July 6 (Bloomberg) -- Russian oil production is likely to fall 0.9 percent this year from last year’s average of 9.78 million barrels a day amid declining drilling, Sanford C. Bernstein analyst Oswald Clint said in a research note.

While second-quarter production showed unexpected strength, the performance of individual companies, fields and assets “does not provide enough evidence to suggest that this strength is permanent,” the report said.

New Russian projects such as OAO Lukoil and ConocoPhillips’ Arctic Yuzhno-Khylchuyu field, which began production last year, and OAO Gazprom and Royal Dutch Shell Plc’s Sakhalin Energy venture have helped offset declines in West Siberia. OAO Rosneft expects to begin output from the Vankor field later this year.

“Expectations for new and longer term growth will be met with disappointment,” Clint wrote. “Across the larger oil producers, production is actually down 0.9 percent, or around 80,000 barrels per day, despite six new fields on stream.”

Russia’s average first-half rig count was about 3 percent below last year’s levels, after rising between 2004 and 2008, the report said. Cost pressures remain an issue in the oil sector with increases in pipeline tariffs across Russia, a higher crude export duty and climbing electricity charges, according to the report.

To contact the reporters responsible for this story: Stephen Voss in London at sev@bloomberg.net Guy Collins in London on guycollins@bloomberg.net

Last Updated: July 6, 2009 04:52 EDT