Crude Oil, Russia, OPEC+: Anguish Grows for Small Producers - Bloomberg

Crude Oil, Russia, OPEC+: Anguish Grows for Small Producers - Bloomberg:

As Russia’s small oil producers struggle to survive a historic price crash, some say in private they wish they could just set their crude ablaze.

The sentiment, though wishful thinking, lays bare the scale of the issue for Russia during the global pandemic -- there is too much crude and nowhere to store it. While Saudi Arabia and the U.S. have more places to keep it, Russia is getting increasingly desperate. Even turning off the taps is expensive.

About 90% of Russian oil output requires complex, expensive technologies like hydraulic fracturing, according to Marina Mosoyan, consultant at Moscow-based Vygon Consulting. That makes turning wells off and on more complicated for Russian producers compared with their competitors in the Persian Gulf.

Shutting an average well in West Siberia, Russia’s main oil province, would cost around 400,000 rubles (around $5,370), and bringing it back online around three times as much, Mosoyan estimated. That’s big money, even for Russian oil majors, as their average lifting costs recently came to less than $4 per barrel, with their wells producing between 50 and 300 barrels per day, according to data from Oxford Energy. For smaller Russian independents, it may be financially unviable.