Russia's oil output and export growth is likely to slow by almost 40 percent in 2005 as the ruin of top major Yukos, higher taxes and a pipeline bottleneck put the brakes on a five-year boom.
Oil has been the engine of the country's economic growth. A sharp slowdown in oil output growth could torpedo President Vladimir Putin's stated goal of doubling gross domestic product by early next decade.
A poll of 18 experts showed an average oil output growth forecast of 5.6 percent to 484 million tons, or 9.72 million barrels per day in 2005, down from 9 percent growth in 2004 and record 11 percent growth in 2003.
Most analysts said the world's second-largest oil exporter was likely to be able to boost production by some 500,000 bpd next year.
With domestic demand flat at about 2 million bpd these extra barrels are set to be exported to world markets. High oil prices will also make some nonpipeline routes economically viable.
Output has grown by more than 50 percent since 1999, but after 2005 that expansion could fall to a mere 2 percent to 3 percent and further reduce Russia's role as the only major non-OPEC supplier able to meet booming demand for fuel, particularly in China.
Boston's Energy Security Analysis, which gave the most pessimistic 2005 growth forecast of 2 percent, said the Kremlin campaign against Yukos and the limited availability of easily accessible and commercially recoverable reserves would be the main factors behind the slowdown.
Top oil exporter Yukos faces ruin over a $27.5 billion back tax claim. Its core Siberian oil unit was auctioned off on Sunday for $9.4 billion to help recover the debt.
Boston's ESAI notes that Yukos was one of the key drivers behind growth over recent years, but its financial troubles prompted a tenfold drop in its oil output growth rates in the first 10 months of 2004.
"As this decline has taken place in an extremely favorable price environment, the concern is that what we are seeing is not just a bump in the road, but a reversal of the trend," said Yulia Woodruff, ESAI's Russia analyst.
"I would be very surprised if Yugansk does not see a fall in production next year," said Adam Landes from Renaissance Capital, who gave a modest 4.2 percent total growth forecast.
The drop in Yukos' growth volumes has been compensated this year by higher-than-expected growth rates at other majors, such as LUKoil, Surgutneftegaz and TNK-BP.
But Yelena Anankina from Standard & Poor's said the Yukos case has highlighted risks and may significantly affect investor confidence. She also noted that production at a number of Siberian oil fields has reached its plateau this year, therefore requiring much higher investments for further growth.
Valery Nesterov from Troika Dialog said higher export duties and mineral extraction taxes, which came into force in 2004 or are due to next year, will leave oil majors with fewer funds available to meet higher capex requirements.
Russia has no reliable oil export data, as crude and refined products leave the country via a huge number of routes.
The Soviet Union was exporting little more than 2 million bpd. With the privatization of the oil industry in the mid-1990s and the fall of domestic demand, analysts tend to calculate export volumes by deducting local demand, which has been flat at around 2 million bpd in recent years, from production levels.
That means Russia will export 7.2 million bpd to international markets this year in the form of oil or products, with those volumes rising to 7.7 million bpd next year.
Anton Zatolokin from MDM-Bank says he believes Russia will have no problems exporting incremental output, as high oil prices still support alternative shipments by rail and river, which are more expensive than pipelines.