/ world today news/ For the first time since 1975, the USA came out on top in the world in terms of oil production, sending Russia to the third position in the ranking. Second place goes to Saudi Arabia. This is shown by data from the Statistical Review World Energy 2015 prepared by BP. Just 10 years ago, such a distribution of power seemed unthinkable, BP CEO Robert Dudley admits.
Alexander Pasechnik, director of the analysis department at the National Energy Security Fund (NESF):
If we consider American oil as a competitor to Russian oil, then it is not worth paying much attention to the question of who is the champion at the moment. The leading three are the USA, Saudi Arabia and Russia – there is no great disagreement here. In terms of industry, Russia’s task is somewhat different. We are currently focused on the Pacific region. It is important for Russia to expand its infrastructural capacities, as the Chinese, Indian, Korean and Japanese markets have great potential for increasing exports. The engine, of course, is China. The most important task for Russia is to synchronize the pace of national production with China’s growing demand for raw materials. Here there is a risk that contracts cannot be fulfilled in the long term, as we are increasing our export portfolio, and all trends in the mining segment are oriented towards stagnation (the Ministry of Energy plans to keep the production level within 525 -530 million tons per year).
It is not clear where more oil will come from. Partly known volumes can be covered by supplies from Iran, but purchases of Iranian oil from Russia are more of a temporary initiative with political overtones. By the way, it is premature to say that due to the slowdown in the rate of increase in production in Russia, it is possible to completely lose the export market.
According to data from the International Energy Agency (IEA), China has enough consumer resources to absorb the volumes not only of Russian suppliers. There is also another important point that should be taken into account. In May of this year, a record increase in oil production was reported in Russia, despite the forecasts of experts (in May, Russia produced 10.708 million barrels per day; Saudi Arabia – 10.25 million barrels per day – editor’s note).
And here it is important to explain the reasons for the success of the sector. It is possible that it is due to the delayed effect of the previous decade, when the value of a barrel of oil was above 100 dollars and this allowed to increase investment in extraction. Another explanation can be sought in the first consequences of the devaluation: oil companies’ revenues in rubles increased and this made it possible to increase ruble interventions and large-scale import substitution (the purchase of local production for the energy sector) in 2015. What exactly caused the record increase in production in May will become clear after the second-third quarter of the year.
Mikhail Krutikhin, partner in the consulting company RusEnergy:
The main task of our government is to maintain the domestic level of production, not to increase it. In the energy strategy, which is currently awaiting final approval in its new version, it is stated that in the most optimistic case, Russia will maintain its production at the level of 526-527 million tons per year. The government’s pessimistic scenario is for oil production to shrink, and by 2035 this decline could be as much as 467 million tonnes a year.
This is due to the deteriorating quality of the stock. New deposits are increasingly smaller in size and located in places that are increasingly remote from infrastructure and geologically more difficult to mine. And most large deposits of easily recoverable oil are in declining production. But the low rates of mining in Russia do not directly affect the state of our economy.
Another factor is that production growth in the US, in Saudi Arabia and elsewhere means that oil on the world market will increase.
For example, the US increases its production in the first place to give up imports. Those who previously exported to the US must seek new markets for their produce. This means pressure on prices. This is the main thing that affects the state of the Russian economy.
However, low oil prices do not only mean a reduction in budget revenues. They also mean that oil companies are left with less cash to effectively develop their reserves. To extract the so-called hard-to-extract oil in Russia costs no less than 85 dollars per barrel. And at the moment it is already impossible to sell such oil at such a price. That is why the extraction of hard-to-extract oil in Russia is also stopped. I.e. the era of Russia’s export earnings is rather over. The economy must develop in other directions.
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