30 December 2025
Oil production at some Russian oil companies has become unprofitable due to discounts they offer to buyers in India and China, Reuters reports , citing analysts and industry sources.
According to Argus , last week the price of Russian Urals crude fell to $33-34 in Baltic and Black Sea ports—the lowest since the pandemic—and its discount to Brent crude reached $27 per barrel. Some batches destined for Chinese refineries were sold at a discount of $35 per barrel—effectively half price.
As a result, the oil industry is on the brink of unprofitability. “A number of oil projects have already gone into the red, in part due to the complexity of production,” notes BCS analyst Kirill Bakhtin.
Fields benefiting from the preferential mineral extraction tax (MET), a key source of oil and gas revenue for the budget, continue to operate profitably. According to Reuters estimates, approximately 20% of oil producers pay zero mineral extraction tax and earn a trading profit of $20 per barrel even at current Urals prices. Another 30% of companies use a preferential rate and also maintain profits.
“Only older fields in the Volga region and Western Siberia with <…> large reserves and proximity to pipelines should fare well,” notes Maxim Shevyrenkov of the Institute of Energy and Finance. Fields with full NPDI rates, geographically remote fields, and fields with challenging production conditions generate a $5 loss per barrel sold, according to Reuters calculations.
Overall, the oil industry is maintaining a positive trend, Bakhtin estimates. But the profit margin is negligible: with Urals prices hovering around $40, approximately 65% ($26) goes toward taxes, up to $4 goes toward well costs, and up to $7 goes toward transportation, Bakhtin calculated. That leaves only $3 per barrel to cover companies’ investment costs—future production, drilling, and field maintenance.
The oil industry, already hit by sanctions that have deprived companies of access to Western equipment, is gradually sliding into crisis, according to Craig Kennedy, an expert at the Davis Center for Russian and Eurasian Studies at Harvard.
In the first half of the year, Rosneft’s profits fell threefold, Lukoil’s by half, Gazprom Neft’s by 54%, and Surgutneftegaz became unprofitable, losing 454 billion rubles in six months. Oil and gas budget revenues fell by 21% from January to November, and in December, according to Reuters calculations, they will be the lowest since August 2020.
The government designed the 2026 budget assuming Urals oil would cost $56 per barrel, but actual prices are currently a third lower than that. All this promises a “major shortfall” in oil and gas revenues, which will accelerate in January, warns economist Yegor Susin.
It looks like we can start hitting more military factories now, because the genius in the Kremlin has destroyed his oil business.
I’m sure they would love to do that if they had the weapons for it. Too bad some in the West are too cowardly to hand over what’s needed.