The Ministry of energy expects that in 2020 only 507 million tons of oil will be produced in Russia - 53 million tons less than the original plans. This follows from the Ministry's proposed changes to the program"energy Development".
The Ministry of energy explains them by falling demand and prices for energy resources due to the pandemic, as well as the need to fulfill the terms of the agreement on limiting oil production between OPEC+countries. In may - July, Russia reduced oil production relative to the previous year by more than 20%, and since August-by 16%. Against this background, the planned decrease of 10% does not look like something catastrophic, but it will be possible to return to the pre-crisis level of production only in 2023, according to the project. It is planned to produce 517 million tons in 2021, and 556 million tons of oil in 2023.
"Given the changes in taxation of the industry, which will take effect from 2021, the recovery of production may be delayed, especially if the price of oil turns out to be low, "says Finam analyst Alexey Kalachev. In his opinion, the change in tax burden will affect the efficiency of production. Some projects will become less profitable. Investments in field exploration and development will decrease, and this will also affect production volumes, the expert believes.
The target values of the state program have also been lowered for natural gas production (from 743 to 691 billion cubic meters) and coal (from 448 to 395 million tons). In the first case, the adjustment in addition to the pandemic is due to low gas demand in Europe due to overflow of underground storage facilities as a result of the abnormally warm winter of 2019-2020 and growing supplies of liquefied natural gas (LNG) to the market. The latter was caused by the redirection of supply flows from the East, which was first affected by the pandemic, to Europe. With low prices, the cost difference between pipeline gas and LNG has almost disappeared, and many U.S. LNG sellers have offered it on the European market at the lowest possible prices, sometimes even below profitability. As for coal production, the reasons are not specified, and the decrease in planned indicators is based on data from coal mining enterprises. According to statistics of Rosstat and the Central Department of fuel and energy for the first seven months of 2020, coal production decreased by 9%. "According to the operational data of the Central fuel and energy Department, the level of production tends to further decrease," the explanatory note to the document says. Plans for coal production in Eastern Siberia and the far East have been adjusted separately. Previously, it was expected that 118 tons of coal would be produced here in 2020, and 140 million tons in 2024, but under the new conditions, the forecast was reduced to 106 and 120 million tons, respectively.
The original plan for oil production in Russia will be fulfilled only by 90%
"The decline in coal production is connected not only with the pandemic, but also with the environmental agenda-replacing it with other sources of energy, natural gas and renewable energy," Alexey Kalachev believes.
Finally, the drop in demand for petroleum products in April-may, when the peak of quarantine restrictions in Russia occurred, affected plans to increase the depth of oil refining. The indicator has been reduced from 85.2% to 84%. Moreover, overcoming the 85% threshold is expected only in 2022, as some refineries had to postpone the commissioning of new fuel purification plants.