Russia sets long-term oil and gas production targets

3 december 2018

At the 6th Russian Oil and Gas Forum "Exploration and Production", an expert of the Analytical Center Irina Pominova talked about the priorities of state policy in the industry.

"Oil and gas production is an area with a long production cycle, this is why long-term development targets are required here", Pominova said. "They are considered as particularly important given the contribution of oil and gas production to the Russian economy and increasing external pressure along with uncertainty."

Despite this, and partially due to this, approval of the updated versions of the main strategic documents for the industry is delayed, the expert believes. However, most of them are aimed at resolving the key industry problems, and this means that we still have long-term development priorities. These include removal, mitigation or prevention of obstacles to further development aimed at ensuring stable production levels with the possibility of increasing supported by favorable conjuncture.

At the end of 2017, the geological exploration returned to positive trends, Pominova told. The volumes of exploration drilling have increased (by 24%) as well as seismic exploration (2D by 24%, 3D by 4%) and oil reserves growth (up to 550 million tons).

Nevertheless, the level of confirmation of resources with their subsequent transfer to the category of reserves remains low against the background of continuing reduction in budget financing of exploration works, the expert stated. In this situation, the priorities include the support of investments, especially private, in oil and gas exploration, creation of attractive conditions for replenishment of the resource base, simulating the most complete extraction of reserves from earth.

At year-end, oil and gas condensate production amounted to 547 million tons, which is 0.1% less than in 2016, which is caused by the action of OPEC+. But in the long term, new fields will occupy an increasing share of exploration, which in the conditions of increasing competition in the world markets is dictated by the priority of technological development and modernization as well as taxation optimization.

"Changes in the oil and gas industry taxation system are under scrutiny", Pominova said. "The law on tax on additional income from hydrocarbon production has been adopted, a decision on tax manoeuvre completion has been made (which will affect the overall investment opportunities of oil and gas companies), proposals on new benefits were made in September. At the same time, it should be recognized that Russian oil and gas industry taxation remains quite complex."

In conclusion, the expert noted the increasing importance of digitalization as a priority for oil production. This priority set at the level of economy and reflected in the program "Digital Economy of the Russian Federation" is detailed in the digital energy sector project. It provides for the implementation of the activities for general fuel and energy efficiency improvement and in industry directions including oil and gas.