Russia Hints at Direction of Energy Policy

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Russia will not engage in formal discussions on a new energy policy until September, but recent statements by Russian officials may indicate how Moscow is thinking about its future under Western sanctions. Comments suggest there are no plans to significantly cut oil and gas production, so long as Russia can continue to find buyers. This is already facilitating a massive shift toward Asia-Pacific markets, which Moscow will more fully embrace. Russian Energy Minister Nikolai Shulginov opposes the idea expressed by Lukoil's major shareholder Leonid Fedun, who believes that Russia should cut its production by about 30% to 7 million-8 million barrels per day and sell less oil at higher prices rather than continuing to sell it at discounts of 30%-40%. Deputy Prime Minister Alexander Novak says the discounts — which can reach as high as $40 per barrel — would disappear with resolution of export logistics problems. Novak also believes Russian oil sales will remain stable, even if crude and gas condensate production could fall to 10.02 million b/d this year from 10.5 million b/d in 2021, because of reduced refining volumes. Russia produced close to 10.7 million b/d in June. Novak said longer-term production would not suffer much because of the EU's oil embargo, which will come into force at the end of 2022, because by that time Russia will have redirected its exports. However, Russia's economic development ministry envisages a bigger production decline — to 9.53 million b/d in 2022 and even lower in 2023.

Sanctions, Oil Supply, Hydrogen
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