Russian Oil and Gas: Just How Much Is Left?

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Russia’s hydrocarbon reserves are running dry

Russia’s gas and oil reserves are not endless, which means the country needs to switch to a new kind of economic model, one which does not depend heavily on the export of raw materials. There are several opinions that exist concerning this matter. For instance, Herman Gref, CEO and Chairman of the Executive Board of Russia’s largest bank Sberbank, believes that the Oil Age will come to an end in 12-14 years. The Energy Ministry believes that the country has enough hydrocarbon reserves to last for another 40-50 years. And the Ministry of Natural Resources and Environment has the most favorable forecast.

According to the statement made by Kirill Molodsov at the St. Petersburg International Gas Forum (SPIGF), existing hydrocarbon reserves will last Russia another 40-50 years.

This came about as a counterargument to a statement that was made earlier by Herman Gref, who said on Monday that the Oil Age was coming to an end – specifically, that we should expect a new form of economy to emerge by 2028-2030.

During a live talk show, he said the unusually high raw materials cycle is unlikely to return given the latest trends. “Historically, moving from a mono-resource economy is a very painful process,” the Head of Sberbank noted.

Artiom Deev, leading analyst at AMarkets financial brokerage company, weighed in: “Gref has expressed the most conservative view. The thing is, the current volume of known oil reserves is rapidly depleting. At the same time, technology is moving forward, and this allows us to extract unconventional oil as well as discover new deposits.”

Deev provided the Dulismin field as an example. In 2013, many experts considered its development as economically unviable, but today its known reserves have quadrupled. “That’s the reason why Gref’s view is overly conservative – I believe the Energy Ministry is more realistic in its estimations,” Deev notes.

The analyst outlined key risks which may hinder the future development of hydrocarbon extraction, which include deteriorating infrastructure and a decline in capital spending. Resuming extraction at old deposits is also much more complicated than standard extraction.

Gref
Herman Gref

Gazprom CEO Alexey Miller also touched upon the subject of the shrinking number of active oil and gas fields. At the SPIGF, he said that the number of newly discovered deposits reached a historic low in 2016, which means that reserves barely increased as well. Herman Gref highlighted that, given the current trend of the raw materials market, the country needs to diversify its economy.

Meanwhile, Head of the Center for Strategic Development Alexei Kudrin said that Russia may start to transition away from an economy focused on fossil fuels in as soon as 10-12 years. This is the time when Russia’s non-raw materials exports may exceed those of fossil fuels. “Only then may we talk about getting off the ‘oil needle,’” said Kudriv at the “Atlas of Business” forum.

As far as fossil fuel reserves are concerned, Minister of Natural Resources and Environment of Russia Sergey Donskoy told Gazeta.Ru in August that previously discovered oil fields have around 15 billion metric tons, or 30 years, of extraction left in them if production rates are kept at their current levels.

However, we can project reserves at a level of 30 billion metric tons if technological advances are considered – that’s 60 years of production. Previously, Donskoy stated that, over the last decade, Russia has not only recovered reserves, but has also increased them.

Another factor to consider is that official estimates do not take into consideration tar sands and shale oil. Rustam Tankaev, leading expert of the Russian Oil & Gas Industrialists Association, believes that reserves may contain up to 100 billion metric tons of oil if these kinds of unconventional deposits are included.

Gazprom
The isomerisation unit at the Moscow Oil Refinery "Gazprom Oil"

Gas reserve estimates vary from analyst to analyst. BP believes that Russia has only 32.9 trillion cubic meters of gas left, which places Russia second in the world behind Iran. Gazprom, on the other hand, has the figure at 36 trillion – and that’s only proprietary deposits, which do not include those possessed by Rosneft and Novatek. Even if we take BP’s conservative estimate, there is enough gas to last over 50 years of production if the current rate is maintained.

The Ministry of Natural Resources and Environment has much higher estimates for Russia’s gas reserves. A spokesman told Gazeta.Ru that the country has more natural gas than any other country in the world.

“Its reserves across categories A+B+C1 (producing reserves, undeveloped reserves [but approved for development], and discovered resources) are estimated at 73.2 trillion cubic meters. The figure is likely to grow – prospective deposits are estimated at 31.2 trillion cubic meters,” the source said. Thus, Russia has enough potential gas reserves to last 160 years.