LONDON: Russia’s oil pipeline monopoly Transneft has warned producers they may have to cut output following Ukraine’s drone attacks on critical export ports and refineries, three industry sources said on Tuesday.
Kyiv has stepped up attacks on Russian energy assets since August in a bid to impede Moscow’s war effort in Ukraine and reduce the Kremlin’s revenues as attempts to secure an end to the conflict through peace talks have stalled.
Oil and gas revenues have accounted for between a third and half of Russia’s total federal budget proceeds over the past decade, making the sector the single most important source of financing for the government.
Ukrainian drones have hit at least 10 refineries - cutting Russia’s refining capacity by almost a fifth at one point - and damaged its leading Baltic Sea ports of Ust-Luga and Primorsk, Ukrainian military officials and Russian industry sources said.
Russian authorities have not publicly commented on the extent of the damage or its impact on production and exports.
However, Transneft, which handles more than 80% of all the oil extracted in Russia, has in recent days restricted oil firms’ ability to store oil in its pipeline system, two industry sources close to Russian oil firms told Reuters.
Transneft has also warned producers it may have to accept less oil if its infrastructure sustains further damage, the two sources said.
The attacks could force Russia, which accounts for 9% of global oil production, to ultimately cut output, said the two sources and a third source familiar with oil pumping operations.
The three sources asked not to be named due to sensitivity of the issue.
Transneft did not answer requests for comment.
The West has imposed successive waves of sanctions on Russia over its invasion of Ukraine, focusing heavily on its oil and gas sector. But Moscow has managed to re-route most oil exports to Asia, where India and China are its primary buyers.
Last week, Ukrainian drones hit Russia’s biggest oil port of Primorsk for the first time since the war began in 2022, temporarily forcing operations there to shut down.
Primorsk has capacity to export more than 1 million barrels of oil per day, or more than 10% of Russia’s total oil production.
Ukrainian President Volodymyr Zelenskiy said the strikes had inflicted significant damage and called attacks on Russian oil infrastructure “the sanctions that work the fastest”.
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