After a period of decline in the nineties, Russian oil production began to increase in 1999, peaking in 2008. The Russian economy’s growth over the past ten years has been primarily driven by increased energy exports. This in turn is a result of increased oil production and the era’s relatively high world oil prices.
In 2012, Russia was the world’s second largest oil and natural gas producer, behind only Saudi Arabia. Russia also has substantial proven hydrocarbon reserves.
There is still room for Russia to grow as an energy superpower. The country has a substantial amount of undeveloped reserves with exploration potential remaining.
These oil and gas reserves are distributed between a number of provinces. Some are mature, such as the North Caucasus, Volga-Urals and the Khanty-Mansiysk Autonomous District of Western Siberia. While others are relatively unexplored and underdeveloped: Timano-Pechora, Eastern Siberia, the Yamal-Nenets Autonomous District of Western Siberia and the Far East.
Brownfield growth opportunities in Russia have been largely exhausted. Therefore, Western Siberia – the country’s most important hydrocarbon producing province, where the majority of fields have already been developed – is expected to continue to experience a decline in oil production.
However, this process of decline is mitigated by the increased use of more complex oil field services, including horizontal drilling and tertiary recovery. These techniques help maximize the recovery from mature fields and increase production from challenging reservoirs. The incentive to use these new techniques has been supported by favorable tax treatment.
Western Siberia’s oil production decline will be offset further by growing production in greenfield projects in newer oil provinces. These include projects in Eastern Siberia, Yamal Nenets and Sakhalin in the Far East.
In the medium term, the bulk of gas production is expected to originate primarily from mature Western Siberian fields including Medvezhye, Urengoiskoye, Yamburgskoye and Zapolyarnoye. Large fields awaiting development in the Yamal Peninsula will also be explored. Finally, the Shtokmanovskoye development in the Barents Sea and various large fields in Eastern Siberia also offer significant production potential.
Longer term, the development of unconventional resources has major potential. Oil from shale formations in Western Siberia and projects in the largely unexplored Arctic offshore are two prominent examples. However, offshore and unconventional projects are often substantially more difficult to develop and fund, primarily due to remote locations, harsh environments, lack of infrastructure and less understood geology. Sources:
1) BP Statistical Review of World Energy June 2013
2) REnergyCO Russian Upstream and Oilfield Services 2013