Russian Petroleum Production Grows Despite Sanctions

Crude oil production from Russia’s Arctic regions will increase by at least 10 percent year-over-year says Russia’s Deputy Energy Minister Kirill Molodtsov. The country is slated to produce between 100-106 million tons of crude oil this year from its Arctic fields, compared to 92 million tons in 2016.

This development comes despite ongoing economic sanctions by the United States and the European Union targeting Russia’s hydrocarbon sector. While a number of oil multinationals, including Exxon Mobil, were forced to halt activities in Russia’s Arctic, including exploration in the Kara Sea, Russian officials claim that sanctions did not affect the flow of investments in oil and gas projects on the Russian shelf. "As far as sanctions are concerned, it's a big question. [...] I don’t see the influence of sanctions," explained Molodtsov to Russia’s TASS news agency.

Role of Arctic oil still limited, but growing

The importance of Arctic oil production as whole of Russia’s total production, while increasing, is still limited, says Alexander Pelyasov, Director of the Center of Arctic and Northern Economies Council for research of productive forces, in comments given to High North News. Arctic oil production accounted for 16.8 percent of all Russian oil production of 547.5 million tons in 2016 and will likely increase slightly in 2017. The majority of oil production remains outside the Arctic, primarily in the Khanty-Mansiysk Autonomous Okrug in West Siberia which produced 238.1 million tons in 2016.

Arctic offshore oil production stood at 13.6 million tons through the end of June and has grown 23 percent compared to the same period in 2016. Offshore activity now accounts for around 25 percent of Arctic oil production, according to Molodtsov. The increase comes in part from the growing capacity at the Prirazlomnaya oil platform which came online in late 2013. The ice-resistant platform, the only one of its kind in the world, sits around 60 kilometers offshore in the Pechora Sea, south of Novaya Zemlya.

The platform now produces at least 10,000 tons per day for a total of 2.1 million tons in the first six months of 2017 – a 79 percent increase over the same period last year. It is on track to extract the projected 2.6 million tons in 2017, reports Gazprom Neft, the consortium that operates the platform. Under full operation the platform can produce up to 5.5 million tons per year.

Arctic gas now exported via NSR

Arctic gas activity, on the other hand, has long been the mainstay of Russia’s overall gas production. Gas from the Yamal peninsula accounts for more than 85 percent of Russian production, explained Pelyasov. Total Russian gas production stood at 519 billion cubic meters last year and is slated to increase by 3-4 percent to around 539 billion cubic meters this year. While the recent investments constructing the Yamal Liquefied Natural Gas (LNG) facility and the export of gas-employing ice-capable LNG carriers via the Northern Sea Route will not increase the Arctic share of gas production, they do represent "the very beginning of the Russian penetration into the world market," concluded Pelyasov.