Russia may not be able to maintain the level of its oil production in the future due to the current taxation system on the oil industry, Russian Energy Minister Alexander Novak said on Wednesday.
Currently, Russia produces around 11.2 million barrels per day (bpd) of crude oil and condensate.
The energy ministry sees risks in Russia’s goal to keep its oil production levels due to higher production costs and dwindling reserves, Russian media quoted Novak as saying at a meeting to discuss the country’s economic policy on Wednesday.
Russia is currently overhauling its taxation system to move from a tax based on production to a profit-based taxation and to gradually phase out the crude oil export duty by 2024, which is expected to increase export netbacks for oil producers.
Russia’s energy ministry plans to update this year the energy strategy through 2035, said Novak, who kept his job in the recent reshuffle of the Russian government.
The energy strategy is filed with the government, there are disagreements on it, but they will be discussed soon, Novak said today.
As early as in September 2018, Novak was quoted as saying that Russia’s oil production could peak as early as in 2021 due to high taxes and costs, provided there are no benefits for exploration or tax incentives introduced.
If current production trends continue, and if Russia doesn’t do anything to further stimulate oil exploration and new field development, after 2021, production may start to fall and reach just 310 million tons by 2035, that is, Russia’s oil production could drop by 44 percent by then, Novak said back then.
Russia’s crude oil and condensate production could rise to more than 12 million bpd by 2035, if global demand for liquid hydrocarbons continues to grow, Russia’s second-largest oil producer, Lukoil, said in a new forecast last month.
By Tsvetana Paraskova for Oilprice.com
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