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Energy Stat of the Week by J. Marshall Adkins

Energy Stat: CapEx Trend Shows That Russia Is Having to Work Harder For Its Oil Production Growth

September 17, 2018

Vladimir Putin’s and the entire Russian government’s approval ratings plunged in recent months due to their extremely unpopular pension reform plan, but when it comes to oil production, Russia remains a model of predictability. We cannot think of any other non-OPEC country where production growth has been as consistent over the past decade. In June, we previewed Russia’s production response following the OPEC+Russia decision to unwind their production cuts, and today we are providing an update on Russia’s oil production outlook. On a short-term basis, it is fair to say that Russia’s post-cuts production uplift will be slightly faster than we had expected. Longer-term, however, the picture is much the same as it has been: steady growth of 1% per year. What’s intriguing, though, is how much harder Russia’s oil industry has to work in order to achieve that 1% growth. While we do not expect Russian supply to peak anytime soon, capital spending trends increasingly raise troubling questions about the country’s oilfield productivity.