Rosneft bucks world trend to boost oil drilling amid price slump

STEPHEN BIERMAN

MOSCOW (Bloomberg) -- OAO Rosneft increased drilling for oil and gas by 27% in the first seven months of the year, bucking the trend of international oil companies as prices slump.

Drilling rose to 4.59 million meters (15 million feet) compared with 3.61 million meters in the first seven months of last year, Russia’s largest oil company said in a statement Thursday. The increase will help Rosneft replace production volumes lost last year when it reduced work with contractor Eurasia Drilling Co., Alexander Kornilov, an oil analyst at Alfa Bank, said by email.

“This jump is rather a sort of catch up” and will yield results in 2016, Kornilov said. Rosneft “needs to drill actively in order to withstand falling production at Yugansk and Samotlor,” its largest units, he said.

While oil drilling in the U.S. fell by a record after the Organization of Petroleum Exporting Countries decided last year to defend market share rather than cut production amid a supply glut, Russia’s industry has shrugged off the price slump. The nation’s oil production is headed for a record this year as tax rates adjust to lower prices and a weaker ruble has reduced the cost of services.

Brent oil prices have fallen to just over $50/bbl, about half the previous year’s levels. Russia’s currency has weakened to 64.0320 to the dollar, almost twice the rate one year ago.

Drilling at Rosneft’s largest unit, RN-Yuganskneftegas, increased 40% over the first seven months of this year to 1.719 million meters, including an increase in higher-technology wells, according to the statement.