Russia eyes return to 10.8 million b/d oil output on a sustained basis: Novak

Russia can expect to boost its oil production to 10.8 million b/d on a sustained basis in the near future thanks to growing global demand and domestic investment and tax changes, Deputy Prime Minister Alexander Novak said in an article published on May 12 in the Energy Policy journal.

Novak said Russia's membership of the OPEC+ group and the resulting quota curbs on its production had been vindicated in stable oil prices and higher oil earnings.

With demand on the rise, the OPEC+ countries were set to increase their share of the global oil market from 49% to 52% by 2050, he said. His comments echoed those made by Saudi Aramco CEO Amin Nasser in an earnings call on the same day, where Nasser forecast steady demand growth through 2025.

Analysts outside Russia tend to be less optimistic about a potential increase in Russia's oil production, arguing the falls in recent years have not just been due to OPEC+ quotas, but a slowdown in investment and lack of access to international technology and know-how as a result of sanctions.

"Already in the coming years we plan to return to a level of production of 540 million mt... per year," Novak said -- a volume equating to 10.8 million b/d. "This indicator will be maintained up to 2050. It requires the timely replenishment of the resource base, above all by the addition of a large volume of hard-to-produce resources and the use of more up-to-date technology," he added.

Novak pointed to some of the challenges facing this anticipated revival, including abandoned oil fields, flooded production sites, and more technologically challenging oil fields -- which together accounted for 60% of Russia's oil resource base, he said.

"To stimulate their development the fiscal system needs to be improved, which would make investment in new categories of resources and technology profitable. This will in turn lead to a leap in investment and strengthening of the role of the oil sector as a locomotive of domestic industry and science," he said, highlighting an expected economic boost for regions such as the Arctic, East Siberia and the Russian Far East.

Russia's oil output has been falling annually since 2022, according to estimates by analysts at S&P Global Energy. They estimate Russia's 2024 production at 10.74 million b/d, including condensate and NGLs. For crude oil only, the Platts OPEC+ survey from S&P Global Energy estimates Russian output in March at 8.97 million b/d, down from 9.42 million b/d a year earlier.

Analysts at S&P Global Energy remain skeptical that Russia would be able to switch to production growth from the current decline path, even if sanctions against the country were eased. They highlight access to international technology as a key factor in Russia's hopes of boosting tight oil production, but caution that international oil and gas companies are likely to be wary of returning following the losses they incurred as a result of the Kremlin's curbs on selling their assets in the wake of the full-scale invasion of Ukraine in 2022.