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Russia’s oil reserves are becoming increasingly hard-to-recover

Russia’s oil & gas discoveries fell to the lowest in 5 years in the 1st 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

Russia’s oil reserves are becoming increasingly hard-to-recover

Source: Ministry of Energy of Russia

Moscow, November 25 - Neftegaz.RU. 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, Oilprice reported.
P.Sorokin said, as quoted by TASS:
  • Almost 100% of our production will be hard to recover over the term of 10 years
  • The hard-to-recover reserves will have much higher lifting costs than conventional reserves
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 & 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.

In the 1st half this year, Russian companies found oil and gas at 6 very small fields, adding just 36 million barrels to reserves, which is equivalent to fewer than 4 days of Russian daily oil production, according to GlobalData’s estimates.

Anna Belova, Oil & Gas Analyst at GlobalData, said:
  • 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
  • To retain its place as one of the top oil & 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 & gas sector well after the pandemic subsides

Author: Tsvetana Paraskova

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