Russian oil producers benefiting from last year’s ruble collapse used relatively cheaper service costs to increase drilling and boost crude output in March, according to Sberbank CIB.
Development drilling jumped 23 percent in the first two months of the year, helping push oil output to 10.71 million barrels a day, Sberbank CIB analysts Alex Fak and Valery Nesterov wrote in a research note Friday. That matched the post-Soviet record level of production in January.
“Oil companies benefited from relatively low drilling fees paid to service contractors under old contracts,” the analysts said. Tax changes lowering export duties provided further stimulus.
Russia has increased output in the face of slumping prices for Brent crude, which trades now at less than half of the peak price in 2014. Under Russia’s tax system, the state bears most of the price risk, while the currency collapse benefits exporters, which earn in dollars and pay for services in rubles.
OAO Surgutneftegas raised drilling volumes 9 percent, while OAO Rosneft increased them 30 percent and OAO Bashneft 160 percent. OAO Gazprom Neft increased output even as the volume of drilling declined slightly due to wider use of new technology, according to the note.