Russian energy minister Alexander Novak said Wednesday he wants new volumes of gas condensate to be excluded from Russia’s quota as part of its oil output pact with OPEC.
Novak’s remarks come as Russia’s output of condensate — a potentially high-value petroleum liquid — is expected to grow strongly in coming years as it expands its output of liquefied natural gas from new giant projects in the Arctic Circle.
“We are trying to reach the target level [in November],” Novak told reporters. “There are certain nuances that have an effect during the winter season. Nevertheless our companies took responsibility and are trying to fully comply.”
“The start of operation of new gas fields also increases gas and gas condensate output. We think that gas condensate shouldn’t be included in the total volume of production,” he said.
“We think this should be discussed with our partners, since gas condensate is not being exported, we think it shouldn’t be included,” Novak added, when asked if rising gas condensate levels would affect compliance with the deal.
Under the current OPEC+ agreement, Russia committed to cut around 230,000 b/d from its October 2018 crude and condensate output of 11.42 million b/d. Condensate output was previously an issue of friction between Qatar and its former partners within OPEC before the gas-rich Gulf sheikhdom decided to leave the cartel.
Output fluctuations
Russian output has fluctuated over the course of this year and it has been producing above the target since August. Earlier this month Novak said that Russia’s output cut in October was only 211,000 b/d.
In May-July Russia over-complied, as a result of crude supply disruptions caused by a major organic chloride contamination of crude shipped to Europe via the Druzhba pipeline.
Novak also reiterated that Russian output is likely to be between 556 and 560 million mt in 2019. This is equivalent to between 11.17 and 11.24 million b/d.
The current OPEC+ agreement is due to expire at the end of the first quarter of 2020. In early December, Russia will take part in meetings with other deal participants to discuss the current market.
Novak said Wednesday that he will meet with Russian producers ahead of these meetings as usual.
Russian producers have split the cut quota proportionally amongst themselves, but have intermittently expressed concerns about the impact of complying with the deal on their longer-term development plans and market share.
