Russia running out of ‘easy’ oil
Nearly all of Russia’s oil production will consist of the so-called hard-to-recover crude reserves unless the country speeds up and incentivizes exploration, Russia’s Deputy Energy Minister Pavel Sorokin said on Wednesday.
“Almost 100% of our production will be hard to recover over the term of ten years,” Sorokin said, as quoted by news agency TASS.
The hard-to-recover reserves will have much higher lifting costs than conventional reserves, according to the deputy energy minister.
This is a problem for Russia, one of the world’s biggest oil producers, as it would see the quality of its reserves decline and make the extraction of oil much more expensive than it is now.
Russia needs to incentivize exploration in order to replace the hard-to-recover reserves with new, potentially lower-cost, discoveries.
In May this year, Russia’s Natural Resources Minister Alexander Kozlov said that oil reserves would last until 2080 at the current pace of annual production. Russia’s actual oil and gas reserves could even rise if it steps up exploration in hard-to-drill areas, the minister added, noting that Russia needs to develop exploration, including in hard-to-reach areas.
Russia’s oil and gas discoveries fell to the lowest in five years in the first half of 2021, after last year’s crisis resulted in steep cuts in capital expenditures for exploration, data and analytics company GlobalData said earlier this month.
In the first half this year, Russian companies found oil and gas at six very small fields, adding just 36 million barrels to reserves, which is equivalent to fewer than four days of Russian daily oil production, according to GlobalData’s estimates.
While Russian oil production and revenues have benefited this year from the much higher oil prices due to the OPEC+ cuts and rebounding global demand, exploration has continued to suffer from the Covid-inflicted crisis in 2020, which forced companies to slash capex for exploration drilling, Anna Belova, Oil & Gas Analyst at GlobalData, said.
“To retain its place as one of the top oil and gas producing nations, Russia needs to ensure a steady pace of discoveries to replace produced reserves. Otherwise, the effects of Covid-19 and reduced investments will be felt by the Russian oil and gas sector well after the pandemic subsides,” Belova said, commenting on GlobalData’s findings.
For more stories on economy & finance visit RT's business section