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Rosneft Output at Top Siberia Unit Drops as Service Deal Ends

OAO Rosneft’s output at its biggest production unit in Siberia fell more than 2 percent in the first quarter as the state-run company cut ties with Russia’s biggest driller, Eurasia Drilling Co. Ltd.

Output at the Yuganskneftegaz unit may have fallen because of a decline in development drilling as Rosneft negotiates with contractors and restructures its services business, Sberbank CIB said in a research note today.

Yuganskneftegas, which accounts for about 30 percent Rosneft’s crude output, produced 1.31 million barrels a day in the first quarter, down from 1.34 million barrels a day in the same period last year, according to data from the Energy Ministry’s CDU-TEK data unit yesterday.

Rosneft is developing its drilling arm and pressuring service providers to lower prices. The country’s biggest oil producer controls about 40 percent of Russia’s crude output through its acquisition of TNK-BP last year.

Eurasia Drilling is redeploying rigs to competing oil producers after relations with Rosneft soured. Eurasia Drilling’s 30 rigs under hire to Rosneft will shrink to six by the end of the year, according to the services company’s March 27 call with investors.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Torrey Clark, Amanda Jordan

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