Russia's Deputy Prime Minister in charge of energy issues, Alexander Novak is optimistic the country’s oil producers can boost their output following the Opec+ group's decision to relax the nation's production quota, starting next month.
Speaking in an interview with Russian state television network Rossiya 24, Novak said that authorities expect the country’s oil production to reach pre-Covid-19 pandemic levels by May 2022.
In terms of output, Novak expects the country to be able to produce up to 21 million tonnes (154 million barrels) of oil between August and May next year to meet increasing energy demand both at home and internationally.
At an Opec+ ministerial meeting over the weekend, Russia was granted permission to increase its oil production by 500,000 barrels per day from the ceiling of 11 million bpd in the period between August and December.
However, the actual volume of liquid hydrocarbons available from Russia as a result may rise above the permitted increase as the ceiling does not account for condensate, the production of which will also rise as more oil is extracted, according to industry analysts in Moscow.
Russian authorities expect a drop in the oil price as a result of the Opec+ decision, Novak implied, saying that Moscow sees European oil prices hovering around $60 per barrel, some $10 per barrel below the current level.
However, even at the $60 ballpark, the authorities expect additional sales by the nation's producers will generate budget revenues of 400 billion rubles ($5.3 billion) as crude output increases.
Novak also revealed hopes in Moscow that the anticipated removal of the country’s output ceiling next year would renew the flow of investments into Russia's oil and gas sector.
However, he did not comment on repeated pronouncements from the largest producers such as Lukoil, Gazprom Neft and Tatneft that they will require new tax concessions and other privileges as incentives to increase oil output.
Last year, the Kremlin suddenly scrapped granted tax exemptions for these companies' major unconventional and brownfield projects in a bid to generate more revenues for the government.
Speaking earlier in July, Deputy Finance Minister Alexei Sazanov said the authorities have no immediate plans to change fiscal operating conditions for the country’s oil producers, as their financial results have already improved from 2019 and 2020.
No carbon tax
Sazanov also said the government is not considering introducing a carbon tax on the industry, such as that proposed in the European Union for carbon energy importers.
He said authorities may have to “assist oil producers, including Tatneft, to adapt to changing market conditions in the European market” as they may have to pay additional carbon taxes on their oil exports to the continent.
Russia has much cheaper hydrocarbon reserves and a vast territory that can be used to plant trees and reduce carbon dioxide emissions, with these reduction credits to be assigned to the oil industry, Sazanov added.
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