Preliminary data for September from the Energy Ministry pegged Russian oil production at yet another post-Soviet era high of 10.4 mb/d, higher y/y by 90 thousand b/d (see Figure 3). The increase was led by Rosneft, whose Vankor field continues to boost output. After a disappointing first half of the year, with oil production declining by around 2.5% y/y, Lukoil's production has started to stabilise somewhat. TNK-BP's output, however, declined y/y by 30 thousand b/d, despite the continued increase at the Verkhnechonsk field in east Siberia. With the delay of the start-up of Russia's first Arctic offshore field Prirazlomnoye, oil output y/y growth is likely to remain around 50-100 thousand b/d in the coming months.
Nonetheless, despite Russian production remaining at elevated levels, exports from the country have remained muted as domestic demand has continued to rise steadily (see Figures 24 and 25). Moreover, with the 2nd phase of the ESPO pipeline connecting Skovorodino (near China) to the port of Kozmino starting earlier than anticipated in November, more shipments will be diverted towards Asia. As a result, we see lower availability of Urals grades for the Mediterranean, which should provide support to Brent spreads.
Crude exports from the rest of the FSU have also remained low in recent months (see Figure 4), primarily due to poor production growth in both Kazakhstan and Azerbaijan. Kazakhstan's liquids output fell y/y by 0.19 mb/d, to just 1.4 mb/d (see Figures 3, 9 and 10), the lowest since September 2008. The fall was due to six weeks of planned maintenance at the Tengiz field, the first large-scale maintenance for the facility since its start-up in 2008. As a result, we expect September's output to have remained weak as well, before recovering in October. However, with the start-up of the 0.45 mb/d Kashagan field pushed back from December to Spring 2013 at the earliest, we expect Kazakhstan's oil production growth to remain uninspiring through to H1 13.
Finally, Azerbaijan's crude oil production remained weak, falling y/y by 100 thousand b/d in August to 0.81 mb/d (see Figures 3, 11 and 12). Azerbaijan's oil production has been marred by technical problems, despite significant maintenance carried out at the ACG fields in Q4 last year. The complex produced less than three-quarters of its targeted 1 mb/d in H1 this year. While some respite may come following the start-up of the 100 thousand b/d Chirag Oil Project in Q4 13, we expect crude exports from the region to remain low on the back of poor output growth and rising domestic production.
FSU product exports, on the other hand, have continued to rise (see Figure 4), totalling around 3 mb/d in August, led by gasoil exports (up y/y by 0.02 mb/d), although fuel oil exports fell y/y.