Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on April 5, 2017

Bookmark and Share

When Will Russia Run Out Of Oil?

Production

On a global level, 2015 and 2016 marked the lowest level of new conventional oil discoveries since 1952. In 2016, only 3.7 billion barrels of conventional oil were discovered, roughly 45 days of global crude consumption or 0.2 percent of global proved reserves. Globally, exploratory drilling fell by almost 20 percent in 2015 and fell even further in 2016. Russia’s exploration activities, which were hit not only by plummeting oil prices but also by a targeted sanctions regime, suffered a double blow during this period. In 2015, only seven new hydrocarbon discoveries were made in Russia, three of them in the Baltic Sea. In 2016, oil and gas companies in Russia discovered 40 prospective fields, however, the 3P reserves of the largest among them, Rosneft’s Nertsetinskoye, amounted to 17.4 million tons. This stands in stark contrast with pre-sanction period achievements, for instance, 2014’s largest find, Pobeda, is believed to contain 130 million tons of oil and 0.5TCm of gas.

(Click to enlarge)

Graph 1. Russia’s Oil Production 1970-2020 and Russia’s Deep-Hole Oil & Gas Exploration Drilling.

Source: Russian Central Bank, IEA, Russian Statistics Agency.
It is only logical that against such depressive trends, that people start to question the sustainability of Russia’s current oil-producing renaissance (Graph 1). When will Russia run out of oil? Were Sheikh Yaki Zamani’s “Stone age” simile to materialize, would Russia still be among the top producers when oil started its descent towards obsolescence?

The Ministry of Natural Resources and Environmental Protection of Russia states that not accounting for new discoveries, current oil reserves in Russia stand at 29 billion tons and under current consumption rates would be depleted by 2044 (its 2P gas reserves’ depletion would come about in more than 160 years). To this end, it would like to implement business-easing measures, e.g.: facilitate the issuance of licenses and to increase the size of the allotted subsoil block to a maximum of 500 km2 (which would mean a fivefold increase compared to existing regulations). The Ministry’s stimulating measures, however, should not obfuscate the fact that Russia still has vast amounts of untapped reserves waiting to be discovered. But where?

Frontiers

The future of Russian crude lies in oil that is more expensive, more geologically complex and further away from traditional regions of production. Just as West Siberia replaced the Volga-Urals Region in the 1970s as the Soviet Union’s main producing region, East-Siberia and offshore regions will overtake West-Siberia (which saw its share in the national output diminish from 71 percent in 2004-2005 to 57 percent currently). This change of “leaders” is long overdue as West-Siberia oil output was already expected to plummet in the 1990s, yet thanks to extended oil recovery methods and slower-than-expected development of other oil-rich regions it has managed to keep stable output numbers. Russia’s oil sector has been consistently hoodwinked by analysts, who, beginning from the early 1980s predicted an imminent production slump. The production fall did happen, reaching a low-point between 1996 and 1999 when production foundered to 301-305 million tons per year. The cause was to be sought in Russia’s overall economic depression, not in its dearth of resources.

Today, Russian companies are similarly constrained in tackling Russia’s three new oil frontiers – shale, Arctic and deep-water. It is no coincidence that U.S. and EU sanctions targeted the sales of technologies related to these sectors and not conventional – whilst Russian companies are well-equipped to deal with conventional fields, they relied heavily on Western know-how. Yet it is very unlikely that even a tightening of sanctions could stall Russia’s Arctic exploration activities for a longer period of time. Russia’s continental shelf contains most of the Arctic’s oil formations and approximately 60 percent of its undiscovered reserves. So far, the 3P reserves of Russia’s Arctic stand at 585 million tons and 10.4 TCm, yet most of its Arctic Seas were only superficially appraised. The Kara Sea, whose fields are almost exclusively gaseous, has been in the spotlight since the 1983 of the Murmanskoye gas field (120 BCm), yet the northern parts of the adjacent Barents Sea, which Russia’s Federal Agency on Subsoil Usage deems the most likely to yield top hydrocarbon discoveries in the next few years, are relative newcomers in prospective surveys.

Western oil & gas companies should be aware that the Russian government treats Arctic formations as resources of “federal significance” and it is unlikely to provide them a role other than that of a minority shareholder. There is more maneuvering room for oil formations in the riskier part of the Arctic – the as of yet impossible-to-assess Laptev and Chukchi Seas, where no large-scale surveying has been done. Moreover, after the UN Commission on the Limits of the Continental Shelf acknowledged the Okhotsk Sea as a Russian enclave, the least-researched Russian sea can now be prospected and appraised. Still, the Russian Arctic, along with frontier zones like the Timano-Pechora Basin and the Yenisey-Khatanga Basin, will play an important role in keeping Russia among world’s top 3 oil producers in the next 40-50 years. Yet there is more, Russia’s oil future is not only more Arctic, but also more shale-related.

Russia has been sitting on vast shale/tight oil reserves, which according to present data are second only to the United States. Yet it might easily surpass all its rivals, as the development of gigantic tight-oil formations, such as Bazhenov Suite, the largest shale deposit in the world covering a territory of more than 1 million km2 and assumed to contain at least 20 billion tons of oil, is still in its infant phase. The potential of the Abalak Suite underlying the Bazhenov, the Domanik Suite, stretching asymmetrically across the Volga-Urals Region from Perm to Orenburg, as well as many others, is still difficult to assess, yet virtually all of them are located in traditional oil-producing regions with a fully-established oil infrastructure. Although the first Bazhenov oil gush dates back to 1969, several factors have hindered the development of Russian tight oil, yet the principal among them was the availability of other, less-costly variants of production. The preference for easier-to-access, less costly formations is aptly reflected in Russia’s curbing of deep-hole exploration drilling (Graph 1).

As Russia’s tight oil needs at least an oil price level of 55-60 USD per barrel, bringing the first fields on-stream is still some way off as conventionals’ breakeven levels are in the 20-30 USD per barrel range. Despite a significant lag compared to the U.S. shale revolution, this might not be that unfavorable for Russia. It is expected that under the aegis of “import substitution”, Russian service companies might be fully up to the task to exploit Russia’s shale bounty by the 2020s, moreover, they are likely to work in an environment with significantly lower drilling costs, time and efficiency rates than their American counterparts in late 2000s (thus yielding more oil). By that time, perhaps, anti-Russian sanctions will be a yesteryear affair.

Lastly, one should not underestimate the tenacity of Russia’s conventional oil reserves, which thanks to enhanced oil recovery techniques and supplementary exploration will remain a force to be reckoned with. As demonstrated by the discovery of the Velikoye field in the Astrakhan Oblast (reserves estimated at 330 million tons of oil), Russia’s pre-salt layers, even in regions previously thought to be on the verge of depletion, might kickstart a new development vector in its energy matrix. As Russia’s Natural Resource Ministry cannot account for events that are still yet to happen, its 2044 depletion assumption reflects merely its inherent conservatism, not the country’s realistic capabilities. By all accounts, Russia will remain a major oil-producing nation throughout the entire XXIst century, with oil production moving to places that are further (north and east), deeper (both deepwater and pre-salt) and generally more costly.

By Viktor Katona for Oilprice.com



7 Comments on "When Will Russia Run Out Of Oil?"

  1. Davy on Wed, 5th Apr 2017 7:14 am 

    Russia’s future is tied to oil and one man. That is not good. It is a great country blessed with resources and smart people but it is also a 3rd world country in decline. Much of what happens to Russia will depend on how long globalism manages to utilize oil effectively. How quickly globalism declines will matter to how much oil Russia can sell. Russia is far better placed than most resource nations but they are still a resource nations with a globalism type infrastructure. When globalism ends so will Russia as we know it. It is likely what comes next will benefit from all these resources at lease in the first step down. Oil is as much of a handicap as an enhancer. Russia has handled oil better than most but some aspects of the handicap are unavoidable. Their economy is dominated by resources and consequently will suffer from commodity decline as globalism declines. It is the wisdom to apply oil in the economy that matters. Russia under Putin has been a clear success. Russia is now and again a world power. Where Russia goes from here is tied to Putin and oil.

  2. dissident on Wed, 5th Apr 2017 7:45 am 

    Davy, take your ignorant fantasies and shove them. Russia’s GDP depended on oil and gas at the 13.7% level in 2013 (World Bank data) and since the price of oil has crashed this percentage has not moved much due to the ruble forex slide. Russia’s consolidated budget depends on oil and gas taxes at the 21% level.

    https://www.awaragroup.com/blog/share-of-oil-and-gas-in-russias-tax-revenue-dropped-to-21/

    Since the oil and gas contribution to Russia’s GDP has been in long term decline, the “running out of oil” BS is essentially a non-issue. Global oil and gas demand will not “run out” either.

    Funny BS about “running out of oil” from a peak oil site. Different standards of technical understanding for different countries? Look up “Bazhenov formation”, twits.

    As for the one man. Sod off, wanker. Roosevelt got four terms. Trudeau had 16 years in office and William Lyon Mackenzie King had 23 years in office. The Russian voters decide and they get all the same propaganda from NATO that you feed off. So don’t hide behind the excuse that they are all brainwashed by “state” media. More of your ignorant fantasy passing off as informed opinion.

  3. Cloggie on Wed, 5th Apr 2017 7:56 am 

    Lunacy at its maximum: Democrat wants to throw Republicans in jail because of contacts with Russians:

    http://www.spiegel.de/politik/ausland/donald-trump-mitarbeiter-koennten-wegen-russland-verbindung-verurteilt-werden-a-1141927.html

    In the eyes of Washington lunatics (Dems “Texan” Joaquin Castro) it is apparently a crime to talk to Russians these days.

    Mug shot Castro:

    https://en.wikipedia.org/wiki/Joaqu%C3%ADn_Castro

    Russians are probably too white and that is a crime according to the Democrats, who plan to draw from the endless reservoir of “Democrats”, aka the third world, change the US demographic balance so much to secure victory for all times, while keeping the Republican competence in prison, just to get the work done.

    The smarter Republicans, who against all odds secured victory for the last time in history, thanks to the blond intruder, know exactly what’s coming their way.

    It is absolutely easy to understand why Americans are so pre-occupied with collapse these days and love to think that this applies to the rest of the world as well (which is not the case).

    #BuildThatWall!
    #BigGeopoliticalChangeComingTimber!

  4. Cloggie on Wed, 5th Apr 2017 8:00 am 

    Roosevelt got four terms.

    Officially Putin has to retreat by 2023 at the latest, provided he will be reelected in 2018, which is very likely going to be the case. In 2023 Putin will be 71, just as old as when Trump began his career as politician. People life for ever these days.

    Here my prediction: after 2023 the Czar will return to Russia.

    I gladly leave it as an exercise to figure out who the first czar of the post-modern era is going to be.

  5. Davy on Wed, 5th Apr 2017 8:05 am 

    Russophile Dissident who is one of the board’s hypocritical Canadian anti-Americans speaks as he always does if his loving Russia is ever step on in the slightest way. Dissident who is a dumbass engineer type with little if any financial understanding does not realize how big a chunk oil is a “21%”. There are other resources that factor into that figure to raise it higher and then the economic knock on effect of other dependent industries also “dumassident”. You opinion that “oil and gas contribution to Russia’s GDP is in decline because it has been in decline is more agenda hopium for your Russo agenda. All you really care about is a bulwark to the US you hate vehemently.

    Better a sod off Wanker, than a habitual circle jerking Russophile anti-American Canadian. Putin will remain in charge even if he leaves. Russia is a mafia state and that just might be the most effective kind of government in a global decline. That said when a country relies on a few resources and one man for direction and support they are very much at risk. You can’t see that because you are so far off the deep end as a Russophile.

    “So don’t hide behind the excuse that they are all brainwashed by “state” media. More of your ignorant fantasy passing off as informed opinion.”
    Hey, “F” wack, please show where I said what you just said you lying sack of shit. LOL

  6. Dooma on Wed, 5th Apr 2017 6:52 pm 

    If Russia is mafia state, and China is a failing state, prey tell what sort of state the US is please?

    You can give your answer on here which is probably monitored or talk into your smartphone which is a microphone. Or any other device in your house with a microphone.

    A surveillance state/police state?

  7. makati1 on Wed, 5th Apr 2017 7:10 pm 

    Dooma, the U$ is a psychotic, insane state. Drugged to the gills and desperate. It includes the mafia corruption of a 3rd world banana republic, a failing economy, a “1984” surveillance and police state all in one sick, smelly, rotten package. A rabid junk yard dog that is going to destroy the world in its death throes. Or so it looks to me. I hope I am wrong. I don’t think so.

Leave a Reply

Your email address will not be published. Required fields are marked *