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Russian oil output falls amid Exxon setback

Russian oil output fell for a second month in a row in October partly because the country and Exxon Mobil failed to solve differences over a Sakhalin venture holding back the start up of full-scale production.

Energy Ministry data showed late on Wednesday output fell to 9.71 million barrels per day (bpd) in October from 9.75 million in September and an all-time high of 9.76 million bpd in August.

Production peaked in August after Exxon ramped up output at its Sakhalin-1 production site and said it was on track to reach output of 250,000 bpd by the end of the year.

But its October output stagnated at around 30,000 bpd after Russia said Exxon's De Kastri terminal was not fully ready for export operations and ordered more checks. The move is seen as part of a broader Kremlin strategy to reduce foreign influence and strengthen control over Russia's strategic energy sector.

Exxon exported in October only one tanker from De Kastri, which is due to load one cargo every four days when it comes fully on stream.

Market players say the Sakhalin-1 group, which also includes Japan's consortium Sodeco, India's ONGC and Russia's state oil firm Rosneft, has pre-sold six cargoes and their delivery is held back by a dispute with Russian officials. The group's spokesman Michael Allen said on Thursday a second cargo, Viktor Konetsky, has arrived at the port. He declined to say how long it would take to load it. He also declined comment on the October production results.

ROSNEFT LEADS GROWTH

October's output was only 0.9 percent higher than in October 2005, the lowest year-on-year growth figure in years. In January-October it was up by 2.3 percent.

Russian output growth slowed to below 3 percent in 2005 after impressive growth rates of nine percent and 11 percent in 2004 and 2003 respectively.

Analysts say the slowdown is caused by Russian reserves in traditional production regions, such as West Siberia, becoming more depleted and also by less efficient state companies playing an increasingly bigger role that outstrips private business.

The International Energy Agency said this week it did not expect Russian oil production growth to speed up before the country launches new massive deposits in East Siberia in the middle of next decade.

The data shows state oil champion Rosneft has been growing faster than any other firm in Russia while growth at previous leaders such as TNK-BP has all but evaporated.

Rosneft sits on top of the best fields it bought from the stricken oil firm YUKOS following a forced state auction in December 2004. In January-October its output was up 9.5 percent year-on-year to 1.62 million bpd.

EXPORT DUTY WEIGHS ON SHIPMENTS

On the export front, deliveries by state pipeline monopoly Transneft to Europe fell by 6.5 percent in October to 4.2 million bpd from 4.49 million bpd.

Russia slapped an all-time high duty on crude exports from October. Oil firms say they will try to refine more at home and export more refined products which are subject to lower duties.

Exports are unlikely to recover before December when duties will fall by 24 percent following a fall in global oil prices.

The biggest decline in exports was on the Druzhba pipeline to Central Europe with deliveries falling by eight percent.

Russia's top Baltic Sea port of Primorsk also cut shipments by six percent or three large cargoes.

© Reuters

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