Key Determinants for the Future of Russian Oil Production and Exports
This paper analyses the fundamental drivers of Russian oil production in the current low oil price environment, highlighting a number of dichotomies currently at work. The low oil price has forced Russian oil companies to cut dollar expenditure and to re-assess their investment strategies, apparently putting oil production and exports at risk. However, the impact of rouble devaluation and changes in the fiscal regime can help to offset these negative factors. US and EU sanctions have restricted access to technology and finance, but import substitution and a search for alternative sources of funding can start to redress these problems. New field developments are being delayed, but a number of projects are already underway that can help to keep production flat in 2015. Arctic and tight oil projects have been undermined by sanctions but this has caused the Russian industry to re-focus on arguably more economic assets in core regions. Finally, even if production does remain flat or even decline slightly, exports may continue to grow as domestic refineries reduce throughput due to recent tax changes that disadvantage production of fuel oil.