Russia has its own economic problems: in addition to slump of world prices, daily oil production stopped growing for two months. Since the end of May oil production has decreased by about 120,000 barrels a day, Vladimir Milov, General Director of the Institute of Energy Policy, wrote in his bloc “Live Journal.”
He said that this long-term trend has changed, because earlier the daily production was only going up. Now there is a stable decline.
It is not surprising, because the biggest field players are already in the negative zone for a long time: in July 2015 Rosneft had a production decline of 1.2% per year, while LUKoil had 1.1%. In July 2015 Surgutneftegas has a very small production growth of 0.3%, but the company has been on the verge of decline for a long time. Only small players demonstrate clear growth, but this is not going to last. The biggest production “daughter” companies of Rosneft have had a serious production decline for a long time. As a result of that year after year the oil production remained a stale growth, but decline of daily production for two months shows that this is not going to last long.
The reasons are simply structural and this is a result of Putin’s policy of super-centralization of the oil industry under the state control. Rosneft, which has seized the biggest number of assets, is not managed efficiently, it has accumulated huge debts and is unable to invest. LUKoil does not have room for growth – all new fields are given to the state companies. Surgutneftegas has become a private stable fund of Putin and it pursues an unclear policy of accumulation of cash on the accounts without investments. Only these three companies ensure two third of volume of Russian production, writes Milov.
