Russia will soon be running out of oil and production is expected to begin to fall off in 2020. That was the warning given by the Minister for Natural Resources and Environment Sergey Donskoy. “We need to be very careful in how we interpret these things: the fact that proven reserves will last 28 years does not mean Russia will have run out of oil by then,” Alexander Kurdin, Head of the Department for Strategic Studies in Energy of the Analytical Center, commented on this situation for lenta.ru.
Russian oil companies have technologies to get at hard-to-recover oil
Proven resources always get depleted as a result of production but they also go up as exploration continues, he noted. At the same time, Russian oil companies do have right technologies to get to hard-to-recover deposits such as horizontal drilling, hydraulic fracturing, shelf drilling and others. “We have got the tech, including as a result of cooperation with foreigners,” Mr. Kurdin summed up. And as for availability of funds for these projects, that depends on the price of oil.
The expert also noted that projections about falling oil production in Russia have been made for many years but so far it has only been growing. It is true that according to the latest data from the central control directorate for the fuel and energy sector, in February Russia expanded oil production by 5.3% on the same period of last year. In one month 43.1 million tons of oil will be produced. “And yet sooner or later we are going to see a slump, most likely in about 2020. The situation with demand is going to change too. Demand for petroleum products is falling in Europe and the region will not need as much oil as it needs now. Demand is also falling in Japan. So Russia will most likely retain its position in the market,” the specialist prognosticates. The situation is different in emerging markets as over there demand for oil is only going to grow (especially in China) and Russia’s limited supplies as well as cost and production constraints may prevent Russia from taking full advantage of this new market niche.”
“The success of Russia’s adaptation depends on how efficiently we are converting natural resources capital into human capital today,” Mr. Kurdin concluded.