MOSCOW, March 6. /TASS/. Oil and gas condensate production in Russia amounted to 11.05 million barrels per day (bpd) in February 2023, having recovered to the level of February 2022, when sanctions were not yet imposed on the Russian oil industry, according to the analytical report of the Energy Development Center.

"At the end of February, oil production in Russia reached February 2022 levels of 11.05 million barrels per day, fully offsetting the decline due to the sanctions and restrictions imposed since then," the report says.

The experts emphasize that initially the Russian government was preparing for a different scenario, expecting a decrease in oil production and an increase in its export prices. The Energy Development Center recalls that the budget for 2023 was formed on the basis of a reduction in the production of oil and gas condensate to 490 million tons (-8.2% by 2022), and the oil price included in the budget was $70.1 per barrel with the dollar-to-ruble rate of 68.1 rubles.

However, experts note that the Urals discount to Brent in January-February exceeded $30 per barrel, so the export price of Russian oil was only about $50 per barrel, while oil production remained stable.

"Now the authorities are trying to adapt to a reality in which oil production is not falling as much as they expected, while the price of oil turned out to be much lower than forecasts. According to our estimates, with an average Urals price of $58.3 per barrel during 2023 (actual price in January-February and a forecast of $60 for the remaining months of the year), the budget could be short of about 1 trillion rubles ($13.2 bln) only in taxes from the oil industry," the report says.

According to experts, the latest government actions to regulate the situation in the oil industry reflect a change in ideas about how the Russian oil industry should react to export restrictions and how the risks of negative consequences of sanctions should be distributed between the budget and oil companies.

In February, the amendments to the Tax Code fixed the maximum discount of Urals to Brent for tax purposes. In addition to that Russia decided to cut oil production in March by 500,000 barrels per day, which is also aimed at reducing the discount on Russian oil, the experts say.

The main way to balance the budget was the weakening of the ruble, which reached 76 rubles per dollar at the end of February amid lower oil prices, the experts say.

"If the average price of Urals in March-December is $60 per barrel (which will correspond to the price cap and allow Russian oil companies to use Western tankers and insurance), then the Finance Ministry needs an average ruble exchange rate of 77 rubles per dollar in 2023 to bring the amount of revenue from oil (mineral extraction tax, tax on additional income from hydrocarbon production and export duty) to the initially budgeted values," the Energy Development Center emphasizes.