Moscow – The Kremlin often touts Russia’s image as an “energy superpower,” but now the country’s oil production is declining. Some say Russia may have already reached peak oil output.
Underscoring the urgency of the issue, Prime Minister Vladimir Putin’s new cabinet made its first order of business on Monday the approval of a package of measures to relieve the oil-production crisis.
“It’s a good first step,” says Natalia Milchakova, an oil and gas analyst for Otkritiye, a Moscow-based brokerage firm. But she adds that “rapidly slowing” oil production, which was growing by more than 10 percent five years ago, isn’t “something that can be quickly fixed with political declarations.”
As the world’s second-largest oil exporter, Russia joins a growing number of top oil suppliers wrestling with how to address declining or peaking production. Like Venezuela and Mexico, Russia is heavily dependent on oil, which accounts for more than two-thirds of government revenue and 30 percent of the country’s gross domestic product. Now, Moscow is trying to remedy a situation caused in part by outdated technology, heavy taxation of oil profits, and lack of investment in oil infrastructure.
The Presidium of the Cabinet, as it is officially known, in its inaugural meeting Monday approved tax holidays of up to 15 years for Russian companies that open new oil fields and proposed raising the threshold at which taxation begins from the current $9 per barrel to $15. Oil companies welcomed the measures, but experts say that after almost two decades of post-Soviet neglect, which have seen little new exploration, it may be too little, too late.
After rising steadily for several years to a post-Soviet high of 9.9 million barrels per day (bpd) in October, Russian oil production fell by 0.3 percent in the first four months of this year, while exports fell 3.3 percent – the first Putin-era drop. Russia’s proven oil reserves are a state secret, but the Oil & Gas Journal, a US-based industry publication, estimates it has about 60 billion barrels – the world’s eighth largest – which would last for 17 years at current production rates.
Energy Minister Viktor Khristenko recently admitted the decline, but suggested it might be overcome by fresh discoveries in underexplored eastern Siberia or in new Arctic territories recently claimed by Russia. “The output level we have today is a plateau, or stagnation,” he said.
But Leonid Fedun, vice president of Russia’s largest private oil company LUKoil, went one step further in an interview with the Financial Times last month.
“Russian oil production has peaked and may never return to current levels,” he said.
- Russia had finally officially admit of being peaked or peaking in oil production and “may never” return to current level of oil supply. This mean Russia had joined Mexico, North Sea, U.S.A., Indonesia and several other oil exporting countries to be either peaked in oil production or in decline.
This is confirming the fears of many “peak-oiler” who believes that the global production of oil is peaking or had already peaked and now in a gradual inevitable decline.
While the global demand of oil is currently hovering around 87 million barrels per day and growing and the supply starts to peak and decline may means the era of CHEAP oil is officially over.
We are entering the stage of “Peak Oil” which is the research topic of this blog. The discussion of this does not stops on proving if it’s a real theory or a scam from Big Oil Corporation to profit from this but the implication of higher oil prices can do to you and your family.
Inflation will accelerate faster every single day as cost of operation for all sectors of the economy are ran mostly on oil and petrochemicals. Oil influence practically every aspect of human sustainability and it had driven the 100 years of industrial age into the current era where human can live in concrete cities with virtually no food production within 100 to 1000 km range.
Virtually all the things in front of you are made partially from oil…
I think it’s time to think alternative to prepare for sustainability, it won’t be a happy ending riding this “Long Emergency”. Wake Up!
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