Russian regional oil producer Bashneft has become a victim of Rosneft's drive to optimise output by removing high-cost barrels from its portfolio in order to comply with the country's quota under the Opec+ agreement on output curbs.
According to available statistics, Bashneft’s oil production fell by over 25% to 9.9 million tonnes (73 million barrels) between January and August this year as against the same period in 2019.
Although the authorities allowed Rosneft to partially increase its overall oil production in August in line with a relaxation of the Russian quota, output at Bashneft has remained in freefall, according to an official from the regional administration Bashkiria, its main operating area.
Speaking at a regional government meeting in the region's capital of Ufa on Monday, Bashkiria Industry & Energy Minister Alexander Sheldyayev said that oil and bypass gas production in the region in September was 46% lower that the same period the previous year.
At the end of 2016, Bashneft came under the control of state-controlled Rosneft after the Kremlin agreed with a proposal from Rosneft chairman Igor Sechin to pay over $5.2 billion for a 50% state stake in the regional oil producer.
Moscow-based privately held holding Sistema bought the controlling share in Bashneft in 2009, later investing hundreds of millions of dollars in brownfield projects.
A new Bashneft management team, put in place by Sistema in 2011, quickly broke the long declining oil production trend. The producer repeatedly posted double-digit growth in oil output compared with stagnating production at Rosneft during this time.
However, authorities renationalised Bashneft in 2015 on the pretext that Bashkiria authorities had privatised Bashneft in the first half of the 1990s without “prior consent from the Kremlin”.
According to Sheldyayev, authorities are now eyeing minor oil producers in Bashkiria in anticipation of being able to increase their oil output to partially compensate the regional budget for the loss of revenues from Bashneft’s oil sales.