Russia cuts oil production: for how many years will its reserves last?

Victoria Pavlova

But the worst of all is not even their quantity, but the quality. One of these deposits is classified as small, and the remaining five are classified as very small. All together they can produce only 5 million tons of oil. On a national scale, this is close to an error. In 2020, according to the Ministry of Energy, Russia reduced oil production by 8.6% - to 512.8 million tons. It turns out that the registered 5 million tons is less than 1% of the annual production. They will not be enough for 3.5 days of work.

Geological exploration work carried out at the expense of mining companies gave indicators slightly better. They found 26.4 million tons of oil with production in the first six months of 254.829 million tons and 15.9 billion cubic meters of gas with production of 334.8 billion cubic meters in the first 6 months. In any case, the new fields do not compensate for the production rates in any way. Against this background, the statements of the head of Rosnedra Yevgeny Kiselev that there will be enough oil "indefinitely" appear in a new light.

"Infinity" had to be achieved under two postulates. The first - the world is gradually abandoning oil, switching to gas and "green" energy sources, the second said: "There has not been a single year when Rosnedra has not reported to the country that the increase in oil and gas reserves is greater than production volumes." Now everything is different.

According to the forecast of Rosnedra, the available oil reserves, excluding exploration, which can be neglected in the first half of 2021, will be enough for 58 years. But here's a profitable oil that can make a profit - for 19 years. Developing remote deposits in the north is expensive. In general, the future does not look very comforting, because at the time of the forecast, last April, the average price of Urals oil was $ 62.5 per barrel. This is a lot, in April 2020 it cost $ 18.22 per barrel. And nothing prevents our competitors if they want to bring down these prices. The only production company in Saudi Arabia, Saudi Aramco, estimates the cost of its oil at $ 10-17 per barrel, and Russian oil at $ 40, including taxes. The conditions are clearly unequal.

What will happen to the economy if Russia can no longer profit from oil and gas exports? The government assures us that it’s okay, because last year the share of oil and gas revenues in the federal budget has been decreasing for several years, and by the end of 2020 fell to 28%. But the Cabinet takes into account only the proceeds from the tax on the extraction of minerals and the export duty. According to the assessment of economic analyst, specialist in the oil and gas market and partner information and consultancy RusEnergy Michael Krutikhin, the real share of oil and gas revenues, taking into account dividends, income tax oil and gas companies, taxes from employees of oil companies, up to 60% of the federal budget. Whatever one may say, but the Russian economy is still an oil and gas economy.

What to do? To allocate, as the Minister of Ecology and Natural Resources Alexander Kozlov suggests , more money for geological exploration of the main company - the state holding Rosgeologia, which conducts 70% of all prospecting work (and receives more than 90% of government contracts)? But an analysis of the reports published by Rosnedra over the past years casts doubt on such tactics.

In 2020, 6.34 billion rubles were allocated from the federal budget for oil exploration and deep exploration drilling with a total length of 3127 meters was carried out. 1 meter of exploration drilling cost an average of 2 million rubles. The mining companies, having spent 292.8 billion rubles on oil and gas prospecting, carried out deep exploratory drilling with a total length of 1,114,162 meters - an average of 1 meter cost them 262 thousand rubles. 7.5 times cheaper! In 2019, the difference was even greater: 3.84 million rubles at the expense of the federal budget and 36.8 thousand rubles for exploration at the companies' own expense.

It seems that Rosgeologia, under the control of Sergei Gorkov, is uniquely able to do three things - to siphon money from the federal budget, manipulate figures and ascribe to itself other people's achievements, counting down its activities from the times of Peter the Great (despite the fact that the holding itself, we recall, was created 10 years ago). According to Gorkov, Rosgeologia in 2020 reduced the amount of outstanding work from 5 billion rubles to 2.4 billion rubles, but the Accounts Chamber found non-fulfillment of state contracts by 4.1 billion rubles as of the beginning of 2021.

For the sake of fairness, it should be noted that Rosgeologia has some impressive finds. Last year, the holding companies in the Laptev Sea discovered a sedimentary cover with a capacity comparable to the oil and gas reserves of Western Siberia. But again, everything rests on the fact that there are hard-to-recover resources that require technology. In 2010, Dmitry Medvedev, in exchange for technology, gave Norway a part of the Barents Sea, where hydrocarbon deposits were soon discovered. But now this option will not work. The transfer of territory to other states is contrary to the Constitution, and the West, under the conditions of sanctions, is unlikely to agree to share technology. They should have developed their own technologies, but the following amounts appear in Rosnedr's reports: in 2019, the federal budget spent 115 thousand rubles on technological innovations, and in 2020 - 14.345 million rubles. That is, approximately on the scale of the industry - approximately nothing. Therefore, only the Prirazlomnaya station is lonely producing oil on the Arctic shelf. There were no more people willing to get into the Arctic for expensive oil.

With such conditions, oil will not be able to feed the state for a long time. The government has to either start searching for and developing new technologies that will reduce the cost of producing hard-to-recover oil, or still stimulate the non-resource economy. It is desirable without another crisis and plunge into the next circle of poverty. Unfortunately, the government has not yet been able to find such plans.