Fuelled by growing demand from China and India for oil exports from Russia, Russian oil and gas production reached new heights in the recent past.

Interfax  news carried a statement from the Fuel and Energy Sector Central Dispatch Service that in the initial four months of 2007, production of oil and gas condensate boosted in Russia at a rate of 3.6 year on year to 161.372 million tons.

In the four months Russia’s gas production increased 0.8% year-on-year to 231.256 billion cubic meters. In April the production was 55.872 bcm while oil production was 40.182 million tons. Even Russian oil exports to non-CIS countries increased 6.3% year-on-year in the first four months of 2007 to 71.662 million tones, of which 18.543 million tons came in April.

Ranked second largest in the world for oil exports, Russia’s government and energy industry have expressed their intention to increase oil and gas exports and for new markets outside Europe which expects a fairly static demand for oil and gas. This move calls for additional export infrastructure like pipelines and oil and gas terminals.

Vertically integrated oil companies in Russia are now on the quest to boost utilization of refining capacities. However, due to greater profitability of export sales, until recently most preferred exporting crude oil at higher world prices than stretch resources for refining. The recent change is credited to the rising Russian domestic oil prices and the government’s increase of export tariffs on crude oil. Therefore, now Russian market sales in refined products make an economic alternative to oil exports.

Another cause for increasing Russian oil exports has been the speed of economic growth in China and India lately. Both countries have been increasing oil demand at an annual rate of nearly 4 percent, more than twice the average global rate.

A RNCOS research analyst sums up the scenario saying every barrel of Russian oil is necessary for the world. Growing Chinese and Indian demand along with the ever-increasing demand by the United States will tighten markets increasing dependency on the Middle East. With today’s soaring oil prices, the belief of Russian companies and the government is that much of the new developments and infrastructure can be self-funded. Chinese and Indian companies with solid backing by their governments are ready to deal with the Russian companies and the government.