the fall in oil production in Russia may exceed 50% in 2023
The fall in oil production in Russia next year may exceed the threshold of 50%, says oil and gas sector analyst Mikhail Krutikhin. In his opinion, even the fact that the open European embargo, which comes into force in September of this year, will be “with exceptions” will not affect the level of detection of detected cases.
The analyst also believes that neither China nor India often helps out in this objectively, despite the fact that Russia trades “black gold” with them at reduced prices.
Mikhail Krutikhin spoke about this and many other things in an interview with the Voice of America Russian Service.
VICTOR VLADIMIROV: According to a recent report from the energy agency, the fall in oil in Russia is 20%. Do you have other predictions?
MIKHAIL KRUTIKHIN: Yes, I do not agree with such a modest assessment. According to official estimates, if oil exports are carried out in accordance with EU sanctions, with a European embargo, then, even taking into account all the exemptions from this sanctions regime, Russia will lose 51% of crude oil exports. And since March [2023 года] to this will be added the loss of 57% of exports of petroleum products. So the fall in oil production in Russia for the next year is estimated at more than 50%, according to the scenario – 56%.
V.V.: Do you think the ban on the export of petroleum products is more serious in terms of its consequences in the short term?
M.K.: Yes, it will have a particularly strong impact on the country’s economy. Because some of the Russian refineries produce mainly export products, that is, low-quality diesel fuel and straight gasoline, which is sometimes called naphtha. There is no great demand for these goods in Russia. And if the export market is canceled for them [Европы]then some oil fields may be closed in the country, because Russian oil refineries will not be able to handle such volumes.
V.V.: But are the proportions of a country measured and measured by parameters?
M.K.: Of course. Because when the revenue shares in the federal budget are taken into account, some indicators are not taken into account. These are dividends and taxes on the profits of oil companies, taxes on their personnel, all taxes that companies that use oil profits entail: the distribution of enterprises and drilling companies, and so on and so forth. The loss of the federal budget from the perspective of the composition of the part of the income is also more than half.
V.V.: Who will be the first to suffer as a result?
M.K.: I think unemployment will rise. Due, for example, to drilling companies that will drill new wells. Many of them continue to operate. There are other nuances. Sometimes they say: well, just think, we will stop receiving export profits in dollars and euros, but we have rubles, including compensation. They say that Western currency is needed only to ensure its import, and now, as you know, Russia does not have it. It’s all right, it’s not. Because the same oil companies pay part of their taxes, including income taxes, in rubles to the regions where they operate. These ruble versions will also disappear. Therefore, here the effect may turn out to be more serious than expected from foreign currency receipts.
V.V.: Will China and India be able to become a lifesaver in this situation, on which Moscow has (or had) great hopes?
M.K.: In China, it is simply impossible to seriously increase oil exports. Because all transport routes are already busy to the maximum. The export record in China was recorded the year before last – 83 million tons of oil. Last year, 72 million tons went there. And when they now say that in a week or two sales in China increased by 55%, this is not an argument, since the estimate is a very short time period. If we evaluate the situation objectively, then there are no real possibilities to send to China more than 80 with millions of tons per year.
The initial euphoria associated with India, from the fact that consumption has increased dramatically, gradually disappearing. This is despite the fact that the price reduction for India has reached 30 or more dollars per barrel. In July, already the flow of oil, which reached its peak, began to subside, which is not surprising. There are huge masses from the countries of the Persian Gulf, first of all. Iraq, Saudi Arabia and the UAE supply oil to the Indian market. And to drive Russian oil through the Suez Canal with pumping with small tankers in the Baltic in large ocean tankers is difficult. Therefore, I do not think that more than 10-15 million tons per year are allocated to India. There is no hope that this will somehow compensate for the losses from the loss of the European market. Last year, 107 million tons were consumed in Europe.
V.V: As expected, the negative for the process in Russia could be, if not completely avoided, then somewhat mixed and slowed down, had the Kremlin not started a war in Ukraine?
M.K.: Of course, the main reason for this is the war and the incitement of Russian aggression against the Congress of Ukraine. In addition, the negative role of Moscow played its role here, in which there was a general focus on abandoning the movement towards green energy. Same solar safety tips [РФ]signed by Putin in 2019, says that the basis for the development of the solar industry – coal, oil and gas … has become especially sensitive.