Just third of Russia’s oil profitable to recover

Russia has vast oil and gas reserves, but technical aspects make a considerable part of them unprofitable to develop. According to Russia’s Deputy Minister of Energy Pavel Sorokin, “just 36% out of 30 billion tonnes of recoverable reserves of Russian oil are profitable in the current macroeconomic environment”.

Only 36% of Russia’s recoverable crude oil reserves can turn a profit in the current market, says Oilprice.com citing Russian Deputy Minister of Energy Pavel Sorokin. In an article for Energy Policy magazine, the official cited a number of technical rather than purely economic problems hindering the development of Russia’s reserves. “Growing water cuts, the need to build costly wells of complex designs, low permeability and compartmentalisation of reservoirs, the move to marginal areas and beds with low thickness” are among factors worsening development opportunities. As a result, the actual profitability of drilling may considerably differ from plans for certain assets, and some reserves will not be confirmed, Sorokin said.

According to calculations of Oilprice.com, the profitable portion of Russia’s recoverable crude reserves amounts to almost 80 billion barrels, which is still quite a lot. The country is currently pumping around 10,19 million barrels of crude and condensates daily. While the actual output is limited by the latest OPEC+ agreement, Russian energy companies are eager to increase production with Rosneft being the major opponent of the cuts.

A set of scenarios developed by Russia’s Ministry of Energy envisages crude oil prices in a range between $45 and $80 per barrel in the period until 2035. “This is a very significant range that allows us to see the boundary conditions in order to determine the measures, our actions in a particular scenario,” commented Director of the ministry’s Oil Refining and Gas Processing Department Anton Rubtsov. However, long-term oil price forecasts cannot be seen as reliable due to a wide range of unforeseen events and factors.

Currently, oil prices are on the rise amid positive industry news from the United States, but worries about the resurgence of COVID-19 in China are likely to overshadow this optimism, as Chinese consumption is now the key driver of prices. At the same time, banks are again getting optimistic about the oil industry. According to Natural Gas Intelligence, lenders expect the pandemic to subside this year boosting oil and gas revenues and reducing the number of loans in distress.

By Anna Litvina