Russia has never been producing more oil than it does now – up to the OPEC/OPEC+ production cut agreed upon in Vienna last week, almost every single month brought along production increments. The latest available official production data, for October 2018, shows that Russian output hiked to 11.412mbpd (the OPEC monthly report states an even higher number, 11.6mbpd, yet it is safer to rely on Russian data). Year-on-year this leaves Moscow with an almost 0.5mbpd increase, even compared to October 2016 - that particular month before the onset of OPEC+ production curbs when Russian producers squeezed out every molecule of oil they could to set up a high output basis – Russia produces 0.2mbpd more oil now than it did then.
Yet behind the success story, Russian geologists have voiced worries that the country needs to crank up its geologic exploration activities if it does not want to run out of crude in 35-40 years. As we have already established, Russia’s currently registered recoverable oil reserves would deplete themselves by 2045 (on the other hand, 2P gas reserves would be enough for some 160 years). Of course, this does not mean Russia would run out of oil – every year since 2006 Russia’s annual oil reserves’ increment has managed to stay above or roughly around the annual production volume. Thus, thanks to geological prospecting, the onset of Russian oil drought is always postponed a bit. Yet the overall trend is turning to negative – this year’s expected annual increment vs production percentage is most likely to end up below 100 percent by a narrow margin (see Graph 1).
Graph 1. Russian Oil Reserves Annual Increment vs Production 2007-2018 (mtpa).
(Click to enlarge)
Source: Russian Ministry of Energy, Russian Ministry of Natural Resources and Environment.
Rosgeologiya, the state-owned leader on the Russian prospecting market, has indicated that the risk seeing Western Siberian production volumes halve in 15-20 years is still of current concern. A decline in W-Siberian output was on cards for some time already – initially expected in late 1990s, it was then foreordained for mid-2000s. Now it seems that the year 2007 will mark the highest W-Siberian volume produced in modern Russian history, hitting 338 million tons (see Graph 2) – it has been an uninterrupted, albeit very slow, decline every since. What is remarkable about this is that W-Siberia still…