Oil producers face new challenges

6 june 2014

Analytical Center hosted a roundtable on “Prospects for development of oil sector up to 2020”. Deputy Minister of Energy of the Russian Federation Kirill Molodtsov presented the main report and talked about the new challenges that oil producers are facing in the present.

According to Kirill Molodtsov, among those challenges are - structural changes in production including the transition to the shelf area, the development of unconventional oil reserves and of oil within solid rocks, appreciation of traditional production and increasing global competition. The main points of growth for the Russian oil sector are considered the reserves of traditional regions which are hard to develop, as well as new projects for the continental shelf.

“According to the Ministry of Energy, difficult to develop reserves could reach 14%-20% of the total production by the year 2035, but only if considerable investments are made in technology development in 2014-2020. By the year 2035 such approaches as geological exploration, exploitation of reserves that are hard to develop and shelf reserves, will grant about 60% of the total production”, said the expert. He considers that a complex approach is needed in order to effectively develop these reserves including: using well-proved advanced production technologies, involving oil service companies with relevant experience and providing tax incentives to stimulate oil companies. Deputy Minister pointed out that this approach will be reflected in an updated version of the General scheme of the oil sector development for the 2020-2035 period, which awaits validation from the Ministry of Energy by the end of this year. The government official also brought arguments in the favor of replacing the Severance Tax with Tax on financial result, for the oil sector but only after testing it on pilot projects.

At the roundtable, experts expressed their views on the future of oil refining, the prospects for competition development in the industry and the existing possibilities in the sector of independent oil and gas producers.