Paul
Goble
Staunton, September 11 – Moscow’s
earnings from the export of oil and gas, a figure that reflects both world
prices and domestic production, are likely to continue to decline until new
fields in the Far East come online two to four years from now, given that world
prices are soft and Russia’s production is falling.
That conclusion is suggested by an
analysis presented on the Moscow portal Chaskor.ru today, which notes the
Russian oil production has been declining since December 2013, that the falloff
is greater in the older European fields, and that the Far Eastern fields will
not come online for some time (chaskor.ru/article/o_pike_nefti_v_rossii_36839).
Russian oil production will continue
to decline over the next two years even if nothing radically changes in the
international situation, Chaskor reports, because only at the end of that time
will new fields in the Russian Far East begin to come into full production and
thus compensate for declining output in the fields of European Russia.
The development of Russia’s oil
industry “geographically” recalls “the dynamic of the establishment of Russia
or reports from a war that is being lost: forces withdraw from the western
front, give up one after another European regions, and move ever further to the
east, with resistance continuing only in the most distant parts of the country.”
“For some,” the portal continues, “this
military metaphor may seem to grate on the ears, but it is sufficient to recall
the USSR for which the lowering of world prices at that time at the peak of
production served as one of the catalysts of the loss in a real and not a
hypothetical conflict.”
With regard to oil production, Russia is divided into three regions:
the European portion of the country, Western Siberia, and Eastern Siberia
together with the Far East. The first passed its peak production in the
mid-1970s and has been falling since. The second grew after that but has since stabilized
or fallen, and the third is the only reason the overall figure isn’t falling
faster.
Another way to
capture this development, Chaskor continues, is to see that “since 2010, the
amount pumped from green fields has not grown.” Instead, in the European and West
Siberian portions of the country, there has been a decline of three to four
million tons a year. As a result, these fields should now be classified as
brown or declining fields.
“Today,” the
portal says, “the main falling fund is in the Khanty-Mansiisk AO which produces
90 percent of the oil in Western Siberia,” even though it was the main source
of the “explosive” growth in production in the 1970s. Production there for the last six years has
been falling by 4.5 million tons annually.
That means that
production elsewhere and especially in the difficult to access regions of the
Far East has to increase by some 26 million tons just to bring Russian output
back to the level it was at in 2008. That won’t be possible without the
development of significant new fields and that won’t happen for several years
at a minimum.
And given the
international climate, that may prove impossible even then given Russia’s
dependence on the West for the most advanced oil extraction technologies. Moscow economists have been coming up with
numerous “theoretical” models to suggest that Russia will be able to overcome
these problems and thus increase oil production.
But Chaskor
notes, “in theory there is no difference between theory and practice. However,
in practice, there is.”
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