Barrels did not get megawatts – Newspaper Kommersant No. 45 (7490) of 03/17/2023

As Kommersant noted, in the Tyumen region, Khanty-Mansi Autonomous Okrug and YaNAO – the main oil and gas producing regions of the country – a drop in electricity consumption has been observed since March. The slump in demand is likely the first sign of the 500,000 barrels per day decline in oil production that was announced by the government. From the beginning of March and across the country as a whole, demand for electricity began to slow down after growing by 1.3% in January and February, which, according to Kommersant’s interlocutors, may be due to warmer weather.

The Tyumen region, Khanty-Mansiysk Autonomous Okrug and Yamalo-Nenets Autonomous Okrug began to reduce electricity consumption in March. So, from March 5 to March 15, the total planned volume of electricity consumption in the region decreased by about 1% year-on-year, to 2.95 million MWh, follows from Kommersant’s calculations based on ATS reports (the structure of the Market Council is the regulator energy markets). The planned volume of consumption is the volume of electricity that consumers plan to buy on the day-ahead market (the main sector of electricity trade).

The decrease in consumption in the main oil and gas producing regions may indirectly indicate that oil companies began to cut production in March. The government agreed with oil companies that in March they will reduce production by 500 thousand barrels per day compared to January. In January, production was 1.481 million tons per day, but in February, as Kommersant wrote, oilmen increased production to the pre-sanction level (over 1.5 million tons per day). It was assumed that this measure would help support the Urals quotes, which fell significantly after the EU embargo on Russian oil was introduced in December 2022.

Maxim Malkov from Kept agrees that the decrease in consumption in these regions is most likely the result of a reduction in production: “Mostly, the most mature fields with high water cut, where one ton of oil produces the most significant amount of electricity, are being decommissioned.”

The Ministry of Energy, according to several sources of Kommersant, has distributed reduction quotas to oil companies. Two Kommersant sources in oil companies claim that oil companies are reducing production within quotas in March.

“For 2023, we expect that the level of oil will be somewhat lower, including this due to the voluntary reduction in oil production,” Nikolai Shulginov, head of the Ministry of Energy, said on March 15. “The level of gas production will continue to decline due to the refusal of the European market, and with the timing of the reorientation of energy flows to the east.

A decrease in the planned volumes of electricity consumption is also taking place in other regions of the country. According to Kommersant’s estimates, since the beginning of March, the indicator has been declining in 41 constituent entities of the Russian Federation compared to the same period last year. Among the regions with the largest decrease in planned volumes are Crimea and Sevastopol (minus 11%), Kursk region (minus 7%), Vologda region and Mordovia (minus 6%), Krasnodar Territory (minus 5%), Belgorod, Novosibirsk, Astrakhan and Ulyanovsk regions (minus 4%). In general, for the 15 days of March, the planned consumption volumes in the wholesale energy market decreased slightly – by only 0.14% yoy.

The statistics on the actual indicators of demand for electricity has been closed since the autumn of last year. The head of the Ministry of Energy, Nikolay Shulginov, reported on March 2 that energy consumption in Russia had increased by 1.3% since the beginning of 2023. At the same time, the growth of the planned volume of consumption on a cumulative basis, taking into account March, is slowing down: from January 1 to March 13, the indicator, according to Kommersant, increased by 0.9%. A significant increase in demand in the first two months of the year was largely due to the temperature factor, Kommersant’s interlocutors say, pointing out that the first weeks of March 2023 as a whole for the Unified Energy System of Russia turned out to be warmer than last year.

Polina Smertina, Dmitry Kozlov