OREANDA-NEWS. October 08, 2009. The Ministry of Natural Resources has allowed oil and gas extracting companies to increase their deviation from the hydrocarbon production levels outlined in their license agreements, domestic media sources wired, reported the press-centre of OTKRITIE FC.

Previously, the maximum deviation could not exceed 10% per annum. The ministry is now looking at a range of deviations from 7.5% for the oil producers with declared annual production volumes exceeding 25m tons (500,000 bpd), to as much as to 50% for companies that produce less than 25,000 tons of oil per annum (500 bpd). Deviations for gas producers will be raised from 10% to 20% per annum. In addition, the ministry is abolishing limits for production levels for fields at preliminary stages of geological exploration.

View: Such a change is likely to be applauded by the entire oil industry, especially by small oil and gas producers and by oil majors that develop greenfield projects. This news is potentially positive for Alliance Oil, which currently extracts 42,000 barrels of oil per day and plans to double output after 2012. This reform facilitates increasing production planning levels at greenfields where the hydrocarbon output can be doubled or tripled YoY. In addition, this change could result in a rise in drilling volumes, which in turn could trigger greater demand for oilfield services.

Action: This news could be a short-term positive for Alliance Oil stock.