Russian authorities expect domestic oil and gas production to decline this year, influenced by the country’s promises to cut output and oil exports, and continued efforts by producers to tap new markets after the 2022 European embargo on Russian oil imports.

Speaking on Wednesday at an industry forum in the West Siberian city of Tyumen, deputy prime minister Alexander Novak said that the government sees full-year production of oil and condensate at almost 10.6 million barrels per day against 10.74 million bpd in 2022.

Natural gas

For natural gas, output is also anticipated to decline to 642 billion cubic metres this year compared with 672 Bcm a year earlier.

Although Russian gas giant Gazprom has been withholding monthly updates on its performance, the drop in the country’s total gas production is seen as being related to the company’s low gas exports to Europe, running at about 25% of the levels seen before Russia invaded Ukraine in February 2022.

However, Russian pipeline gas supplies to China via the Sila Sibiri trunkline from East Siberia reportedly hit a new record high of 2 Bcm in July, according to official customs data. Even so, these are still not sufficient to offset the decline in European gas exports for Gazprom that are estimated at about 100 Bcm annually.

These volumes have been partially replaced by higher supplies of Russian-produced LNG to Europe from Novatek and Gazprom-managed LNG export facilities.

Meanwhile, Sila Sibiri gas deliveries are set to temporarily fall this month as Gazprom will halt operations of this gas export line for one week from 21 September for a maintenance turnaround — the second and final one this year.

Oil production enigma

The decline in oil and condensate production, revealed by Novak, is nonetheless less than country’s earlier commitment to members of the Opec+ group to cut production by 500,000 bpd from 1 March.

Additionally, this summer, Novak revealed two voluntary restrictions by the government on oil exports by Russian oil producers — the first being 500,000 bpd from 1 August and the second of 300,000 bpd from 1 September, aimed to prop up international markets and thus improve the flow of revenues to the country’s deficit-ridden budget that has high military spending.

However, shipments of oil by sea from Russia increased to an average 3.34 million bpd in the four weeks to 17 September, according to tanker-tracking data compiled by Bloomberg, reaching a three-month high.

That is an increase of 465,000 bpd from the four-week period to 20 August, with the hikes seen by analysts at the Baltic ports of Primorsk and Ust-Luga, and Novorossiysk in the south of the country.

The ports are the core outlets for exports of the Russian heavy and sour oil blend, known as Urals, that since August has been seen trading above the price cap of $60 per barrel imposed last December by G7 countries and Australia to limit Russian state oil earnings.

International oil traders and Russian authorities recently have reported sizeable improvements in the market discount for Urals, as delivery and logistics chains from Russia to new markets matured.

At the end of the last week, Russian President Vladimir Putin announced that Russian oil and gas revenues recovered strongly in July and August, rising to the levels seen in the same period of 2022.