drop 20% to 115.3 million mt in 2022.
Reluctance to buy Russian oil has had a major impact on its key crude grade Urals, which is trading at record low differentials to other crudes. Platts assessed Urals at $75.49/b May 18, compared with Dated Brent at $111.325/b, S&P Global Commodity Insights data showed. On Feb. 23, the day before the invasion, Platts assessed Urals at $90.72/b and Dated Brent at $100.48/b.
The economy ministry forecasts an average Urals price of $80.10/b for 2022.
The invasion of Ukraine has also had a profound impact on the Russian gas industry.
Supply concerns from the conflict have led to record-high prices across Europe in recent months. The TTF month-ahead price reached a record Eur212.15/MWh ($221/MWh) March 8, according to Platts price assessments by S&P Global Commodity Insights. It was last assessed at Eur89.10/MWh May 18.
The economy ministry forecast includes prices for Russian gas exports to non-CIS countries to rise 72% to $523.30/1,000 cubic meters in 2022. It expects Russian contract gas export prices, including to CIS countries, to grow 65% to $453/1,000 cu m in 2022.
Russia introduced a new ruble-based payment mechanism for sanctioning countries buying Russian gas in response to the freezing of Russian assets abroad. State-owned Gazprom cut off supplies to Poland and Bulgaria in late April after they refused to comply with the new system.
Ukraine also declared force majeure on Russian gas flows entering the country at the Sokhranivka entry point May 10, meaning gas from Russia is now only transiting Ukraine through the Sudzha entry point.
The economy ministry expects a 10% drop in natural gas exports in 2022 to 185 Bcm.
Deliveries of Russian gas through Ukraine initially rose following the invasion, but have dropped off in April and May.
The economy ministry forecasts that Russian gas output will fall 5.6% on year in 2022 to 720.9 Bcm. Gazprom's output last year reached a 13-year high of 515 Bcm.
The ministry expects a 5.5% rise in LNG exports in 2022 to 30.7 million mt.