For Russia, gas condensate plays a key role amid sanctions on production in the Arctic

As Siberia's oil fields slowly dry up, Russia is using the by-product to keep oil production up and meet its 10 million barrels per day target. Companies including OAO Gazprom, OAO NOVATEK and OAO Rosneft are also increasing condensate yield at new Siberian gas fields, as this is a common component of underground gas reserves. Analyst Alexander Nazarov said the condensate is especially important now because it is not subject to sanctions against the Russian oil industry for projects in the Arctic.

Ultra-light oil production is set to increase 17 percent this year, according to Gazprombank estimates. This makes it one of the key growth drivers. Nazarov said that "We are witnessing a unique situation this year, as the number of gas condensate projects increases significantly." He said that condensate production could be as high as 600,000 barrels per day, or 5 percent of total annual production. This should help the country achieve another record in oil production in 2015 and maintain its position as the world's second largest producer. Russia produced 526.3 million tons of oil and condensate in 2014, with an average of 10.57 million barrels per day. January production reached its historic post-Soviet level of 10.7 million barrels per day and continues to maintain output close to that level.

Gas condensate is a very valuable raw material. Condensate profitability was the main driver for growth in total production. Its profitability starts at the wellhead, and production tax and export duties on condensate are lower than for conventional oil. NOVATEK, one of the leading Russian exporters of condensate, was estimated to have an average 2014 export price for condensate products of $ 488.50 - $ 538.60 per tonne excluding duties, while the net export price of crude oil was 317. 10 dollars per ton.

Nazarov said that Gazprom, Russia's largest gas company, is likely to remain the dominant condensate producer in the country, with an output of around 15 million tonnes in the near future. Gazprom plans to increase its condensate production to 17 million tons per year by 2017. The total volume of gas condensate production in Russia tends to grow to 50 million tons per year by 2030.