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Russia is the largest holder of oil and gas reserves in the world and the second largest oil producer with 12% of total global oil output. The oil upstream industry is a backbone of the economy with an impact on the country’s international balance of payments, exchange rate and formation of investment resources of the economy.

Following its post-Soviet collapse, Russian oil production has been growing and rebounded from its low of 5.8 million barrels per day to the level of 10.4 million barrels per day in 2012, with around 7.2 million tons exported as either crude or oil product. According to the Russian Energy Ministry, oil output in Russia grew by 1.6% to 517m tonnes, supported by tax legislation incentives and the launch of new pipelines and oil exploration projects.

The well stock reached 162.8 thousand versus 159 thousand in 2010 while more than 138.8 thousand (~85%) of them are actively producing. Russia aims to maintain annual oil production at the current level, or just over 10mn bpd, over the next 10 years.

Capital expenditures of the oil upstream sector grew from RUB 596 bln in 2011 to approximately RUB 700 bln in 2012. Oil prices continued to support favorable conditions in the industry. Following strong performance in 2011 driven by unstable political situations in key oil producing regions as well as the monetary policy of the developed countries, average oil price continued to demonstrate moderated growth supported by ongoing monetary expansion of the key Central Banks and prolonged instability in some producing countries. Average oil price reached 111.7 USD in 2012 versus 111.2 in 2011. The industry forecast for 2013 is for prices to climb to over 110 −115 USD per barrel.

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