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Russian Oil Output, Exports Fall on Price Drop, Shell Probe

Russia's oil output and exports fell in October after world prices fell and the government threatened to halt work at a Royal Dutch Shell Plc project that's the nation's biggest foreign energy investment.

Average daily oil output during the month was at 9.711 million barrels a day, or 41.07 million tons, down 0.4 percent from 9.751 million barrels a day in September, according to the Energy and Industry Ministry's CDU-TEK unit. Exports dropped 9.4 percent to 4.94 million barrels a day as the government raised export duties to a record.

Crude oil futures fell 6.6 percent in New York in October, declining for the third month after touching $78.40 a barrel on July 14, the highest since the contract began trading in 1983.

Shell's $22 billion Sakhalin-2 project may have to stop building key pipelines if Russia's Natural Resources Ministry decides this month to cancel a construction permit. Shell and Japan, developers of the Sakhalin-2 fields in the Sea of Okhotsk, have rebuked Russia for threatening to halt the project, citing ``abnormal'' and ``one-sided'' demands. Japan will also be one of the biggest consumers of the project's fuel.

The pipelines will carry oil and gas to the southern tip of Sakhalin Island to ensure year-round export. Shell-led Sakhalin Energy Investment Co. is building a plant there to cool natural gas to a liquid state for shipment by tankers starting 2008. It has contracts to sell about 98 percent of its liquefied natural gas output, mostly to customers in Japan and Korea.

Exports Drop

Exports to countries outside the Commonwealth of Independent States fell 6.5 percent to 4.2 million barrels a day. Russia raised export duties to oil to a record $237.60 a ton ($32.41 a barrel) from Oct. 1, up 9.8 percent from the previous duty of $216.40 a ton.

The CIS comprises the former Soviet states, except for the three Baltic republics.

Shipments to refineries in Belarus, Kazakhstan and Ukraine plunged 30 percent to 577,000 barrels a day, from 820,000 barrels a day in September. Exports outside the Transneft system jumped by a seventh in October to 160,000 barrels a day, from 140,000 a day a month earlier.

Production rose 0.9 percent from a year earlier and exports fell 3.4 percent compared with October, 2005.

OAO Lukoil, Russia's biggest producer, reduced extraction 0.7 percent to 1.80 million barrels a day, compared with the year-earlier period.

OAO Rosneft, key to President Vladimir Putin's plans to increase the government's role in the energy industry, raised output 15 percent to 1.77 million barrels a day. Rosneft in September started operating OAO Udmurtneft, acquired this year from BP Plc's OAO TNK-BP Holding.

Sakhalin Venture

Exxon Mobil Corp.'s Sakhalin-1 venture off Russia's Pacific coast kept output at 24,200 barrels a day, matching September, when production slid 60 percent from August's 38,500 a day, according to CDU-TEK. Output at fields run by so-called production-sharing agreements, such as those covering Exxon Mobil's Sakhalin-1 and Shell's Sakhalin-2, fell 3 percent in October to 125,000 barrels a day, compared with the previous month.

Shell, BP, Exxon Mobil and Total SA face demands from Russia to cede some control of oil and gas fields to state-aligned companies, including OAO Gazprom and Rosneft. The foreign-led ventures have become anomalies in Russia as President Putin increases state control over the energy industry.

The first phase of the Sakhalin-2 project, which has already been completed, cost $2 billion. Shell announced in July 2005 that the cost of the second phase, involving the construction of the pipelines, new platforms and the LNG export terminal, had doubled to $20 billion.

© Bloomberg

3 Responses to “Russian Oil Output, Exports Fall on Price Drop, Shell Probe”

  1. Laayla Says:

    taxes are flowing in to Moscow, even as Moscow sepdns large sums to purchase medical equipment, upgrade the universities Они - в пределах Первичной Области Религиозных Заказов, Не государства!!!and rebuild the army, as well as tax breaks??? Тарифы Импорта и экспорта - Главный Законный Источник Налогового Дохода!!!to get new businesses and factories opened. мы надеемся, они, и их владельцы, могут далее преследоваться, чтобы сделать репарации за повреждение, которое они сделали!!! БОГ ПРОКЛИНАЕТ ИХ ВСЕ!!!

  2. Nhan Says:

    No more expensive than nlcuear power, Unter, and with far less catastrophic potential. The technological gains in wind and solar power in the past decade are amazing. Denmark gets 25-40% of its domestic electricity from wind turbines, and the British government plans on achieving the same goal within the next decade.Solar farms are being proposed far and wide. California has several initiatives in the works. The Arab countries are also investing heavily in solar power.As for Germany, it has made deep investments into alternative energy. I think it sees natural gas as a stop gap until it can achieve its long range goals.France is really the anomaly in Europe, having invested heavily in nlcuear energy and with a major stake in this industry, which is why it has been slow to move toward wind and solar.The EU is pushing toward wind and solar by offering tax credits and special funding, including in Eastern Europe, where Lithuania used an EU grant to start a solar chip factory, and is finally investing more in wind power, as Latvia has done in recent years to ease its energy dependence on Russia.

  3. Felipe Says:

    Seems to me wind, solar and geothermal are beettr alternatives, and little chance of running out of energy. Nuclear energy is so expensive and requires large bodies of water for cooling, which makes it cost prohibitive in arid and semi-arid climates. Nuclear energy is almost entirely government subsidized, whereas wind, solar and geothermal is developed privately for the most part, although governments like Denmark and Britain have invested more heavily.

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