Russia's Best Ally
39
RUSSIA’S BEST ALLY THE SITUATION OF THE RUSSIAN OIL SECTOR AND FORECASTS FOR ITS FUTURE
Wojciech Konończuk NUMBER 39 WARSAW APRIL 2012
RUSSIA’S BEST ALLY THE SITUATION OF THE RUSSIAN OIL SECTOR AND FORECASTS FOR ITS FUTURE
Wojciech Konończuk © Copyright by Ośrodek Studiów Wschodnich im. Marka Karpia / Centre for Eastern Studies
Content editors Adam Eberhardt Marek Menkiszak
Editor Anna Łabuszewska
Co-operation Katarzyna Kazimierska
Translation Ilona Duchnowicz
Co-operation Jim Todd
Graphic design Para–buch
Maps and CHARTS Wojciech Mańkowski
DTP GroupMedia
Publisher Ośrodek Studiów Wschodnich im. Marka Karpia Centre for Eastern Studies ul. Koszykowa 6a, Warsaw, Poland Phone + 48 /22/ 525 80 00 Fax: + 48 /22/ 525 80 40 osw.waw.pl
ISBN 978-83-62936-08-3 Table of Contents
THESES /5 Introduction /7
I. CRUDE OIL – THE FOUNDATION OF RUSSIA /9
1. Oil as a source of income /9 2. The significance of oil for political and economic stability /11 3. Oil as foreign policy instrument /14
II. RUSSIAN OIL DEPOSITS /16
1. Deposit levels /16 2. Key production centres /17 3. Future oil regions /20 4. The level of oil production /23 5. The level of oil exports /25
III. TRANSPORT INFRASTRUCTURE AND THE REFINERY SECTOR /27
1. Existing infrastructure /27 2. Infrastructure under construction /27 3. The refinery sector /30
IV. THE OIL SECTOR’S PROBLEMS /38
1. State control and political supervision /38 2. The privileges of state-controlled companies /41 3. The inefficient tax system /42 4. Insufficient investments /48 5. Limited access for foreign investors /52
V. HOW MUCH OIL WILL RUSSIA PRODUCE AND EXPORT? /56
1. Oil production forecast by 2030 /56 2. Future oil export levels /64 3. Export directions: how much to Europe and how much to Asia? /66
3. 2. 1. THESES revenues, which is preventing the development sector.revenues, the preventing is of which this of source budget atemporary as industry oil of the treatment its and icy government’s adopt to of awell-thought-out the failure pol consistent and aconsequence ones. extent The agreat to present problems are of existing the development exploration forand of the new fields necessary is which be not ablewill to generate capital for investment firms oil system, fiscal of the suppliers. Without aliberalisation technology as mainly treated are imposed investors,on foreign who restrictions significant and companies favour in of state-controlled sector, government’sthe the discrimination the monopolisation investment, for of necessary funds the of deprive firms levies which excessive include The mostserious fiscal challenges. serious posing are and sector oil Russian the problems in haveMany accumulated future. the in production about in areduction bring exploration ofthe new will deposits in investment and work geological insufficient combination with in This have them been overexploited. many of that is this of effect accessed. An ily eas fields most oil production at the extensive prices and oil in id increase possible rap due was the to This 50%. production by oil more than in crease in an been has decade past sector’s oil the successThe in Russian greatest consequences. political ing would have which far-reach economic about an crisis, prices bring could in reduction acontinuing because budget harmful, prices is oil on high foreign policy. state Russian However, dependence of the increasing the Russian in assertiveness to a stronger out also and economic reforms carry economy’sgovernment’s to the to sian failure on raw materials, reliance Rus of the led astrengthening to budget has in revenues this increase and brought 2009) about has in avast crisis exceptionof the the (with few years past prices over oil in the country. The the in rapid growth stability social and political maintain to class ruling the allowing means one chief of the also Revenues Russia’swhich are position based. oil is from international on pillars budget state one main income is of the to and the largest plies the economy. Russian of the branch It mostimportant sup the The is sector oil ------
5 OSW STUDIES 04/2012 6 OSW STUDIES 04/2012 7. 6. 5. 4.
production falls back. back. production falls oil as However, tonnes. falling be longer million it the will in term, of 244 present level above the four to years three next the within alittle grow will exports oil Russian 2011, in products duty rate on petroleum customs of the increase the with connection in out that ruled be Itconsumption. cannot and domestic refineries of Russian capacity processing oil the including however factors, volume on depend levels, several the will ofport which ex its in areduction in result production will oil Russian in The decline term. medium the in tonnes million below 400 level of the production may evenout fall that ruled be it overly cannot actions, inconsistent cautious takes and ernment slow butHowever,it down. ittheduction decline may significantly govif the pro notstop will policy fiscal state the in Achange investment climate. the and environment improvement fiscal the of the mainly including takes, government the actions on depend the will fall of Thetonnes. this degree level of million below the 500 fall to start it will then and years, three two- next the within Russia in slightly increase to likely production is Oil states. member EU in especially abroad, networks distribution fuel and of refineries invest to takeovers companies oil more in actively aging government encour is Russian low. the time, same output still At is the their of quality howeverthe refineries; volumesthe Russian of processed in oil aimed boosting at policy effective an conducting been government has sian Rus few the years, past the Over modernisation. time-consuming and costly a very requires and outdated technologically is sector refinery The Russian material base for Russian exports. exports. for base Russian material raw main the are fields, oil which output at Westerndecreased Siberian not decisionof but however consequence of rather apolitical the be will few which years, next the 15-20% by approximately decrease within will supplies oil Europe to Russian that It years. likely ten is next the within exports of present level 65% total of the from 80% around to drop will share its although foreseeable the future, in oil keyoutlet for the Russian main re will adoptedpolicy Europe diversification by Russia, export Despite the ------1 gas and oil allies: only two had Federation also Russian concluded ago afew the years that expert one Russian fleet, its and army its allies: two only had Empire Russian the century, that late 19 the in III by Alexander Tsar made statement famous the Paraphrasing on foreign markets. recognisable and active are most which firms the Russian of part a significant ‘energy empire’,an ago. form years corporations emerged several which Oil concept as of Russia informal the is of this manifestation symbolic One tial. poten energy and raw material of vast its basis position on the international its economicbuilding is and Russia stability. political its maintains Russia tee budget of source state revenues most important guaran which the are ports ex on production and oil Taxes future. its and state of the forfunctioning the significance one for of and fundamental Russia raw material a strategic is Oil Introduct in this sector in detail, including: the inefficient fiscal system, discrimination discrimination system, fiscal inefficient the including: detail, in sector this in existing problems analyses part sector. The refinery fourth the and structure infra transport the describes part The production centres. third sible future pos present and of the characteristic abrief and provides areview and posits de oil condition Russian shows of the position The the of second Russia. part economy, for sector oil the of international the cance the stability, and political the signifi first onepresents The into five divided been parts. has study This oil. of Russian major importers are which states, for member EU important economy topic This also politics. is and country’s on this impact great about the and Russia, one major in of issues the remain will and is which oil, levels of Russian export the production and ture possible about fu the questions to the to answer attempt to an introduction an economy. be Russian of the keybranch will This this ernment’s towards policy gov the as well as it posing, is sector, challenges oil the problems its sian and Rus of present situation the the describe to is text objective of this The main of Russia. future the and functioning on the gas than impact have a much greater will and has oil sector, oil that fact despite Russian the the developments present done of been conditionpossible into the and future has research little surprisingly Gazprom, and have gas devoted been to Russian
October 2005, p. http://carnegieendowment.org/files/pb42.trenin.FINAL.pdf 6, 2005, October Brief Policy Peace for International Endowment Carnegie Right, Russia Reading D. Trenin, i on 1 . While a great number of various publications of various number a great . While th th ------,
7 OSW STUDIES 04/2012 8 OSW STUDIES 04/2012 port levels, also broken down into the European and Asian directions. directions. Asian and European broken into the down levels, also port ex future and 2030 tion about possible production volumes until oil Russia in questhe to address an attempt is part resolved.problems are The pivotal fifth way these on depend the will sector of the future the because important cially espe is This investments. insufficient and favourin offirms, state-controlled - - - Average annual Urals oil prices in 1999-2011 prices in oil Average 1. Urals Chart annual 1). (see 2011 in Chart arecord-high respectively, again US$78 level of and US$61.1 reach to US$109.4 2010 and to 2009 in price fell This 2008. in US$94.4 to 2000–2003 US$23–27 in the main oil brand exported by Russia exported brand oil main the The few years. average past over barrel, observed been the Urals price per has which ofmarkets, prices on oil global rapid aconsequence of is the growth This 3 2 budget, state dependence on onesian deepening its consequence is of which the Rus to petrodollars of prices brought oil influx Growing about avast Data: budget accounted of for products all incomes 44% petroleum of and oil ports budget of state share revenues. 2010, largest In ex offroma source the profits economy Russian and of sector the mostimportant the is The industry oil 1. I. 100 120
20 40 60 80 0 O articles.php?id=49076 http://www.rusenergy.com/ru/articles/ Shmatko Sergei Minister of Energy opinion the In tonomous Okrug), ESPO (from Eastern Siberia) and Sokol and Vityaz (from Sakhalin). (from Vityaz and Sokol and Siberia) Eastern (from ESPO Okrug), tonomous Au Khanty-Mansi the (from Light Siberian as such brands, oil other exports also Russia CRUD EIA il as a source of asource as incomeil 17.4 [US$] 1999 E O 26.9 2000 IL –T IL 23.0 2001 HE F HE 23.7 2002 OUND 27.2 2003 34.5 2004 A T 50.7 I ON O 3 2005 and 1998 in US$11.8 from , increased 61.4 F RU 2006 SSIA 2007 69.3 94.4 2008 61.1 2009
2010 78.2 109.4 2011 2 - - - .
9 OSW STUDIES 04/2012 10 OSW STUDIES 04/2012 is exported. exported. is gas of products), Russian petroleum aprocessed form as in one only third while it oil of produces 25% the 75% (including around exports Russia Furthermore, 3). (see at Chart been alevel it of seven has years 48–53% last for the 39.4%, and 33.5% rangedbetween share this in 2000–2003, significantly. While increased also exports of value Russian total the in products petroleum of and oil sales of revenues from share few the years, past Since over prices tripled oil the Data: 2000–2011 in products petroleum of and oil Revenues 2. exports from Chart revenues. of total for accounts which 6–7% sector, gas revenues the from tax the budget Russian for than the more vital much income is generated sales by that oil billion). emphasising It worth is (US$263 level 2011 unprecedentedly in high an of lower reached prices, oil they aresult as years two next 2). the in fell incomes oil (see from Although Chart arecord-high 2008 level reach to in of years billion US$230 next the idly in rap increasing started and 2000–2002, in annually a level billion of US$35–40 These revenues were at product exports. petroleum revenues and oil from 100 150 200 50 0 Federal Customs Service of the Russian Federation Russian of the Service Customs Federal 25.3 [US$ billions]
2000 10.9 25.0
2001 9.3 29.1
2002 11.2 39.7 14.0 2003 oil 59.0
2004 19.2 83.4
2005 33.8 petroleum products 102.3
2006 44.6 114.2
2007 51.4 151.7
2008 78.3 93.5
2009 46.8 129.0
2010 69.4 171.7
2011 91.3 - 4 most into 0.9% at the price of oil 10% GDP the translates in growth increase an economists, of Russian estimates the to According of public unrest. breaks out potential thus and ‘extinguish’ expenditure social increase significantly it made annually), possible which to (5–7% few years past the in nomic growth follow eco to of state high relatively apath Russian prices the enabled oil ing The increas Putin. led by elite Vladimir level of public political for support the a high ensure and country of governments the to the add legitimacy tors which one keyfac is of the turn in This 2000. since Russia cio-economic in situation so of the stabilisation for the basis the been Income has generated sales by oil 2. Data: 2011 to 2000 from exports Russian total in products petroleum of and oil of export revenues The the from share 3. Chart Fund, which was created in 2004, enabled Russia to significantly alleviate alleviate significantly to Russia enabled 2004, in created was which Fund, Stabilisation special the in accumulated exports incomes oil of from the part Furthermore, aid. financial need its for international annulled and schedule it made possible forincome also Moscow of repay to foreign its debts ahead budgetstate revenues go up (or oil-generated Growing billion. down) by US$3 the makes automatically (or barrel pricesper by oil US$2 in decrease) increase 30 40 50 60
T Neftegazovaya Vertikal koleye’ Neftegazovaya ‘Po nayezzhennoi Central Bank of the Russian Federation Russian of the Bank Central he significance of oil forandeconomic political stability 34.3 [%] 2000 33.5 2001 37.5
2002 39.4 2003 42.6 2004 48.0 2005 , no. 8, 2011, p. 20 , no. 2011, 8, 48.3 2006
2007 48.8 51.0
. 2008 48.9 2009 51.4 2010 4 53.1 . An . An 2011 - - - - - 11 OSW STUDIES 04/2012 12 OSW STUDIES 04/2012 all our incentives our for development“all it would destroy would acatastrophe; be barrel per dollars “140 country: the of modernisation the to impediment prices were an oil high that turn in stated a whole a public as Russian or Norway, the to ‘oil welfare not the is able rent’ ensure to Kuwait, Qatar Saudi Arabia, as producer oil of countries such those bigger than force. However, driving its much becoming is of population Russia the since economyis and the Russian sectors of the other apositive on having effect is 8 7 6 5 in 2008–2009 crisis financial consequences of the the taken any real action to change the raw material-based model of the Russian Russian of model the raw material-based the change to action real any taken subject of only random individual decisions” of individual subject random only the economy, was products innovative and developing technology while unique old raw the materials ahead on pushing prices. was The high priority ofuse the maximum make to now was important what was that and wait could reforms structural that illusion for of honest, be to fell the us, many, all growing almost longbly, “So prices were 2009: oil in as Medvedev admitted PresidentDmitry Assem Federal the to address his In on Russia. has oil expensive tive impact nega of the aware are elite political Russian of the part at least It that seems price of oil. the in crease in of the beginning the coincided with (2000–2004) tenure presidential first his during launched been Putin’s had which of reforms discontinuation Vladimir changes. does not have structural any introduce to Kremlin the flowin sales generously, incomes oil from the As economiction and reforms. for action modernisa real given up taking government has Russian the that The however, worst oil, consequence offoreign markets. expensive fact the is economy of the sectors less is competitive (not on in raw based materials) the production of other of effect which in currencies, other against stronger rublethe makes petrodollars of tive The consequences for influx Russia. However, of oil-generated nega anumber having revenues growing are the workforce. Russian of
eng.kremlin.ru/transcripts/285 May, 28 http:// 2010, sphere, social and economy its modernise but to choice no has Russia http://www.osw.waw.pl/sites/default/files/Crisis_report_2010.pdf, 2010, January Report, one’ OSW year crisis: in ‘Russia Wiśniewska, I. J.Rogoża, Dubas, A. p. 13. http://eng.kremlin.ru/transcripts/297 2009, November 12 Federation, Russian of the Assembly Federal the to Address Presidential US$1,800 capita per approximately reached 2011 in products petroleum and oil of Russian exports from Income 6 . This is also an effect of the fact that the oil industry employs 3% only industry the oil that fact the of effect an also is . This . 8 . Despite all this, the government has not government has the this, . Despite all 7 . In 2010, the Russian president 2010, Russian . In the 5 . Russia’s potential oil - - - - - years, Russian politicians are reluctant to consider proposals to cut taxes. taxes. cut to consider to proposals reluctant are politicians Russian years, have for repeated which been many system, defective tax consequences of the negative of the warnings and corporations oil from Despite appeals countries. among highest producer oil the among are cow, levies acash tor as fiscal the sec oil the government treating is Since politics. the on Russian impact mense haveim an would certainly which Russia, in economiclead to a serious crisis by as much as 20% of much as by GDP as of 5% GDP,grow reach deficit could below US$50, the price fell will the if and budget level the at2006–2007, i.e. it in the deficit was barrel, per US$60 to fall price oil the should that speculates of Finance Ministry by the prepared 2014 Debt Public Policy Management to the by 6.5%. turn investments In and 1.4% 11 10 9 US$100 be average the price will that oil assumption on the budget aconsequence,ther. the As law for envisages 2012 adeficit 1.5%of of GDP fur have increased been expenses social 2012) elections, (March presidential 2011) and (December parliamentary the with connection In on that. depends stability, social maintaining to sector, thus and developed social increasingly the obligationsto its government’s fulfil the to because so is This ability Russia. nearly d’État become level price at araison oil has ahigh the maintaining brought aboutwherein has asituation price to changes sensitivity its and budget Russian dependence of on oil-generated the The incomes increasing budget its (theof 0.8% 2011 budget GDP). balance in to reached surplus able was for good, situation Russia producers oil was market Since the US$105. is budget the not price below oil the ofif adeficit for lack envisaged 2011 the level US$70, to and rose this 2008 in price barrel, at oil per US$25–30 the with of budget adeficit no risk Russian ran the stronger. 2000 in While regularly economy, budget Russian dependence of growing on prices is oil the the and investments in ofdecrease 2.5% of GDP asignificant economic in and areduction to growth would lead to US$80 a price fall government’s Russian bymates the experts, to esti stability. According to Russia’s a threat posing financial potentially budget economy Russian of and the prices is oil onThe high reliance heavy only at a barrel. per level of US$117 be balanced could public finances that
‘Yest’ Vertikal li zhizn nizhe $100/barriel’? Neftegazovaya Y. Kravchenko, M. Lutova, ‘Pechal neftianika’ Vedomosti neftianika’ ‘Pechal Lutova, M. Y. Kravchenko, The budget law also estimates that the oil price will reach US$97 in 2013 and US$101 in 2014. in US$101 2013 and in US$97 reach will price oil the that estimates The budget also law 10 . Should the oil price fall to US$60, Russia’s US$60, to by price fall oil . Should GDP the would shrink 11 . In effect, a potential decrease in the oil the price could oil in decrease potential a effect, . In , 11 August 2011. August , 11 , no. 22/2011. , no. 22/2011. 9 . Analysts estimate estimate . Analysts in in - - - - 13 OSW STUDIES 04/2012 14 OSW STUDIES 04/2012 Council in 2005 that “Russia wants to be a global energy leader” energy aglobal be to wants “Russia that 2005 in Council 15 14 13 12 more policy assertive eign for have Russian and Russia’s made in ambitions increase ed an international have budget stimulat growing revenues provefew exports oil years from that past over the experiences Practical Russia’s arena. international position on the government reinforce to by the used been has The potential country’s energy 3. country’s unique oil and gas potential gas country’s and oil unique of the basis position on the at helping international its it aimed build to actions Moscow’s to define by political attempt experts ment. It an as seen should be govern Russian therepresentative bya speech of or document official any in forged. ‘energy empire’concept not was formalised It an been as of has Russia rapidly, growing president informal (2000–2004), the when prices started oil influence” its defines geopolitical extent agreat to markets energy on playing is global policy. The country role the external and of internal leading instrument the of economic basis development complex, the is which and energy and fuel ful apower and resources energy great possesses tool:a foreign policy “Russia as policy energy the of significance the admits which astatement includes 2003, adopted August in was 2020, to which Strategy The Energy documents. Russian ‘energy of someempire’ havein an official appeared terms in Russian countries and the former Eastern Bloc – as one Bloc of –as tools. keyforeign its policy former Eastern the and countries CIS in –especially them seeing foreign expansions, their Moscow supports significance. of strategic sectors invest in often foreign investors and sian Rus most important the are companies oil Russian and countries, other with relations in chip as abargaining used by Russia are often gas and oil effect, In economic and presence abroad. status international its atool strengthen to as mayused be which lowrelatively economic potential sector, has Russia energy its from apart that, fact the from results belief lar http://archive.kremlin.ru/text/appears/2005/12/99294.shtml
O before the start of the conflict. conflict. of the start the before weeks three 2008, July in barrel per US$147 cost Oil history. in levels highest the reached had prices oil global when time out at the broke war Russian-Georgian the Interestingly, a statement. a statement. such contain not does of 2009, end at the adopted was which 2030, to Strategy Energy of the version new However, the p. 4. goda, 2020 do period na Rossii strategiya Energeticheskaya tre, September 2004, http://fpc.org.uk/fsblob/307.pdf 2004, September tre, Cen Policy Foreign Russia’s Revival, and Gas Oil, Empire: Energy F. for example, Hill, See, il as foreign as il policy instrument 14 . In turn, President Vladimir Putin said at a session of the Security at a session said Security of the Putin President Vladimir turn, . In 12 . At the end of Vladimir Putin’s first term in as office Putin’sterm ofend first . At Vladimir the 13 . However, symptoms of thinking about . However, of thinking symptoms 15 . This simi . This ------16 corporation of aRussian to Orlen instead land’s PKN it would sold be that to Po announced been decision had the after ‘failure’) of the its pretext in 2006 (under refinery supplied Lithuania’s to oil Mazeikiai the which pipeline off company; switching it aRussian to sell to refused had government Latvian the 2001 after in Ventspils supplies oil the to terminal ting include: cut apply to pressure issues of oil uses Examples how political Russia of its own shares. However, this agreement was not However, implemented. was agreement shares. of own its this for 10% company exchange in British the in shares company of 5% the Russian BP,with deal the evenwould offer more beneficial which an strike to attempt an made Rosneft 2011, In January Sea. Kara the fields on three in shares of the for 33% exchange in Canada, USA and the in including production units, six ExxonMobil’s accessto gained has Rosneft of effect which in 2011, August in struck ExxonMobil and Rosneft deal the is new policy of example this vivid to a conditions company.foreign on certain The most stakes minority offer then may which andZarubezhneft), Gazprom Gazprom Neft, (Rosneft, firms state-controlled by only be obtained can Arctic es forthe exploration field in law, Russian to licenc Pursuant gas. of deposits and oil vast has potentially world’s the undeveloped which region largest Arctic, of the case the in ly clear is especial This in Russia. fields oil in stakes for minority exchange in transfer or assets technology at in production or its agiven Western in firm over shares taking at aiming are 2010. evident since been State-controlled firms has sector energy access Russian foreign have companies the the to by restricting rations corpo oil position of Russian international the for strengthening The strategy time. first the market for Chinese the entered firm Russian this which to ing ow to Rosneft, under construction refinery Tianjin the in of 49% shares of the granting the was China to Siberia Eastern from running pipeline oil tion of the construc on agreement the ple, Russian-Chinese one conditions of of the the exam For firm. concessions agiven to Russian certain supplies oroil with gas for acontract combines signing often Russia Furthermore, imports. material to accept new conditions to force of 2007 raw Minsk in to Belarus exports oil
based Williams, which in effect led to this firm being resold to Russia’s to resold Yukos. being firm this to led effect in which Williams, based US- the by purchased was refinery Mazeikiai the when 2000, in supplies cut also Russia 16 ; and the withholding of withholding the ; and ------15 OSW STUDIES 04/2012 16 OSW STUDIES 04/2012 fields. Furthermore, the increase in the deposits also results from the fact that that fact the from results also the deposits in increase the Furthermore, fields. large and medium with case development the is lesstheir is cost-efficientthan and small, as However,outputclassified Russia. in are new fields mostof the annual the than newlyhavehigher the found fields in deposits oil been the that exploration investment outlays on work. and in geological It 2005 since only is decrease andsignificant a exploitation thesome fields by companies of the of the effectover of an was new found fields. in This produced being than was oil more as 2004 1991 and between depleting were regularly deposits oil Russian investment. expensive further require and structure complextheir or duemedium to geological small as have classified been them 5). output (see Additionally, Chart of percent most of ten annual more than new, while account for projects times, Soviet launched slightly only recently Moreover,companies. fields putin intowere of operation majority the avast largest oil production the total level of the in to access difficult are fields which of 60% share the is production sector oil Russian of the feature Another 60%. output. However, have depleted been they problem significantly, by that the is account 60%for currently approximately oftotal fields, which large from nates most of origi oil its that is sector oil Russian of the feature A characteristic be found. will deposits new significant that likely it very is that and tonnes 16.5 reach could billion Arctic, the in mainly shelf, continental ondeposits the oil its that estimates Russia Furthermore, years. level for forty approximately present its output it maintain to would allow tonnes, which billion 22 at least volume fields oil fit the of is for the production that estimates Ministry Energy The Russian are more optimistic. much data Russian ficient twenty years. for 2011), in tonnes would suf be present they production level (511.3million the for accounts tonnes,which Thus, 5.6% deposits. 10 of billion global with around are at a level deposits of oil Russian of EIA), World the confirmed and Energy Review (forBP Statistical the from example, estimates international to cording is the world’s output 2010) the in global is producerin oil (12.9% largest share 17 world the in (7 largest among the are which deposits oil has Russia 1. II.
D producer. world’s of biggest oil the was Russia 2011 in Also Arabia. Saudi than more of oil tonnes lion mil 37 produced Russia 2010, In 2011. London 2010, of World Review Energy BP Statistical RUSSIA eposit levels N O IL D IL EP O SI T S th th place) and 17 . Ac . - - - - - Oil from this region is characterised by its high quality owing to alow to sulphur owing quality by high its characterised is region this from Oil 318.3 tonnes. reached province oil million output Western of Siberian the tal one world’s of and 2010, region the to oil In production centres. oil the largest Tyumen,the Tomsk (5.5%), Novosibirsk and Oblasts Russia’s is mostimportant (82% output), of regional Yamalo-Nenets Autonomous the (12.5%) Okrug and Western Siberia, 1. Table production. oil in region Russian of each shares Table the 1presents 1 (see map on pageshown the is The provinces oil 19),location of Russian while (1.8%). Caucasus Northern (3.9%) the and Krai of Krasnoyarsk part northern the (2.9%), East country, Far of with the the Siberia part Eastern European of the Timan-Pechora are: (6.3%), significance the north growing, in is located which of The production. oil lesser, forregions 22.1% of respectively 63% Russian and if the and these account Volga-Ural Siberia region; ofWestern keysignificance: provinces), oil (called production centres oil of are two several which has Russia 2. tonnes. million 89 of reached newly above deposits surplus time oil output discovered at that 2010, and the 2000 between aggregate, of In production. likelihood the mining categorieshigher in deter classified fields oil were previously discovered the Northern Caucasus Northern East Far Krasnoyarsk Krai northern and Siberia Eastern Timan-Pechora TOTAL Volga-Ural Siberia Western R Key production centres egion The shares of Russian regions in oil production (2010) oil in regions of Russian The shares which encompasses the Khanty-Mansi Autonomous Okrug Khanty-Mansi encompasses the which millions of tonnes of millions 505.1 318.3 111.5 14.8 19.7 31.5 9.3 22.1 100 2.9 3.9 6.3 1.8 63 % - - 17 OSW STUDIES 04/2012 18 OSW STUDIES 04/2012 18 it present level at the maintain to is scenario mostoptimistic the and beria, it no is longer output that Western believe Si in possible increase to experts investment activity. Most Russian despite increasing The output declining is annually).5% around field by Samotlor of the case (in the falling regularly is outputtheir as a consequence 50%, of which approximately reaching fields, its level of high depletion the is of has province oil problem Western Siberian the account foraggregate 15% of Russia’s However, production. oil mostserious the TNK-BP, tonnes),in world’sand 25 among the million fields oil are largest ten field Samotlor the by (owned and of tonnes annually) oil produces million 34 and and Priobskoye Gazprom Neft field the of(it by these, Rosneft is owned in Russia’sRussia. fields oil largest eight ten Two of the deposits, including oil of half around has still region this Despite continuous 1964, production since havecontent brand), Light fields a structure. (Siberian the good and geological portant Soviet oil province was Volga- was province oil Soviet portant mostim the Western production Siberia, commenced in oil large-scale Before deposits of Timan-Pechora are 1.3 for accounts are ofdeposits tonnes, which Timan-Pechora 6% billion of all The 1990s. estimated the in here launched production was and began part ern development in north time, its fields of same the At the region. this menced in production com when large-scale 1960s the 1930s. in only It the was as back far as already Timan-Pechora in AO).Nenets production began oil scale Small the in 41.5% Republic Komi and produced the in productionwas (58.5% oil sian 2010, in accounted produced for which of there tonnes was 6.3% oil Rus of total of 31.5 Republic. million Komi Atotal Autonomous Nenets the and the Okrug encompasses and of Russia part European of the north the located is in which of output T is terms in province oil Russian largest The third howeverhas depletedbeen 80%. which by fieldby Tatneft, owned Romashkino the is annually) tonnes (15 Russia in million production capacity largest third the with the one and regionthe in field The deposits. oil largest Russian of total Volga-Ural account the for in deposits 16% Oil still region decreasing. regularly haveregionthe outputis depletedbeen and this by 70%, in The oil. fields sian of Rus brands other various soldBrent is and attherefore lower prices than level of ahigh sulphur, contains and and heavy is region this 2010. from Oil in tonnes million of tonnes have111.5 oil produced,6 billion been including the 1920s, overin province this in fields of operation of the the beginning the Since Oblasts. Orenburg and Samara the and Krai Perm Udmurtia, Bashkiria,
zovaya Vertikal zovaya Neftega obvala’ do dobychi otsnizheniya Sibir: ‘Zapadnaya Turukalov, M. for example: See, no. 6, 2009, p. 14. , no. 2009, 6, U ral, ral, which encompasses Tatarstan, Tatarstan, encompasses which iman-Pechora, 18 . ------Map 1. Key Russian oil production regions 19 OSW STUDIES 04/2012 20 OSW STUDIES 04/2012 present fiscal situation. situation. present fiscal unprofitable,the productiongiven is 80% of in of them ity while production, the feasibil is new fields the regarding aspect crucial Another shelf). Arctic of the case application (as the in undeveloped of technologies new, still often the requires and investmenttheof costs raises significantly conditions; this climate much harsher the are production centres present chief ent the from differ shelf Arctic the and East Far the Siberia, Eastern Whatdeposits. makes of confirmed terms in as medium classified development are most of them and stage of initial the are at at fields low discovered are levels, the tion research explora and geological in investments Furthermore, there. deposits oil of the the assess volume to it difficult makes far, so which extent asmall only to ically have explored geolog been all they have common that is regions in What these sector. oil however Russian have shelves, on less will the impact which tal continen Sea Black the and Caspian on the expected output also in is increase low. levelits still is An although some regions, in of these started already has of major Production becoming production sources. chance greatest the stand longer the in term) shelf Arctic (and the East Far the and Krai of Krasnoyarsk part northern the with Siberia velopment aproblem. ofis new Eastern regions the de falling, regularly are fields oil traditional the production levels in As 3. late 19 to the back date production there N the is region oil The oldest Russian provinces. oil Russian all in highest exploration among workthe and is Timan-Pechora in cal The level Sea. of geologi Barents by the Varandey terminal the from exported Volga-Ural,from is brand) Light sold is prices. It at therefore higher (Arctic and oil sulphated the than quality ahigher has region this ital-intensive. from Oil and cap to access difficult are and them 70% of and medium, small as classified are region Titovaand this fields).Trebsa the in fields fields (including Most larger several in 2015, from when production starts increase to it expected is exploitation (10%). but years, two past over the decreasing The been output has stage of initial the at still are region this in The fields Russia. in deposits oil tion (annual output there is approximately 5 million tonnes). 5million approximately is output there tion (annual produc oil Russian total in share depleted have and amarginal totally almost are Stavropol Krai, and Krai Krasnodar Chechnya, located in are which region, Future oil regions Future orthern C orthern th century. However, the fields in this century. However,this in fields the The beginnings of oil The beginnings aucasus. ------Vankor has 390 million tonnes of proven oil reserves and 105 million tonnes tonnes 105 million of and tonnes proven reserves oil million 390 Vankor has 1991. after beginning the very havefrom fieldto oil developedbeen in Russia largest the Vankor place field, at only in the currently is and 2009 in started production there Oil of Western Siberia. it part is geographically although ria The The region. the in exploration and research of intensity geological insufficient due the to also is as yet, which forecasts optimistic highly these not confirmed has few years 20 19 of tonnes probable billion deposits 1.18 oil and of tonnes confirmed 1.15 billion has Siberia Eastern estimates, current to According years. twenty next the within production centre oil a keyRussian Siberia Eastern make to is planning of government fields. oil The its Russian whatsoever, development prevented which the infrastructure no transport in 2010.had region previously pipeline This Ocean) oil Siberia-Pacific (Eastern ESPO of the launch the after Siberia Eastern commenced in also Production regions. oil future as seen are which Chukotka, and shelves place on of the Kamchatka ration work taking is explo Sakhalin, in deposits additionthe to output. In i.e. 2.9% Russian of total tonnes, million 14.8 was East 2010, level Far In tonnes. of output the the oil in 1.5 reach billion to estimated are and higher times many are region this in its depos Forecasted tonnes. million 400 approximately are projects Sakhalin-3 and Sakhalin-2 theSakhalin-1, deposits of oil The years. confirmed ten past the put over into operation were gradually and 1980s the in were discovered which shelf, theSakhalin Currently, fields on produced is the oil in only tion started. producwhere oil first the was East Far the regions, oil future the regards As duced tonnes 8billion to re is often figure this volume tonnes, although billion 1522 of and between agigantic reach could East Far the and Siberia ploitable Eastern in reserves oil ex that Academy of even Sciences estimates Russian of the Branch Siberian The region. this found be to in likely new are geologists, deposits Russian to According markets. on Asian commodity for this demand into high translate Volga-Ural will the from oil the this and region less than sulphur contains and
materialy moskovskogo Centra Carnegie, no. 4, 2007, p. 2007, 14. no. 4, Carnegie, Centra moskovskogo materialy Rabochiye Rossii’, provintsiya neftegazovaya novaya vostok: ‘Vostok yest Pusenkowa, N. zovaya Vertikal zovaya Neftega gazu’ po ivozmozhno nefti po net Y. VNIGRI: Podolsky, ‘Mneniye O. Prishchepa, is often mentioned as Eastern Sibe mentioned Eastern often as is Krai of Krasnoyarsk part northern , no. p. 2010, 20, 28. 20 . The insignificant increase in the deposits in the past the past in the deposits in increase . The insignificant 19 . This oil is of much better quality quality of is oil much better . This ------21 OSW STUDIES 04/2012 22 OSW STUDIES 04/2012 the Korchagin oil field near Astrakhan, the first one in this regionRussia this of in one first the Astrakhan, field oil near Korchagin the 2010 In tonnes. production commenced in million of 300 approximately serves re with fields, oil significant found several has 1995 and in shelf Caspian on the shelves Sea Black C of the parts Russian mentioned, the already East Far the in shelf additionthe to In shelf. continental Russian of the parts other the found in be also oil deposits considerablecould estimates, Russian official to According unexplored. totally almost still is region this since survey million tonnes respectively tonnes million 860 approximately and tonnes billion 1.2 approximately are deposits oil mated by Rosneft). owned Tuapse are esti Their Ridge Shatsky (both the and Trough Thethe work shelf. Sea fields: on mostadvanced two Black is on the launched exploration being.Meanwhile, work been fortime has conducteding the there but no work geological promising, seems be is also Dagestan in The shelf sea 11.5 billion tonnes billion 11.5 reach could shelf Arctic on exploitable the reserves oil Environment, Natural for the Ministry Russian (to the from far so Rosneft). forecasts to According have Sea granted been licences for Kara production at the fore three 2030. Only be launched be to It project. unlikely is future adistant as seen still is region this production in costs, enormous the and needs technological conditions, the However, climate Pechora Seas. the and extreme given the Barents the Kara, the primarily and shelf, Arctic the is production region oil future Another production. Western Siberian in lowrelatively decline compensated still for the partly already has region this production in creasing In disputable. level still is but ultimate its future, immediate rapidly the in continue grow to The output aggregate. production in will 3.9% oil of Russian accounted for 19.7 tonnes,which reached million Krai of Krasnoyarsk part ern 24 23 22 21 reserves of likely on the continental shelf in Kaliningrad Oblast. Oblast. Kaliningrad in shelf continental on the produced also are of annually) tonnes of thousands of (hundreds oil amounts Small before 2025. not start capital-intensive be will and conditions,mate will
http://lukoil.ru/materials/images/Oil_production/2011/Oil_production_FB_ru.pdf http://www.ngv.ru/about/news/news9528.aspx
http://rosneft.ru/Upstream/ProductionAndDevelopment/eastern_siberia/vankorneft/ Y. Mazneva, V. Novyi, ‘Morskoy rekord’ Vedomosti rekord’ V. ‘Morskoy Y. Novyi, Mazneva, 21 22 are promising regions. LUKoil embarked on exploration oil embarked LUKoil regions. promising are . In 2010, the total output in Eastern Siberia and the north the and Siberia output Eastern in 2010, total . In the . However, these estimates are not based on not geological any based . However, are estimates these 24 . Production in this region, despite region, favourable cli this in . Production , 18 June 2010. June , 18 aspian and and aspian 23 ------. 26 25 corporations largest produced nine is by the tonnes) approx. 90%million of (464 oil this, 4). (see Against 2011 in Chart tonnes 511.3 to 2000 million in tonnes 323 million from grew Russia production in Oil 4. been developed already in Soviet times Soviet in developedbeen already had accessible mosteasily fields which on the overexploitation, focused and almost adopted production, of apolicy corporations extensive of the owners sector. oil private Firstly, Russian the the much so in risen duction level has why to pro as the explanation provide the which major two reasons There are significantly. it out fall could that not did rule time same at the and best at the marginally would few grow years next the output within the that 2000 ed in forecast of Energy The Ministry unexpected. extent agreat to production was Russia’s leap in The overstated. be giant easily economy cannot politics and sector’son oil impact its success and Russian greatest the is period over this which had been considered unprofitable. been had which madein fields of possibleproduction it production intensification resume to an enabled which of new technologies introduction resulting the and capital of The 1990s. influx the in adeep crisis in sector, oil of was the which a revival led to this mentioned been above. All one has decade, as within times several prices grew oil that fact by the stimulated productionly, was in increase the Second back. hold to were unable this time, at that were weak which tutions, most cost-effective of the many have fields been oil insti overexploited. State effect, In methods. consequences of such or future rationality the considering of possible amount lowest oil at largest the possible without cost, the producing
T Neftegazovaya Vertikal Neftegazovaya blagopoluchiye’ shatkoye ‘Neftedobycha: mil (86 TNK-BP (90.7 million), tonnes), LUKoil million (122 Rosneft for 2011: data to According Petroleum and Novatek. and Petroleum Salym majorones: Tomskneft, three including firms, oil small and fields, Sakhalin-2 and Sakhalin-1 the in operating consortiums international Gazprom, by produced was oil the 10% of The remaining (13 million). Russneft and million) (14 Bashneft million), (18 Slavneft he level of oil production lion), Surgutneftegaz (60.7 million), Gazprom Neft (32 million), Tatneft (26 million), (26 million), Tatneft million), (32 Neft Gazprom (60.7 million), lion), Surgutneftegaz 26 . Their goal was to maximise profits by maximise to was goal . Their 25 . This increase of as much as 58% 58% much as of as increase . This , no. 5, 2010. , no. 5, - - - - 23 OSW STUDIES 04/2012 24 OSW STUDIES 04/2012 sian oil sector are presented extensively in Chapter IV. Chapter in presented extensively are sector oil sian sector. this the problemsRus The serious most on of effect adetrimental ing hav also access for are foreign investments monopolisation restricted ing and sector. oil theincreas theconditionThe Russian of adversely is affecting this and imposed companies on oil burdens aconsequence of excessiveextent fiscal great to a are discovered been havedevelopmentalready fields which of the exploration and the level in Theand of investment work geological insufficient 5). production (see oil 6.7% Chart of total accountedtonnes, which for million 31 reached five the years preceding within been puthad into operation output fields which of the the 2009, In Sakhalin. in fields)and (the Vankor, Siberia Talakan Verkhnechonsk and Eastern in cially new fields, productionespe levels in compensated by growing was decrease this few thesector. past years overthis forNevertheless, of key significance are output old of the fields, the in which decrease regular a consequence of the low, primarily is which running are growth of sources the the that means This production level went the alittle. because down exception, an was 2008 years. few past 2% the in around reach to down slowing 6% 11% started annually, and between ranged 2000–2004 in rate, which However, production growth the Data: 1999–2011 Russia production in Oil 4. Chart 100 200 300 400 500 600 0 Ministry of Energy of the Russian Federation Russian of the of Energy Ministry [million tonnes] 305.0 1999 323.2 2000 348.1 2001 379.6 2002 421.3 2003 458.8 2004 469.9 2005 480.5 2006 491.3 2007 488.5 2008 494.2 2009 505.1 2010 511.3 2011 - - - - 10 15 27 13,2% wysokości w udziałem na z ropy świecie, eksporterem Saudyjskiej Arabii po największym drugim jest Rosja 5. Dane: 20 roku w2009 koncernów naftowych Wykres 5. Udział krajów obszaru WNP wynosi 21% (głównie Białoruś i Ukraina), Azji 12%, 12%, Azji Ukraina), i Białoruś (głównie 21% wynosi WNP obszaru krajów Udział sprzedaży. całości 70% przypada które na Bałkanów, i UE rosyj państwa są ropy skiej eksportu rynkiem głównym rok 2009 za danych Według rzeczny. i wy kolejo transport na ropociągów przypada 13% a pośrednictwem Transniefti, kontrolą pod za się znajdujących jest eksportowane ropy rosyjskiej 87% Około ton (zob. ton pkt 3.2.). do 132 mln III, rozdz. mln o50 szerzej wzrósł od który 2004 roku produktów sięnaftowych, eksport zwiększył znacznie nak jed Jednocześnie rocznie. ton mln 250 około poziomie na się utrzymuje portu eks wielkość roku 2004 Od wydobycia. wzrostu znaczącego ze wynikało co z poziomu ton145 mln w 2000 roku do 250 ton mln w 2010 roku (zob. Wykres 6), dziesięciu lat o około ostatnich 75%, w ciągu wzrósł surowca Eksport państwa. budżetu i jak naftowych, koncernów rosyjskich zarówno dochodów źródłem 0 5
Poziom eksportu ropyPoziom eksportu Udział Arabii Saudyjskiej wynosi 15,4%, na trzecim miejscu jest Iran – 5,4%. Dane EIA za za EIA Dane 5,4%. – Iran jest rok. 2010 miejscu trzecim na 15,4%, wynosi Saudyjskiej Arabii Udział Nieftiegazowaja Wiertikal Rosnieft' [%] 3,5 Procentowy udział nowych złóż wogólnym nowych poziomie wydobycia udział Procentowy Ł 10,3 ukoil TNK-BP 10 15 wei, uzae w yooc 13,2% wysokości w udziałem na z ropy świecie, eksporterem Saudyjskiej Arabii po największym drugim jest Rosja 5. Dane: 20 roku w2009 koncernów naftowych Wykres 5. 27 Udział krajów obszaru WNP wynosi 21% (głównie Białoruś i Ukraina), Azji 12%, 12%, Azji Ukraina), i Białoruś (głównie 21% wynosi WNP obszaru krajów Udział sprzedaży. całości 70% przypada które na Bałkanów, i UE rosyj państwa są ropy skiej eksportu rynkiem głównym rok 2009 za danych Według rzeczny. i wy kolejo transport na ropociągów przypada 13% a pośrednictwem Transniefti, kontrolą pod za się znajdujących jest eksportowane ropy rosyjskiej 87% Około ton (zob. ton pkt 3.2.). do 132 mln III, rozdz. mln o50 szerzej wzrósł od który 2004 roku produktów sięnaftowych, eksport zwiększył znacznie nak jed Jednocześnie rocznie. ton mln 250 około poziomie na się utrzymuje portu eks wielkość roku 2004 Od wydobycia. wzrostu znaczącego ze wynikało co z poziomu ton145 mln w 2000 roku do 250 ton mln w 2010 roku (zob. Wykres 6), dziesięciu lat o około ostatnich 75%, w ciągu wzrósł surowca Eksport państwa. budżetu i jak naftowych, koncernów rosyjskich zarówno dochodów źródłem 0 5
4,7
, nr 4, 2010 4, , nr Poziom eksportu ropyPoziom eksportu Udział Arabii Saudyjskiej wynosi 15,4%, na trzecim miejscu jest Iran – 5,4%. Dane EIA za za EIA Dane 5,4%. – Iran jest rok. 2010 miejscu trzecim na 15,4%, wynosi Saudyjskiej Arabii Udział Nieftiegazowaja Wiertikal Rosnieft' [%] Surgutnieftiegaz 3,5 16,4 Procentowy udział nowych złóż wogólnym nowych poziomie wydobycia udział Procentowy Ł 10,3 ukoil 10 15 20 Russia is the world’s second largest oil exporter after Saudi Arabia, with with Arabia, Saudi after exporter 2010 of oil in 13.2% share a largest second world’s the is Russia 5. Data: outputin 2009 companies of thetotal oil of percent in in new fields Share 5. Chart 27 tries (mainly Belarus and Ukraine) have a share of 21%, Asia 12%, North and and North 12%, Asia 21%, of share a have Ukraine) and Belarus (mainly tries coun CIS oil. Russian exported of 70% buy which Balkans, the and states ber According to data for 2009, the key outlets for EU are mem oil Russian exports ships. river and railway by transported are exports the of 13% and by Transneft, controlled are which pipelines, by exported is oil Russian of 87% Around tion 3.2.). sec (fortonnes III, see Chapter to tonnes 132 more million information million 50 from risen has level their 2004, since well; as higher, significantly become tonnes annually. million At of the same time, exports petroleum products have at 250 approximately maintained volume been has export Since 2004, growth. output significant a of effect an was 6). This Chart (see 2011 in tonnes million over 75% proximately tonnes ten in past 2000 to years, the from million 247 145 ap by increased volume export The budgetalike. state the and companies oil 0 5
Gazprom-
t nieft’ for2010. Saudi Arabia’s share is 15.4%. Iran, with a share of 5.4%, is Data ranked third. from the EIA 4,2 he level of oil exports Neftegazovaya Vertikal Neftegazovaya [%] 27 Rosneft TNK-BP . Eksport ropy jest podstawowym podstawowym jest ropy Eksport . 3.5 4,7 , nr 4, 2010 4, , nr Ta tnieft' 0,3 Surgutnieftiegaz LUKoil 10.3 16,4 Sła wnieft' 7,0 TNK-BP , no. 4, 2010 , no. 4, Gazprom- 27 4.7 nieft’ . Oil exports are the main source of incme for Russian for Russian of incme source main the are exports Oil . 4,2 27 Russnieft' . Eksport ropy jest podstawowym podstawowym jest ropy Eksport . Surgutneftegaz 0,2 16.4 Ta tnieft' 0,3 Ogółem 6,7 Gazprom Sła Neft 4.2 - - - - wnieft' 7,0
25
PRACE OSW 04/2012 Tatneft Russnieft' 0.3 0,2 Slavnieft Ogółem 7.0 6,7 - - - -
Russneft 0.2 25 PRACE OSW 04/2012 Total 6.7 - - - - 25 OSW STUDIES 04/2012 26 OSW STUDIES 04/2012 28 Data: 0.3% 0.7% Australia and 6%, Africa Americas South Chart 6. Chart (5%). China and (10% (7.5%), exports), oil Holland of total Germany are: oil Russian Poland (5.5%) 100 150 200 250 300
50 0 Data from the EIA. the from Data Federal Statistical Service of the Russian Federation Russian of the Service Statistical Federal 128.5 [mln ton] 1999 Russian oil exports from 1999 to 2011 1999to from exports oil Russian 145.0 2000 161.8 2001 190.0 2002 223.0 2003 258.0 2004 252.0 2005 253.0 2006 258.0 28
2007 of importers . The largest 243.0 2008 247.0 2009 250.0 2010 244.6 2011 jects as part of the development of the national networks are the pipelines: the are networks development of the national of the part as jects pro The largest export. and use internal for both infrastructure, transport intensively been developinghas fivenew its Russia past years the Over 2. 2009. until use in also was refineries, of Ukrainian supplied part to which pipeline, oil oil The Samara–Odessa China. and Russia between connection infrastructure energy first the also is lion This tonnes. to 30 mil expanded be can tonnes, which of 15 capacity million annual an has route export new oil This China. to oil carries and 2011 January in operation of (a ESPO), pipeline Skovorodino–Daqing oil branch the put into was which annually), tonnes and million 75 around (in total Hungary Republic and Czech the Slovakia, to branch southern the Germany, and Poland and Belarus, to oil supplies of which branch northern the Druzhba, are: pipelines The keyexport by sea. exported is annually) tonnes 150(around million oil 60% ofapproximately aggregate, Russian In Sakhalin. from oil of the part transports which Krai, Khabarovsk in Kastri De and Timan-Pechora, from oil handles which Sea, Barents Varandey by the terminals oil the are centres port ex oil important Other significance. put 2010, into in was operation gaining is line).(ESPO), Ocean which ofsection Siberia-Pacific first the The new Eastern BPS, System, pipe oil Pipeline (the Baltic Primorsk rossiysk pipeline)to oil and Novorossiysk in Tuapse and (the Sea Samara–Novo Black by the terminals export Russian the to there from and of Russia, part central the to Urals the and Western (see from Siberia 2) Map run mains pipeline oil The keyRussian private firms. and (RZhD) Railways Russian by the mainly transported is rest The oil. of 93% of Russian transport of the charge in is Transneft aggregate, In for and export. Russia within for companies oil to transport oil locates quotas al company accessand This to pipelines manages a monopoly on transport. oil holds also which company state-controlled Transneft, the is pipelines oil of the 19,300 of The including pipelines. product oil exclusive km owner km, 68,000 of length one world’s a total of has the networks, Russia with pipeline oil largest 1. III. Infrastructure under construction Existing infrastructure
TR SE CTOR A N SP
ORT I NF R AS TRUCTUR E A ND THE R EFI NE R Y ------27 OSW STUDIES 04/2012 28 OSW STUDIES 04/2012 struction will exceed US$30 billion US$30 exceed will struction cost ESPO conof tonnes. Thetotal million 80 to expanded be will part first the of capacity tonnes,1,763 long) the and km million (50 built be will Kozmino to 2013) project (by secondof pipeline the oil phase the In the terminal. Kozmino Skovorodino from the to by railway 2010. transported At is oil present, uary Jan in launched tonnes, was of 30 million a capacity 2,700longis has km and (Tayshet–Skovorodino),the pipeline of part The first 2006. menced in which of com ESPO The construction markets. oil Asian the to entry through ports ex oil Russian help to diversify expected also The is pipeline new oil Ocean. thePacific by terminal the Kozmino with there fields oil the connect to and Siberia Eastern emergence in of production centre contribute anew the to oil to is sector. Its purpose energy Russian the in implementedbeing currently T System-2). Pipeline BPS-2 (Baltic and ESPO are struction by 2015. Two con under pipelines oil annually tonnes keyexport million 67 to tonnes million 28 from expanded be will capacity its and oil, of Kazakh transit for used is the CPC of Russia. part southern the through runs also pipeline oil Tuapse(CPC) supplies oil ing Consortium the to Pipeline refinery. TheCaspian lion of of tonnes annually,cost oil US$0.7 at billion), increas aimed is which 31 30 29 Krai of Krasnoyarsk part ern north the from oil carry over billion), US$5 worth project is will which the by tonnes 2016; million 50 to by 2013 tonnes increase ofto 25 million capacity length; (approximately in 910 km Purpe–Samotlor and Zapolyarnoye–Purpe tonnes by the end of 2013. The total cost of the project will reach US$5 billion US$5 reach project will of end of cost 2013. the by the Thetonnes total million 50 to expanded be the pipeline’s Then will of 2012. capacity quarter first put be the in into operation of tonnes will oil, of 30million capacity annual an have will which stages.branch, The two in first built be The will new pipeline 2009. mid Ust-Luga in long), and oblast) km (998 Sea ansk Baltic started by the (Bry Unecha connect will which pipeline, oil BPS-2 of the The construction
he ESP struction-bps-2-oil-pipeline-starts EastWeek starts’ pipeline oil BPS-2 of the construction ‘The W. see: For on BPS-2 more Konończuk, tary/2008-10-22/east-siberiapacific-ocean-espo-oil-pipeline-strategic-project-o ure?’ fail – organisational project strategic a pipeline: (ESPO) Ocean Siberia/Pacific East ‘The Konończuk, W. http://www.osw.waw.pl/sites/default/files/EastWeek_194.pdf; 2010, uary EastWeek Asia’ to pipeline oil its launches ‘Russia W. see: For on ESPO Konończuk, more The Purpe–Samotlor oil pipeline was put into operation in October 2011. October in operation put into was pipeline oil The Purpe–Samotlor OSW Commentary OSW is among the most strategic and expensive projects projects expensive and moststrategic among the is pipeline O oil , 17 June 2009, http://www.osw.waw.pl/en/publikacje/eastweek/2009-06-17/con , no. 12, 2008, http://www.osw.waw.pl/en/publikacje/osw-commen 2008, 12, no. , 29 , and Tikhoretsk–Tuapse-2, and long, mil (247 12 km 30 . , 6Jan 31 ------. Map 2. Key oil pipelines in Russia 29 OSW STUDIES 04/2012 30 OSW STUDIES 04/2012 33 32 and China the USA after place third Russia ensures and output, for refinery 6.2% of global accounts tonnes, which million is 279 refineries of Russian capacity processing The annual modernisation. expensive avery needs outdated and nologically tech is sector refinery its production, oil leader in aglobal is Russia Although 3. completed be planned. as will pipelines oil strategic two these that Therefore, state. it the mayexpected be from support receiving is and of (US$10 billion) ESPO construction for the China from a loan 2009 given in been has not aproblem, be Transneft since also Moneytion. will construc the through to carry determined government clearly is Russian the put been stage into (oneoperation),vanced already of BPS-2 section has and ad routes at of is an both more The 45% oil. approximately construction port able be ex to tonnes,have completed, been will million of Russia 120 pacity ca annual total aplanned ESPO, BPS-2 pipelines, new and oil with When the Europe. Central recipients oil in and Poland) and Ukraine (Belarus, states transit apply to on the a means pressure provide it with will routes and Europe to transport its manoeuvre to Russia enable will This states. dependence on transit minimise to and pipeline oil Druzhba the to route alternative export oil an gain to but rather transported volume the of oil increase to not project is really of this aim needed. Thus the than capacity export a larger has already infrastructure pipeline oil Russian the since viable not is economically BPS-2 pipeline oil of the The construction of Russia’s output control of 72% which total corporations, oil largest owned byaare few ‘mini-refineries’). and firms plants these Most of chemical is generated by Gazprom’s part output remaining (the refining oil total of the they 96% generate In aggregate, in at Russia. present operating are refineries 28 exported. was tonnes 132 tonnes,of million which million 258 volume reached 2011 of processed in oil stalled in them have been worn down to a level of 80%, and the average have alevel to worn the down of been them and 80%, in level of stalled in The since. systems afew have exceptions, not modernised with been and, midexceptiontwo, thethe 1960s beforeof built with were refineries, these
T BP Statistical Review..., Statistical BP lion by Surgutneftegaz and 18 million by Gazprom Neft. Gazprom by million 18 and Surgutneftegaz by lion TNK-BP, by mil 22 million 22 LUKoil, by million 45 Rosneft, by tonnes million 50 Including he refinery sector he refinery 32 . However, Russian refineries are not running at full capacity: the capacity: full at running are not . However, refineries Russian op. cit. op. 33 . All . All ------refinery in Gdańsk, and 10.3 in the Mazeikiai refinery in Lithuania in refinery and 10.3 Mazeikiai the in Gdańsk, in refinery Lotos the in 10 almost Orlen, PKN by owned refinery Płock 9.5Europe, the in in reaches index 7.4 Western this For comparison, 4.4. is only this refineries of Russian case the in and highly-processed products petroleum manufacture to possibility the and complexity refining of the degree oil reflects son Index products (12.8%) and has remained basically unchanged since the 1990s. the since unchanged basically remained has (12.8%) and products 23.5%), (mazut, oil (31.7%), oil diesel (16.4%), petrol (4.1%), aviation fuel other follows: as fuel heavy was 2011 in production Their structure cessed products. low-promainly manufacture refineries Russian backwardness, technological 35 34 2030. in 89–90% to and years, ten next the 83% to within 71.2% from increase will depth processing oil ply envisages 2030 to 2015. that The from Strategy ap to of class Euro-4 and 2012 since force of class in 2011, Euro-3 been since has which of class, Euro-2 production of on fuels the ban the is means of these One means. leap by administrative technological a make to refineries forcing at aimed is Kremlin The adopted recently by policy the breaks. form of tax the in including stimuli, of modernisation lack due the to primarily investments have relatively made low owners refinery recent years, In on modernisation. embark to industry refinery force to the intending The government also is 2030. in tonnes million 275–311 and 2022 in tonnes million 249–260 to volumes processing oil in increase envisages 2030 to afurther Strategy Energy 90%7).to from at 70%in 2000 present Chart grown (see The has refineries sian level of of the usage Rus capacity of markets, the global in products petroleum the prices of in rise the because of also and decision this ofeffect In met. been have supply oil providedrefineries to be on condition quotas that will system export access Transneft’s to that government arule introduced 1999,the in Already oil. of crude expense at the products more petroleum exporting thus and refineries level of at the processing Russian at increasing aimed been has few years past over sector oil the government’s the The Russian towards policy 3.1. 90%) around is EU level the in 60% only (this alevel of around has refineries the of part asignificant while low 71.2%, as as is depth processing oil
_2011.pdf http://www.orlen.pl/PL/RelacjeInwestorskie/Documents/Company_overview_PL_March Neftegazovaya Vertikal Neftegazovaya sheyu’ na ‘Khomut Meshcherin, A.
The government’s sector the policy towards , no. 7, p. 2010, 12. 34 . The Nel 35 . Due to to . Due - - - - 31 OSW STUDIES 04/2012 32 OSW STUDIES 04/2012 and 2011 and 7. Chart ments. therequire new unableto meet are refineries proven that –has fuel Euro-2 ofthesale on the ban of effect an partly was –which 2011 spring in country the of somein parts occurred deficit have The set. which which petrol been deadlines the out within impossible be carry to will reforms the that appears It certainly unrealistic. thus and ambitious, too are means administrative by force to through government trying is the reforms companies, the oil and experts opinion of Russian the In funds. such probably earn to unable be will future, immediate the in offields new oil investment in costs high the incur have to sector, oil will the which and unattainable level seems This years. ten next the within billion US$30 require will velopment Industry Oil of the 36 Data: billion US$20 cost for 2015necessary will investments the that estimates of Energy The Ministry expensive. credibly in be will sector refinery of the However, modernisation technological the 100 200 300 400 500 600
0 Interfax-ANI, 7-13 2011. July Interfax-ANI, Federal Statistical Service of the Russian Federation Russian of the Service Statistical Federal 399 [million tonnes]
1992 256 354 Dynamics of oil production and processing in Russia between 1992 between Russia in processing of production and oil Dynamics
1993 223 318 1994 186 307 1995 182 301
1996 176 306
1997 177 303
1998 164 production 305
1999 168 324
2000 173 348
2001 179 380 185 2002 36 , and the General Scheme of De Scheme General the , and processing 421
2003 190 459
2004 195 470
2005 208 481
2006 220 491
2007 229 488
2008 237 491
2009 237 505
2010 249 511 258 - - 2011 - shorter refining process, was 30% was process, refining shorter amuch needs which oil, on fuel heavy that 10%, while was petrol high-quality of sales on more profitable. return The exports its made production and dated out favoured since facto it de of refineries, modernisation preventedtem the sys fiscal oil). duty on crude Asimilar export of value the of the 67% 46.7% and (respectively process products on highly that much lower was than products duty rate on low-processed export the 2001, October until too. Furthermore, low, prices are of low are their quality, products petroleum exported Since the billion more in annual revenues annual more in billion budget state the US$13 products, would have of petroleum gained instead rel bar price of per at US$70 oil the exported of had Energy, Russia if Ministry the 39 38 37 30.3%) is (diesel oil’s low 3.4% share as as a share has petrol while exports, in share a48% (mazut) has oil fuel heavy that noting worth is especially It refineries. of Russian backwardness technological of the result is a which structure, the sales foreign in are predominant refineries eign by for further be to processed products semi-finished as used are which ucts by 109% However, 2000. since have and increased ports low-processed prod ex oil crude 8). rate than (see atyears afaster They Chart have growing been few the past over increased have products significantly of petroleum Exports 3.2. income on the modernisation of refineries. of refineries. modernisation income on the this spend and more US$2.5 annually approximately billion earn to companies oil allow will time same at the and processed products of highly exports the in increase an and exported oil of fuel heavy amounts the in areduction in result newprocessed ones. duty rates will The the government hoping is that low- on the increase an and processed products duty on highly customs the of areduction means this practice, In 2011. October in products petroleum oil imposed on was rateon duty oil customs 66%duty of the export of A unified
Neftegazovaya Vertikal Neftegazovaya nelzya’ zhit tak ‘Neftepererabotka: Data from the Federal Customs Service of the Russian Federation for 2010. Federation Russian of the Service Customs Federal the from Data Neft iKapital goda’ Neft dva yeshcho dadut ‘Mazutu The export ofThe petroleum products export 39 . 38 . Meanwhile, according to estimates from from estimates to according . Meanwhile, , no. 12, 2009. , no. 12, 37 . , no. 5, 2010, p. 2010, 64. , no. 5, ------33 OSW STUDIES 04/2012 34 OSW STUDIES 04/2012 120 150 two to three times higher than in the case of Western refineries case the in than higher times three to two sector, is which refinery the in consumption energy high in result refineries at used the outdated but systems the not least, Last much moreis expensive. which by rail, products their transport must manufacturers –and transport of means cheapest –the of pipelines short product oil is Russia Furthermore, 42 41 40 Russia located deep inside are Sea Black pse by the and oblast) Tua (Leningrad Kirishi in exceptionthose the of with refineries, Russian All markets. competitivenesstheir international on negatively affect prices and their increase costs aconsequence, transport As ports. sea export the from far and Russia in outlets main the from located far are which eries, refin of the distribution irrational economically the is reason Another ucts. prod petroleum of Russian exports lowof profitability the problemthe with ofThe low-processed sale of cause only cheap) not is (and the thus products Data: 8. Chart of the country and by as much as US$80 in the case of Siberian refineries of Siberian case the in US$80 much as by as and country of the part the European in located of refineries case the in tonne per by US$ 20–30 price higher their makes which distances, great products their transport must 30 60 90
0 oilcapital.ru/technologies/2006/10/061059_98699.shtml http://www. 2006, 6October vRossii’, neftepererabotki razvitiya ‘Problemy V. Kapustin, refineries in case of an armed conflict. conflict. armed an of case in refineries the secure to need the was times Soviet during places such in them for building The reason aly moskovskogo Centra Carnegie, no. 2, 2008, p. 13. 2008, no. 2, Carnegie, Centra moskovskogo aly materi Rabochiye pererabotki’ rossiyskoy i nishcheta ‘Blesk Bessonova, A. N. Pusenkova, Federal Statistical Service of the Russian Federation Russian of the Service Statistical Federal [million tonnes] 62.6 2000 Exports of petroleum products from Russia between 2000 and 2011 and 2000 between Russia from products of petroleum Exports 63.3 2001 75.5 2002 77.7 2003 82.4 2004 96.5 2005 102.3 2006 110.9
40 2007 . Thus Russian refineries refineries . Thus Russian 115.4 2008 120.6
42 2009 . 133.2 2010 132.0
41 2011 - - - - . of crude oil are much more cost-efficient are oil of crude exports since refineries, volume the Russian of processed in oil not increase to for Russia arguments presenting are and stance this with agree experts sian envisages a regular increase in oil processing output Russia processing oil in in increase envisages aregular 2030, to which Strategy of the guidelines the to contrary is this although mal is opti tonnes million output at a level of refinery 230–240 annual lieves that 45 44 43 produce themselves. they process more than oil usually companies, which Western large with case the is lower than times several is ratio processed oil producedtheir versus oil because firms for Russian vital is This them. to oil crude supplyingand abroadRussian over refineries –taking foreign expansion solution best intensify the to is possible. situation, products leum Given this processed petro of highly exports ones make to existing of the modernisation the as would expense, and a time lot take of would in Russia new refineries of The states. construction member EU in especially outsidenetworks Russia, distribution fuel and of refineries investcompanies takeovers more in actively oil make to is policy this the of goal thethat conclusionto leads industry finery re the government towards Russian adopted policy by ofthe the analysis An 3.3. andproducts” notpetroleum oil crude it more is profitablesell to the economic butpointfrom view today of may paradoxical, seem profits. This “One what brings 2009, build should December in said Putin Vladimir ister Min Prime example, for officials; by state statements concluded certain from be BPS-2). (ESPO and also can This construction now under are which pipelines the oil need to fill one if considers the serious tion 2). especially is issue This V, may even see Chapter products go (for down on this, more information sec petroleum of Russian exports that duty rates mean export the in The changes development of the Kirishi and Tuapse refineries currently in progress. in progress. Tuapse and currently development refineries Kirishi of the completedwas the in 2010,which and in Nizhnekamsk, opment refinery of the the devel from apart in Russia built being is no new refinery that emphasising
http://premier.gov.ru/visits/ru/8759/events/8815/
ble and creates new jobs” http://government.ru/docs/1374/print/ jobs” new creates ble and profita (…), more is products which petroleum processed but highly oil not “export should manufacturers Russian however, that said, Putin Vladimir Minister Prime 2008, May In Interfax-ANI, 16-22 June 2011. June 16-22 Interfax-ANI, ya Gazeta neftepererabotku’ v Rossii likvidirovat predlagayut Sergeyev, M. ‘Ekonomisty
Expansion to foreign refinery markets to foreignExpansion refinery , 30 March 2011. March , 30 44 . The Ministry of Energy also be also of Energy . The Ministry 45 43 . It is worth . It worth is . Many Rus . Many Nezavisima ------35 OSW STUDIES 04/2012 36 OSW STUDIES 04/2012 refinery and downstream assets in the EU.the in assets and downstream refinery over become taking more in active will they that Therefore, it mayexpected be strategy. business arational is expansion the convinced that are themselves companies the foreign expansion, of the initiator the as acting is which state the Russian Althoughin is Poland’sLotos.it to 53%stake buyin 2011 a efforts (Schwedt Leuna),TNK-BP making while and Germany was eastern and ská) Republicthe Czech rafinér in (Česká refineries in stakes gain to attempting been has Neft Gazprom that Germany. It fact and awell-known is Europe tral of Cen countries the These pipeline. oil are Druzhba the using ideally expense, at oil low crude may supply they which to their countries those are interested especially are companies Russian which in (Surgutneftegaz). The area gary Mayin 2011 Hun and until up (Slavneft) Belarus in refineries in share and (Rosneft), Gunvor) and (LUKoil (LUKoil), Germany Italy and Netherlands the (LUKoil), (Zarubezhneft), Serbia (Gazprom Herzegovina Neft), and Bosnia (TNK-BP and (LUKoil),LUKoil), in Ukraine Romania Bulgaria refineries own theyor co- Currently,own outside Russia. markets refinery presence on the their haveincreasing actively been firms few Russian years, past the Over oil. crude than products troleum itpe more is profitable arule sell to as that fact the from results policy Their - - - - Map 3. Map Refineries owned or co-owned by Russian oil companies oil by Russian or co-owned owned Refineries 37 OSW STUDIES 04/2012 38 OSW STUDIES 04/2012 restricted access for foreign investors. restricted and levelinsufficient of an investment, is of onewhich effects ofsystem, the fiscal inefficient favour companies, in the of state-owned ment discrimination control sector, of the below, govern political and ownership tail include: state economically unfeasible economically is this now – function are forcedto companies oil in which fiscal, mainly tion, situa but annually, tonnes –given the 85 to or tonnes even 100 million million output its 59 from company increase could his that said Bogdanov few years. past for sector the condition entire of the the illustrating indicators were the whose development class, top of be to believed a company is the results which Bogdanov, president of the by by Vladimir astatement Surgutneftegas, trated development illus be awhole. the as sector can of impeding This the cantly have companies government’s about the the signifi is policy The uncertainty dependent heavily on oil-generated are reduced be could income. these since budget that fear due revenues the to primarily out reforms carry to unwilling 47 46 on Russia’sthe by an attack company inspired oil largest was affair’, which the by ‘Yukos manifested was aspresident,which Putin officein ofVladimir term first took of end placesector. atthe changes the However, fundamental oil it control to the had instruments government not the did use the garchs, oli from Russian influence informal and institutions of state weakness the to Due capital. oligarch controlled by Russian became companies oil most all al and 1990s, mid the in privatised was sector oil Russian of the part A vast 1. [from government]” action emergency the any would require awhole as sector oil which no problems the in are “there 2009, in said Sechin Igor economy. Minister sian whatPrime is Deputy possible One of example this Rus of the branch mostimportant this to approach its noseen need change to has However, few years government past Russia. overuation in the Russian the the economicsit adversely may affect thus and future, to its challenge a serious posing are and sector oil Russian the in problems havemany accumulated been one in decade, tonnes million 200 production by oil almost in increase Despite the IV.
State control politicalsupervision and Razvedka &Dobycha Razvedka otMinenergo’ ‘Strashilki from: Quotation ‘Yest beguny na korotkiye distantsii, a my stayery’ Kommersant amy stayery’ distantsii, korotkiye na ‘Yest beguny
T IL SE OIL HE CTOR 47 ’S P ’S . The key problems, which have been discussed in de in . The keyproblems, have discussed which been ROBLEMS , no. 2, 2011, p. 11. 2011, , no. 2, , 29 April 2008. 2008. April , 29 46 . The Kremlin is is . The Kremlin ------fiscal system and is lobbying for high tax rates to be maintained. maintained. ratesbe to tax is and lobbying high for system fiscal the it because sector determines oil on the impact a strong has turn in Finance of role. Kremlin’s playing a minor orders, ofis The the Ministry performer the and supervisor administrative the as mainly of Energy, acts which The Ministry 49 48 company time oil at state-owned that only the over by Rosneft, taken were assets and its bankruptcy, ledgovernment. Yukos artificial to was of Rosneft, where he was chairman of the supervisory board until April 2011 April until board supervisory of the chairman where he was of Rosneft, sector. lobbying especially oil been for of the He interests, its has supervision ical of government’s polit the is Igor charge in person Sechin Minister Prime Deputy for priorities development the sector. oil of the akeyroleplaying determining in are Putin, Vladimir Minister Prime above all and class, ruling of the Members sector. oil control Russian of the total has ernment gov the that means facto de This changed. be to is of agiven entity structure ownership the if government, especially consent the from obtain informally must they keydecisions, Therefore, when private make companies export. ing includ infrastructure, transport decides on which access the to Transneft, government’s ofthe company the is influence instrument important One etc. damage, alleged ecological for penalty financial licence, ahigh by imposing production the cancel to private ones,but for threats also by example, using companies notstate-owned influence only successfully government can the budget.state the contributorto However,main of status and significance tegic stra its reflects sector oil the TheRussian state’sof part control of asignificant 50%. almost to rise will share Russneft), and this Bashneft Slavneft, governmentsentatives ofhave some the in private (Surgutneftegas, companies repre control which However,present. informal into account the one if takes at to 37% ‘Yukos affair’) before the (i.e. time 2003 in 24% the from grown has production oil Russian total in ofcompanies state-controlled share the which Neft), Gazprom a private company a consequence of was (currently as which bought Gazprom Sibneft, 2005, in sion government Furthermore, ofelite. the supervi direct the under thesector found itself that was ‘Yukos affair’ the
yukos-affair-its-motives-and-implications ies, no. 25, August 2006, http://www.osw.waw.pl/en/publikacje/osw-studies/2006-08-15/ Stud OSW Implications’ and Motives its Affair”, “Yukos ‘The W.For see: more Konończuk, influence on the running of these firms. firms. these of running the on influence behind-thescenes, now albeit real, their weaken not however, did This, introduced. was Medvedev, President by initiated was which companies, and institutions state in positions of holding simultaneous on the ban the after resign to had They companies. state-owned many of bodies supervisory the in positions key held officials state senior 2011, mid Until 48 . An effect of effect . An 49 ------. 39 OSW STUDIES 04/2012 40 OSW STUDIES 04/2012 my. The Energy Strategy to 2030, which was adopted only six years after the the after years adopted six only my. was 2030, to which Strategy The Energy of keysector econo its the regarding deprivedRussia of strategy a consistent collide, make often whose Transneft), interests and of Finance, Ministry the of Energy, Ministry the Igor Sechin, Minister ter, president, Prime Deputy minis (the policy prime oil formation of onthe the centres decision-making various from influence the and The interests combination of state private and the ESPO and BPS-2 oil pipelines, and the Souz Petrolium trader firm trader Petrolium Souz the and BPS-2 pipelines, oil and ESPO the of the construction in is participating which firm, Stroynovatsiya the Primorsk, in terminal oil of the part entities, controls, among other which holding, Summa Magomedov, Novorossiysk Ziyavudin of owner the and the port; of owner the 53 52 51 50 30% of around a share holding oil, of of Russian Gunvor, aco-owner exporter Timchenko, largest the include:Gennady individuals The state. mostinfluential of the interests the contradict often and sector the in interests private business their at securing aimed are role. actions Their an essential also playing are politics state influence may successfully Putin, Minister Prime including elite, political the with tions connec their who to owing do notbut posts holdSome individuals official any accumulate personal wealth personal accumulate to elite thepolitical of theof part desire because of also and significance tegic it of because asector is stra sector control oil of the total The government has including the construction of the ESPO and BPS-2 pipelines oil and ESPO of the construction the including projects, implementation oil expensive the of very during occurred ment has to siphonEmbezzle means off as funds. used public to economic are logic and contrary performed being are some projects oil aresult, As class. ruling the of of part interests sector’s financial and development political on depend the energy of priorities the aconsequence, the As management. of their members or politicians to linked ‘satellite’ are many which companies have especially
Timchenko’ Timchenko’ of Gennady case the Russia: in crisis on the money ‘Making W.For see: more Konończuk, ‘Kak pilat v Transnefti’ 16 November 2010, http://navalny.livejournal.com/526563.html8 2010, November 16 vTransnefti’ pilat ‘Kak Navalny, blogger, Alexey Russian famous the by investigation the see issue For on this more supplies of 2.4 million tonnes of oil. of oil. tonnes million of 2.4 supplies for annual contract three-year another it signed 2011 December in and 2009, November in annually of oil tonnes million of supply 4.8 for the contract athree-year it signed Orlen: PKN to of oil supplier main the is Switzerland, in registered acompany Petrolium, Souz no. 1, 2009, pp. 14–27. 2009, no. 1, Economics, and phy Geogra Eurasian Industry’ Oil Russian the in Control of State Rise Resistible ‘The P. Hanson, fault/files/Commentary_31.pdf OSW Commentary, OSW 50 , and of the gas company Novatek; Arkady Rotenberg, company Rotenberg, Novatek;Arkady gas of the , and no. 31, 28 December 2009, http://www.osw.waw.pl/sites/de 2009, December 28 no. 31, 52 . The state-controlled companies and Transneft Transneft and . The companies state-controlled 53 . 51 . ------the state still had at disposal had its still state the development Titova field (Timan-Pechora), and Trebsa of the largest the one of for the of end licence at2010 of the the Bashneft to granting the was of this recentexample The most wins. company that one particular so fixed often are an Sea and the Sea of Azov) can be produced of be Sea firms Azov) by only state-controlled the can and Sea an Caspi exceptionof the the (with shelf continental Russian on the materials raw that regulates provision of which 2008, legal the is moreOne example is Rosneft. of which beneficiary main the Siberia, dutyEastern on from oil export of the lifting temporary the to contribute to continuing growth of the share of state-controlled companies of companies state-controlled share of the growth contributeto continuing to government’s is the to According intention, this task. this cope to with unable are companies three since shelf, continental Russian on the wealth natural the of utilisation the in delay causesignificant restrictions legal fields. ter Similar work with on underwa a private experience company, largest the has which it outside LUKoil, Meanwhile, is of Russia. primarily does business and pany com a small of is which latter the Zarubezhneft, and Neft Gazprom Gazprom, Rosneft, four to firms: restricted been competition has the that means This 57 56 55 54 schedule export the setting in given them to preferences treatment include of some entities Examples special of officials. state senior the most favour frommay their count in on lobbying Thesegutneftegas). firms Sur and (for Bashneft example, class ruling controlled by the orNeft) those Gazprom and favour (Rosneft companies in of state-owned discriminating is the government state-controlled, is sector the oil of part Since asignificant 2. out,though long-term activities. are not a consequence and of well- firms and institutions lobbying certain from influence of the under administration state by the taken are decisions Many present policy. the to contrary are oil concerning part the sions in included Some of provi its potential. country’s the energy atIt demonstrating aimed is of propaganda. ameans 2020, to mainly is Strategy endorsement Energy of the the best production licences best the
T and at a defined time, is determined by Transneft in consultation with the Ministry of Energy. of Ministry the with consultation in Transneft by determined is time, at adefined and direction a defined in send may company a given of oil quantities the i.e. schedule, The export O. Gavshina, ‘Sdielka iz proshlogo’ Vedomosti proshlogo’ iz ‘Sdielka O. Gavshina, D. Rebrov, ‘Gazprom i Rosneft idut na dno’ Kommersant dno’ idut na D. Rebrov, iRosneft ‘Gazprom The Ministry of Natural Resources is in charge of granting production licences. licences. production of granting charge in is Resources of Natural The Ministry he privileges of state-controlled companies 55 . Although formally tenders are held, their results results their held, are tenders formally . Although 56 . Another example of unequal treatment is is treatment of example unequal . Another , 3 December 2010. , 3December , 17 April 2008. , 17 April 54 and granting them them granting and 57 - - - - - . 41 OSW STUDIES 04/2012 42 OSW STUDIES 04/2012 lection rate, with a damaging effect on the rationality of production”field rationality the on effect adamaging rate,lection with (…) col payment for of system the “primitivisation tax improve to the stands NDPI Russia, in gas and oil with dealing magazines one most important of the Vertikal overexploitationthe opinion of Neftegazovaya ofIn some fields. of the irrational theand one fields, is of consequences its extract to easiest and best production at the encouraging is tax Thusdepletion production costs. this and of degree structure, location, geological their geographical of regardless fields, all from on extracted oil amount equal it at imposed is an that fact the namely flat rate,NDPI its concerns of criticism budget.state the offto main The panies incomethe comof of oil part siphons automatically asignificant which nism Thus it asimple is mecha barrel. US$15 per approximately reaches price and oil current on the depends 2002, in introduced The was rate of which NDPI, 9). them Chart (see on burden fiscal amuch heavier imposed taxes two income, 70% the of much as their as keep duty. able been to had companies oil export While (NDPI) the resources and of mineral extraction on the tax on companies: imposed oil the were then taxes rapidly. growing Two when prices started oil Putin, key ofpresidency Vladimir first of the beginning force at in were the created currently systems The tax 59 58 deposits Russia in oil all of accounts half for in aggregate in operation, which already old fields rates, it unprofitable is presentto develop tax 90% and the 30%of new of fields development. its the With at stimulating aimed function the performs system possible budget highest the economy the of in revenues. the gain to is Nothing branch this regarding system fiscal Russian of goal the The primary future. its consequences for serious poses development its potentially and inhibits cantly sector, problems oil ofsignifi the which chief among the rates are tax High 3.1. 3. companies. state-owned of the subcontractors only as shelf continental production on the the in part take may firms The other significance. their in also thus production and oil in
T no. 5, 2010, p. 2010, 17.no. 5, Vertikal Neftegazovaya izbrannykh’ dla ipryaniki Kudrina nozhnitsi ‘Nalogooblozheniye: ‘Zhertva dobychi’ RusEnergy dobychi’ ‘Zhertva
he inefficient tax hesystem inefficienttax Characteristics of the tax system of tax the Characteristics 58 . , 25 October 2010. October , 25 59 . - - - - , , 10 20 30 40 50 60 70 80 Percentage share of the NDPI tax and export duty in the Urals oil price oil Urals the duty in export and tax NDPI of 9.Percentage the share Chart ation of oil companies, the share of taxes in a barrel of oil worth US$100 is 41% is US$100 of worth oil abarrel in of taxes share ation of companies, the oil followed tax be to amodel presented as the often is in system whose tax Brazil, For in extent. comparison, incomes forhigher limited producers oil avery to to prices translate oil higher that means This 71.4%. reach taxes US$100, the price of at 55.9%, to the while grow taxes US$50, the price reaches When the price. oil 35.1% duty is of the export of and NDPI share the barrel, of per US$30 the price companies. At oil imposed levies on Russian fiscal of the growth the more intensive price, oil the below, the higher the chart the in demonstrated 61 60 Data: month preceding average on the depends the price monthand in oil every The duty rate changes of barrel. above value oil per US$25 of the 67% and 65% between ranged years two the past duty,export in ratethethe of is which levy major fiscal Another
0
even had to withhold production because the fiscal levies were higher than their incomes. incomes. their than higher were levies fiscal the because production withhold to had even firms smaller some of 2008 half second the in dramatically down went prices the When rapidly. dropped prices when losses, high also and profits additional companies oil offered growth price of rapid case the in which months, two every changed duty export 2010, Until O. Gavshina, Y. Mazneva, A. Trifonov, ‘Reshitelnyi i shchedryi’ Vedomosti ishchedryi’ ‘Reshitelnyi Trifonov, A. Y. Mazneva, O. Gavshina, Neftegazovaya Vertikal Neftegazovaya [%] 30 35.1 48.1 40 60 . On 1 October 2011, the duty rate was reduced to 60%. As reduced As to 60%. duty rate was the 2011, 1 October . On , no. 5, 2010 , no. 5, 55.9 50 61.0 60 64.7 70 80 67.5 69.7 90 , 31 August 2011. August , 31 100 [US$] 71.4 61 - . 43 OSW STUDIES 04/2012 44 OSW STUDIES 04/2012 the construction of new oil pipelines, including primarily ESPO, BPS-2 and primarily of including pipelines, new oil construction the with connection in few years past over the incurred huge it has the expenses way for company state-controlled compensate must this this since costs, port trans oil actual the than much higher usually These are by Transneft. lected fees col transport oil the pay must companies are Russian of tax kind Another Data: 10. Chart of development. its trends the for setting a mechanism as act production and stimulate to fails time same sector,atoil the which and dependent on the budget,plying state revenues increasingly is the which to supof function fiscal the only performs system tax the that fact the is for this ment ofdifficult-to-accesscause invest main new fields in to or oil fields. The develop large-scale on the for embark to companies oil provideto astimulus record-high Even projects. prices havecapital-intensive the oil failed upstream in new, investments usually forsignificant fields butsmall used too already the to income leaves sufficient continueproduction on system with companies oil 10). profits 80% of and the companies generated by Chart oil (see 75% fiscal The between take currently aconsequence, taxes As few years. past of 20% the in rate a reach to 2004 since increased significantly has which pay income tax, companies and products, on imposed duty is petroleum Additionally, excise sector. the imposedoil on levies fiscal only not the duty are export and NDPI 100 20 40 60 80 0 Neftegazovaya Vertikal Neftegazovaya [%] 31.7 1999 Taxes imposed on the profits oil companies between 1999 and 2009 1999 between profitscompanies on imposed oil the Taxes 34.4 2000 49.7 , no. 5, 2010 , no. 5, 2001 54.1 2002 50.8 2003 71.2 2004 74.4 2005 76.5 2006 74.6 2007 80.6 2008 75.0 2009 - - - - and US$0.68 in the USA the US$0.68 in and Canada in US$0.44 it while was US$0.95 cost of Russia, 100 km in at adistance 65 64 63 62 duced of tonnes have oil pro been 25 for million 10 15 to or until years Krai yarsk Krasno and Irkutsk oblast in fields located of the case Yakutia, pletely the in com lifted was tax reduced slightly forthis depleted fields and to over80%, rate 2007,was NDPI In the some in areas. action fragmentary arather but was form of a comprehensive the however This reform, some not did extent. take it to government to liberalise took action the some experts, and companies from oil coming system fiscal of the criticism increasing with connection In 3.2. producer among oil countries highest theis 71%and one of by increased tariff transport Transneft’s 2009–2011, in conditions of Only adverse on operation. its the impact additional an has which sector, the oil for burden fiscal another fact in then is This Purpe–Samotlor. ernment to improve the fiscal environment were: the reduction of oil export export reductionthe of oil were: environment improvefiscal to the ernment The mostrecent gov moves of by the Finance. made Ministry the from test May in 2011 fields. due However,to a of pro imposed these again was the duty in in only four place was production real although twenty-twotended to fields, ex was list 2010,this In January 2009. December in Siberia Eastern in fields oil duty on thirteen export of the lifting the ofoperation was companies oil the conditions of improveto financial attempts the of the The most important with the exception of the Vankor exceptionoffield the the with low, still are region output since this levels in extent a whole limited avery to as sector oil ofyears). situation improved the the has However, measure this for tonnes (15 seven Yamal Autonomous Nenets in million and the in Okrug of (up Sea tonnes,for Azov seven years), the no longerand to 10 million than Sea shelves Caspian have on tonnes of extracted), the been the 35 million (until
no. 1, 2009, pp. 15-18. 2009, no. 1, Carnegie, Centra moskovskogo materialy Rabochiye vRossii’ ‘Neftedobycha Bessonova, A. the regular NDPI rate has been imposed on this field since then. then. since field on this imposed been has rate NDPI regular the so 2011, September in tonnes million 25 exceeded field Vankor at the output The aggregate ‘Zhertva dobychi’ RusEnergy dobychi’ ‘Zhertva O. Gavshina, ‘Privilegiya Transnefti’ Vedomosti Transnefti’ ‘Privilegiya O. Gavshina, Attempts to improvesituation fiscal the 64 . In 2009, NDPI was also temporarily lifted for fields on the Polar shelf the forshelf Polar fields on lifted temporarily also was NDPI 2009, . In 63 . , 25 October 2010. October , 25 65 62 . . In 2009, transport of one of tonne oil transport 2009, . In , 26 August 2011. August , 26 ------45 OSW STUDIES 04/2012 46 OSW STUDIES 04/2012 67 66 2011 October 60% to from 65% duty from 5 million tonnes million 5 of deposits less than with tonnes)tonomous (up those and Okrug 30million to the in Au fields located Yamalo-Nenets the have from tonnes extracted), been 20million (until of Sea Okhotsk the and Sea shelves Black of the from the oil ing to another version– the introduction of one tax whose ofrate would depend one version– introduction tax the another to ing or products, –accord duty on petroleum excise on and NDPI oil tion of ahigher imposi the time same at the and oil duty on crude of export lifting a gradual They solutions projects. suggest among other or upstream regions selected to breaks tax of offering instead sector entire for of reform the asystem-based need the indicate exporters The and solutions companies proposed by Russian lifted. temporarily duty is possible export if be only will shelf the continental fields on the in investments its that predicts duty. export also in reduction Rosneft it a temporary needs that and barrel per US$100 at possible price be is oil least implement to the if project will the that assesses time investment, buttheonsame at improvereturn the significantly will which billion, US$4.5 approximately gain will fields, ofing onit NDPI these lift the to that owing the in AO. fields companyYamalo-Nenets estimates This solutions. Neft’s for Gazprom This, concerns example, technological expensive conditions and/or require which those climate unfavourable very located in fields adopted primarily concern measures the noted be to needs that It also Vankor. duty rate on from oil export zero the not able been maintain to has officials, state most senior among the lobbying potential great its with Rosneft, even Nevertheless, Neft. Gazprom and companies, Rosneft state-controlled the thesolutions to all of adopted above brought part benefits a significant Furthermore, situation. improve to the taken been comprehensive has action duty, export the no in slightreduction the from produced, is oil apart Russian of ofshare old case vast fields, a where the output. In oil ofpercent Russian account fields to which for a only few extend and changes system bring to fail fragmentary, are sector. taken oil of situation the The measures ment the in improve notabout a real bring will taken it has actions the and four years, past over the done governmentlittle has Russian the appearances, to Contrary
K. Melnikov, ‘Neftianikam obnulili stavku’ Kommersant stavku’ obnulili ‘Neftianikam Melnikov, K. per tonne of oil. The 65% rate has been replaced with 60% since October 2011. 2011. October since 60% with replaced been has rate The65% of oil. tonne per US$29.2 of price base the to changes) figure (this US$182.5 and of oil tonne per price current the between difference of the 65% following: the is duty export of the formula The complex 67 . 66 and lifting NDPI in August 2011 for 2011 August in NDPI lifting and , 22 July 2011. July , 22 - - - - - in the next ten years than the presently applicable presently would ensure the system than years ten next the in system’s this with of theyhigher year be 20% operation but first would the budget byin US$2.5 state revenues billion the to would fall calculations, its to According ratethe of at 27%. incometax ofone introducing new fields, case the in and, duty 55% to export suggested reducing of Energy Ministry the economy. Russian of sector the of strategic end 2010, At the this in reform cal out fis athorough need carry to of governmentthe aware is the It that seems transported. is oil which distance on depend should the sector are quite low in the immediate future. future. immediate low the quite in are sector oil of the taxation the in change for real chances the that means sions. This keydeci the for responsible elite making Russian of by the amajority ported level, at sup is ahigh budget revenues maintained being guarantees stance group, The latter sufficient. whose are already have taken which been tions ac the that or claims opposes this of Finance, Ministry the in whose is centre group, the other changes. Meanwhile, of fiscal lobbyingis introduction for the sector, oil of the guardian the Igor Sechin, Minister led Prime by Deputy them, of One class. ruling Russian the within competing are groups two thermore, Fur extent. of only to a limited companies oil prove investment potential the Kremlin’s for passiveness. however, This, the excuse another helps as im used budget revenues. consequences of prices of are falling High fear the due the to fragmentary and insufficient is challenges existing sector, the to response its the in situation of the objective picture an government has Even the though V). Chapter in more detail in discussed is (this a decade more than a little may even 30% be lower within and Russia, in dramatically falling start production will oil through, carried is reform fiscal no radical if that predicts 2020, to which Industry Oil the of Development Scheme of General the found be in conclusions can Similar 69 68 reduction scenario of budgetthis leadcould asignificant to revenues. While sector the oil pertaining system fiscal of reform the thorough any that fears government it proves by the that taken approach circumspect, very This, 3.3. company’son a income
D. Kazmin, A. Peretolchina, F. Sterkin, ‘Syryevoye zaklatye’ Vedomosti zaklatye’ ‘Syryevoye F. Sterkin, Peretolchina, A. D. Kazmin, ‘Zhertva dobychi’
The consequencesreform of of lack afiscal the RusEnergy 68 . It has also been suggested that the rates of fiscal levies rates of fiscal the suggested that been also . It has , 25 October 2010. October , 25 , 12 October 2011. October , 12 69 ------. 47 OSW STUDIES 04/2012 48 OSW STUDIES 04/2012 comparable output and reserves. comparable reserves. output and Western competitors with their problemthe of than much lower capitalisation by affected are companies oil Russian All environment. fiscal unfavourable an need in operate to the is for reason this most important other the panies, salescom Russian of the total in products petroleum of share insufficient the addition to In of ExxonMobil. those than larger a third neft’s are deposits oil although Ros ExxonMobil, that of stock-marketthan fivetimes is lower value whose Rosneft, is prices. companies, example despite One oil of high Russian valuation the affecting adverselyare Secondly, burdens excessive fiscal the Russia. in favourable investment climate un the is for this one keyreasons of the that indicate companies oil of Russian acceleration of foreign the expansion Syria). and and (Libya The scale Tatneft and Iran), (Algeria) and Saudi Arabia),Rosneft (Iraq and Neft Gazprom Egypt Ghana, Vietnam, Kazakhstan, Azerbaijan, Iraq, in oil or exploring (producing include: abroad LUKoil active companies Russian Other Iraq. tion licences in for atender in extrac participate to intending is Julyand 2011 in billion US$1 field for a Brazilian 2010, in BP October from in took over stake a 45% Vietnam Venezuela in projects oil and in bought outside shares Russia, upstream ed in of example TNK-BP. the is this company, This not had previously invest which of world. the places Agood across illustration various in deposits in investing more favourable conditions for started These investment, expecting entities, years. two past over companies the among Russian observed been has which projects, in foreign upstream activity increased the es. Firstly, it affecting is major two consequenc other at has least also system overly aggressivefiscal the in output, reductionoil of asignificant risk imminent real additionthe to In crisis. of aserious risk sector’s the the posing impeding development force in are are and currently levies fiscal the that warning a realistic as but also system tax of the alisation 70 tion and outputdurable reduc reform fiscal between choose to has Russia that regularly placehave anyway. warning been take Representatives of firms oil negative consequences budget for the the will all and fall, production will oil through, carried is reform fiscal no radical if term, short the in real fact in is
Energy, 27 May 2011, p. 3. 2011, May 27 Energy, FSU Argus Fedun, Leonid of LUKoil, CEO deputy the by statement the for example, See, 70 . Such opinions need to be seen not only as lobbying for a radical liber lobbying not need seen be to for. Suchopinions as only aradical ------than the investment expenses of all Russian oil companies in aggregate in companies oil Russian of all investment expenses the than higher was which were billion, US$ 32 2011 in Rosneft, produces less than oil which of ExxonMobil, 11). investment expenses For(see the comparison, Chart 2011 in billion US$25 and 2007 in billion US$11.4 reach to rapidly 2005 in creasing in it started billion, at US$4–5 was investment level 2000–2004 in annual the While sufficient. from far still are but they price growth oil to the owing years five past over the have companies oil increasing ment been outlays of Russian firms ranges between US$15 and US$20 US$15 rangesbetween firms 73 72 71 exploration work and geological on production and billion US$491–501 cluding in years, twenty next the within billion US$609–624 reach should sector the in investments level of the necessary that forecasts 2030 to Strategy The Energy Data: US$7 much lower it US$10, was and recently, and US$9 between ranges at to US$5 currently in Russia oil extracted of fields. oil The level investment barrel per of idle exploration development work and explored but the and of still cal already on including geologi to investment, funds insufficient allocate companies sian sector, the imposedoil on Rus burdens excessive aconsequence of fiscal the As 4. Chart 11.Chart 10 15 20 25 ‘Investitsii’ ‘Investitsii’ 0 5
Insufficient investments Y. Kravchenko, ‘Bal Neftianikov’ Vedomosti Neftianikov’ ‘Bal Y. Kravchenko, http://www.rosbalt.ru/business/2011/05/30/853490.html 2011, May 30 mld’, $100 prevysit mozhet RF kompaniy neftegazovykh pribyl ‘Chistaya
Neftegazovaya Vertikal Neftegazovaya [US$ billion] 71 4.1 2000 oil for averageindicator international large the . Meanwhile, of value this The investment levels of oil companies in Russia between 2000 and 2011 and 2000 between The Russia investment levels of in companies oil 5.7
Neftegazovaya Vertikal Neftegazovaya 2001 4.7
, no. 5, 2010 and own calculations on the basis of data from companies for 2010–2011 for companies from of data basis the on calculations own and 2010 , no. 5, 2002 5.4 2003 5.8 , no. 5, 2010, p. 2010, 91. , no. 5, 2004 7.8 72
, 13.09.2012 , 2005 . It needs to be admitted that the invest the that . It admitted be to needs 11.4 2006 . 15.9 2007 19.5 2008 16.9 2009 20.5 2010 73 . 25.0 2011 - - - - - 49 OSW STUDIES 04/2012 50 OSW STUDIES 04/2012 Table 2. Table US$325 billion by 2040 billion US$325 approximately reach should shelf development the Arctic investment in of the level of the that estimates Resources of National Ministry Russian tionally, the able and this has been regularly falling over the past few years. The existence The few years. existence past over the falling regularly been has this able and 74 76 75 (0.9%) equipment (13.3%),(3.6%) exploration for ofand the newother fields drilling (42%), fields construction active (40.2%), already in industrial drilling ing: follow as 2010 in companies was oil of Russian The investment structure Data: sector refinery of the modernisation forwould havethe allocated be to billion US$44 of by which 2035, billion US$633 reach should they estimates, its Agency (EA). to Energy According International by the determined been has sector oil the in made be to level of investment necessary terestingly, asimilar In annually. billion of US$5.9–6.2 costs additional 2030, means to Strategy ing system), Transneft’s accordand fields which, their between connections the and network (Transneft’s construction and pipeline oil sector refinery of the modernisation of the costs the have incur to also will companies oil thermore, present outlays. Fur the than alevel much higher annually; billion US$24–25 (seealone invest to approximately Table it necessary 2). is that means This
Total Transport Refinery sector exploration work exploration and geological and Production Investment level Investment IEA World Energy Outlook 2010. 2010. Outlook World Energy IEA no. 4, 2011, p. 42. 2011, no. 4, Vertikal 2010’ Neftegazovaya Rossii igaz neft blagopoluchiye: ‘Fasadnoye Meshcherin, A. Moskovskiye Novosti Moskovskiye vdefitsite’ ‘Investitsii Kezik, I. Energy Strategy to 2030 to Strategy Energy 76 . The exploration lowon of the is new notice level fields of expenses Forecasted investment needs of the oil sector until 2030 (US$ billion) (US$ 2030 billion) until sector oil of investment needs Forecasted the 75 (to 2013- (to . 162-165 Stage I Stage 110-111 2015) 21-22 31-32 (to 2020- Stage II Stage 134-139 109-112 2022) 17-18 8-9 , 5 October 2011. 2011. , 5October (to 2030) (to Stage III Stage 272-278 313-321 23-24 18-19 609-625 491-501 Total 47-50 71-74 74 . Addi . ------, almost all large oil companies in Russia have loans to repay, to of have value Russia loans in companies oil total large the all almost Furthermore, Russia. in of investing possibilities of their reducing expense at the of money happening be must amounts on which foreign investments, significant allocate firms of Russian part that Ita considerable true is sum. (see 2011 in Table billion US$48.9 3). output, reached quite Russian is This total 90%control net companies, profitwhich eightof theoil largest The overall of lion in 2010 (an increase from US$100 million in 2005) in million US$100 from 2010lion in (an increase mil exploration low: US$310 on work and it geological was also is expenses the discovered. state’s The in field develop to right has it the given the share be will a given firm that do not which guarantee regulations, ofcause legal low so is be is area why level of this the reasons investment in ofOne the 81 80 79 78 77 2009 in metres reduced it annually, million 0.86 to lion was metres mil 7 approximately was theearly for exploration1990s ofin the new fields level of the drilling while that fact proven is by the area this in of acrisis Brazil is at 5–8% of the total oil production value oil total atof is 5–8% the Brazil USA or the Canada, as countries such in purpose forpublic this spending having paid US$8 billion in dividends for dividends 2010 in billion US$8 paid having them for reproached and investment for companies oil insufficient criticised who July 2011, in Putin Minister by Prime made statement the was ple of this exam One for lowering taxes. solutions, as search to such than rather panies level of investment on insufficient for com blame put to the the more inclined development unprofitable.the be fields ofwould still many The is government otherwise since controlled companies; secondly, high, prices remain must oil favour in of state- of discriminating instead companies private oil and trolled conditions state-conforto ment,doing for business equal by example, offering create a competitiveand environ burden government fiscal reduce should the the that above all improved, be to means which investment climate the needs possible, seems but This conditions: onthis two firstly, by themselves?’ funds The is: ‘Are keyquestion able companies vast oil generate to such Russian vestments in geological and exploration work and geological in at be should vestments US$15–18 billion in level of annual necessary the that estimate experts Russian Meanwhile, for billion exploration. new field US$0.8 approximately allocate companies
‘Gosudarstvo ukhodit’ Nefteservis ukhodit’ ‘Gosudarstvo Data: The General Scheme of Development of the Oil Industry to 2020. to Industry Oil of the of Development Scheme The General Data: op. cit op. konchilis’…, slivki baza: ‘Resursnaya no. 5, 2010, p. 2010, 44. no. 5, Vertikal, Neftegazovaya konchilis’ slivki baza: ‘Resursnaya ‘Gosudarstvo ukhodit’ Nefteservis ukhodit’ ‘Gosudarstvo , no. 1/2011. , no. 1/2011. ., p. 42. 81 . 80 . 79 . For comparison, the the For. comparison, 77 . Russian . Russian 78 ------. 51 OSW STUDIES 04/2012 52 OSW STUDIES 04/2012 of (US$ 2012 billions) 3. Table work. exploration and development the and in of investments newgeological fields level ofthe their increase to companies oil for Russian stimulus ment, would provide astrong environ fiscal of the especially and improvement investmentan climate, of the 82 The limited. competition are and capital necessary the that means which tions, corpora inaccessible international to extent agreat to is sector oil The Russian 5. case. the previously been has than sector would access improve the situation to foreign investors if were given better and its general sector oil the Russian in significantly grow could Investments Source: debt current income on servicing of their part allocate (see billion Table 3), of exceededUS$44 2012 must and beginning at the which
AL TOT Bashneft Tatneft Neft Gazprom Russneft Surgutneftegas TNK-BP LUKoil Rosneft O Limited access forLimited access foreign investors Own calculation, based on data from companies. from on data based calculation, Own il company il Own calculations based on data from companies from data on based calculations Own Net profit of oil companies in 2011 and their debts as of beginning as beginning of debts their Netand profit in 2011 companies of oil Profit 48.9 0.67 12.4 10.3 5.35 1.75 8.9 1.6 8 82 . Regardless of all this, this, of all . Regardless D 5.06 44.5 15.8 2.6 5.8 6.7 6.3 2.3 ebt 0 - - 83 formission foreign investment control required is com governmental the –consent sector from oil the –including strategic as defined sectors in firm aRussian in a10% stake more than acquire to wishes if a non-Russianentity regulations, becometo less legal flexible. According has the law asa aspresident, which consequence of Putin office in ofVladimir term first the took place during government that policy liberal previously quite the in change of a effect an is which restricted, of foreign investors strictly is share shown in Table 4. Table in shown 4. is which firms, for Russian partners minority as projects upstream several in 51%). participate also Foreign remaining holds (Rosneft firms the murtneft 51%), China’s remaining Ud and holds in the Sinopec holds 49% shares of the (Zarubezhneft 51%),ing Rusvietpetro in PetroVietnam holds 49% shares of the Energy, China’s Vostok 49% remain in holds (Rosneft perial CNPC the Energy India’s companies. Russian Im in ONGC with holdsventures 100% shares of the joint are often which firms, afew in small holdForeign investors shares also in 2006. firm’s LondonExchange the IPO this at Stock during by BP.owned are 1.3% it which bought shares owns BP shares, of also Rosneft exceptionof TNK-BP, majorclude any the foreign investors, with 50% of whose do companies not oil in Russian largest of the structures The shareholding managed. are they waythe on influence real not gain will thus companies, and energy Russian in stakes may countentities on only minority international practice few, in past over that the mean years intensifying been class’s sector, control oil ofhave the which ruling the and The nationalisation envisaged.is capital by foreign firm aRussian in of shares a considerable part the acquisition of if investment, especially foreign for significant each quired re is approval political which to according not legislation, recorded in rules,
A legislative amendment is being prepared which will raise this threshold to 25%. to threshold this raise will which prepared being is amendment A legislative 83 . There are also unofficial unofficial also . There are ------53 OSW STUDIES 04/2012 54 OSW STUDIES 04/2012 sky Ridge)sky respectively (the Tuapse shelf (the Shat shelf Sea Caspian Black on Trough) the and jects pro common upstream concerning Chevron, and US ExxonMobil companies with agreements signed 2010, In also Sea. Rosneft Kara at the blocks three from extraction concerning ExxonMobil and Rosneft between and cessful) (unsuc Rosneft BP and aforementioned between agreement were the this 85 84 up foreign to investment opening for abroader at readiness its hints making been government has Russian the sector. oil the However,Russian in 2010,since share hold insignificant an exceptionof TNK-BP, BP’sin the Thus, foreign companies, with stake still 4. Table
-Nenets AO -Nenets Yamalo- the in fields has company SeverEnergia Kharyaga block) (Veninsky Sakhalin-3 Sakhalin-2 Sakhalin-1 O Ridge. the Shatsky on deposits potential the of assessment the in differences were for that son rea Theofficial project. on this co-operation their ended Rosneft and Chevron 2011, June In eign investors’ EastWeek investors’ eign for to sector of Russia’s energy opening-up ‘Controlled Wiśniewska, I. For see: more week/2011-03-09/controlled-opening-russia-s-energy-sector-to-foreign-investors il field name field il The share of foreign firms in Russian oil projects projects oil in Russian of foreign firms The share Novatek (51%) Novatek and Neft Gazprom (49%), Enel and Eni Zarubezhneft (10%) Zarubezhneft (40%), toilHydro (40%),Total Sta Sinopec (25.1%) Sinopec (74.9%), Rosneft (10%) (10%) (12.5%), Mitsubishi Shell (27.5%), Mitsui (20%) (30%), ONGC Sodeco (30%), ExxonMobil Shareholders 85 , 9 March 2011. http://www.osw.waw.pl/en/publikacje/east 2011. March 9 , . - 84 . The most important manifestations of manifestations . The mostimportant 568 million tonnes 97 million tonnes 169 million tonnes 150 million tonnes 256 million tonnes R eserves has not started yet started not has development field lion tonnes tonnes lion 1mil proximately ap of production are being made made being are launch production for preparations lion tonnes lion 8mil proximately ap of production of 9 million tonnes of 9million production annual Project stage Project ------86 changed system fiscal unfavourable the and guaranteed be vestments in of protection their the that expect will foreign entities that it likely quite is sector. oil However, problems Russian of serious the increasingly for the a cure thusbecome andput being into fields oil operation acceleratecould many so far firms).Engagement from considerably companies than foreign intensive more and Japanese choiceChinese between (the significance political of be high also choice decision onof the agiven company the will East Far of the case the In need partners. foreign will and require, fields the capital large complexity and technological due alone operate to unable the to are companies East), Russian Far the and Siberia, Eastern shelf, (the Arctic regions many drop.In to starts production oil if especially years, level coming of over foreign the investments the increasing in more interested more be and government will Russian the However, foreign to investments. sector oil that Russian itthe mayexpected be up of of policy acontrolled opening of the results up the early sum to too It still is firm. aRussian to assets international of attractive sale or the of shares exchange condition on of the Russia amutual investto in allowed often foreign are companies Furthermore, project. ofmanagement the the investoron influence deprived is control the of package, and real the keep rule as a firms Russian preparations, expensive and lengthy require usually of asource know-how as Moreover, capital. and projects mainly such treated thusbeing Investorsare shelf). the continental fields located on concerns ily primar technologies (this do havethenot necessary firms where Russian those in especially projects, and capital-intensive upstream difficult nically risky,investin to tech foreign firms encourage to large attempt selected an is goal conditions. Its co-operation main or better investment climate ment the in improvean of effect not is an conditions. It many to also subject and restricted controlled, up is which opening an as characterised be can area this in policy However, implemented projects Russia. in in participation Moscow’sed in new interest them makes risk, political existing of the foreign regardless entities, to deposits of Russian The investment. attractiveness international attracting aprovision included for already adopted 2009, in was 2030, to which Strategy of Russia’s signs are These deals foreign newto investors. approach The Energy
‘Nevostrebovannyie bogatstva’ RusEnergy , 18 May 2011. May , 18 86 . - - - - - 55 OSW STUDIES 04/2012 56 56 56 OSW STUDIES 04/2012 OSW STUDIES 04/2012 and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual V. 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. V. and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. V.
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Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, Strategy to 2030 to Strategy Geology Energy Strategy to 2030 to Strategy Energy o o
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Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, il productionil forecast by 2030 H H il productionil forecast by 2030 il productionil forecast by 2030 o o o W M W M W M d d d evelopment evelopment evelopment evelopment evelopment evelopment uc uc uc H o H o H o IL WILL ru WILL IL IL WILL ru WILL IL IL WILL ru WILL IL 2010 fact 2010 fact 2010 fact 505 505 87 505 505 87 505 505 87 . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major SSIA P SSIA SSIA P SSIA SSIA P SSIA 88 88 2015 88 490 . Despite the fact that proven . that Despite Russian fact the 515 2015 2015 490 490 . Despite the fact that proven . that Despite Russian fact the . Despite the fact that proven . that Despite Russian fact the 515 515 roduc roduc roduc 2020 500 527 2020 2020 500 500 527 527 E A E A E A nd nd nd 533.5 2025 533.5 2025 EXP 533.5 2025 - EXP EXP - - ort ort ort 2030 530 534 2030 2030 530 534 530 534 ? ? ? ------56 56 56 OSW STUDIES 04/2012 OSW STUDIES 04/2012 and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual since the collapse of the USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. V. 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual V. 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. and the Geology Development Strategy (in million tonnes) Development (in million Geology Strategy the and Strategy Energy the to by according 2030 production forecasts Oil Table 5. (see 2030 in Table 5). tonnes million 530 and 2020 in tonnes million 500 of level the reach to little a growing start then will and tonnes, million 490 2015 to in fall will production 2028–2030. the In Geology turn, Development Strategy to 2030 assumes that oil nual level of tonnes tonnes 505–525 million in million in 2020–2022 and 530–535 an an reach to years twenty next the within 5% approximately by grow production will oil that envisages 2009, Energy of end The the at another. approved 2030, one to Strategy from differ significantly documents Russian ous Official forecasts concerningoil production levelswhich can be found invari sector. oil government’s the the require in towards policy a change will this since goal this attain to difficult be will it deposits, covered undis still large very has probably Russia that and vast, still are reserves oil in the government’s opinion is ‘optimal’ is opinion government’s the in which tonnes, million 500 around at years few next the within output annual 88 87 Complex. Energy and Fuel the for Commission in Government endorsed the and by 2010 2001 of April end the at public made was which 2020, to Industry Oil the of Development of Scheme General the in provided is forecast Another USSR the of collapse the since level highest the tonnes, million 511.3 reached Russia in production oil 2011, In 1. V.
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Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, Strategy to 2030 to Strategy Geology Energy Strategy to 2030 to Strategy Energy o
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Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, Annual oil production in the Russian SFSR in the late 1980s was 570 million tonnes. million 570 was 1980s late the in SFSR Russian the in production oil Annual mier.gov.ru/events/news/14105/http://pre 2011, February Putin, Vladimir Minister Prime by speech the example, for See, il productionil forecast by 2030 H H il productionil forecast by 2030 il productionil forecast by 2030 o o o W M W M W M d d d evelopment evelopment evelopment evelopment evelopment evelopment uc uc uc H o H o H o IL WILL ru WILL IL IL WILL ru WILL IL IL WILL ru WILL IL 2010 fact 2010 fact 2010 fact 505 505 87 505 505 87 505 505 87 . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major . Russia’s major goal in oil policy is to maintain maintain to is policy Russia’s oil . in goal major SSIA P SSIA SSIA P SSIA SSIA P SSIA 88 88 2015 88 490 . Despite the fact that proven . that Despite Russian fact the 515 2015 2015 490 . Despite the fact that proven . that Despite Russian fact the 490 . Despite the fact that proven . that Despite Russian fact the 515 515 roduc roduc roduc 2020 500 527 2020 2020 500 500 527 527 E A E A E A nd nd nd 533.5 2025 533.5 2025 EXP 533.5 2025 - EXP EXP - - ort ort ort 2030 530 534 2030 2030 530 534 530 534 ? ? ? ------200 300 400 500 600 Scheme of Development Industry Scheme Oil of the General the to by according 2030 Russia in production forecasts Oil 12. Chart 2030. Strategy than forecasts production oil more includes optimistic document this changes, operate nies compa 2017. oil in which tonnes in environment Thus, million the level if of 571 amaximum reach to few years next the within growing be production will sector, the oil applicable system in oil fiscal of the cover aliberalisation marily the a adopts andpri government policy, good will which significantly increase ‘designed’, investments if as defined is which second scenario, the to According state. negative its consequences Russian for the all with years, twenty in by 55% and years ten next the by 20% within fall aradical mean will 2030. This in tonnes million 228 2020 and in tonnes million 2015, 403 in tonnes million 454 reach to rate at few afast years next the within falling be production will oil maintained, is operate companies oil as thewhich environment present if defined ‘planned’, scenario, 12). first to the (seeto 2030 According Russia duction levels Chart in of pro oil possible two scenarios presents scheme The centres. general research and foreign scientific and of Russian anumber with co-operation in of Energy developedMinistry government and by the by ordered the was document This 494
2009 [million tonnes] 496 2010 484 505 2011 473 513 2012 462 522 2013 454 513 2014 445 553 2015 438 567 2016 428 571 2017 415 568 2018 403 561 2019 388 547 2020 374 533 2021 365 513 2022 337 492 2023 319 470 2024 301 450 2025 285 429 2026 269 403 2027 255 383 2028 planned designed 241 364 2029 228 346
2030 - - - 57 OSW STUDIES 04/2012 58 OSW STUDIES 04/2012 by 2020 and 3.5% by 2025, to remain thereafter at that level until 2030–2035 level until at that thereafter 3.5% remain to byby 2025, 2020 and 7% falling: start then will 2015, and present level at until the remain will sia Rus production in oil estimates, to its According IEA. have by the made been forecasts Similar fall. to government’s them on the expect but policy generally depend production levels oil will who that believe experts, Russian of many predictions the with line 2030. These in in tonnes conclusions are million 443.1 2025 and in tonnes 2020, million in 478.1 tonnes million 498.1 reach to ularly reg fall date, production levels will this 2015. After in Russia place in take will tonnes over fifteen years. years. overtonnes fifteen million 50 by approximately fall production will IEA, Thus, to the according 90 89 industry gas and oil the to dedicated amagazine Vertikal, 2010sented Neftegazovaya in in pre was forecasts one mostreliable of by. the experts, fall For Russian many how is much it will unknown only or adecade the so in fall to bound duction is pro that and overly 2030, to are optimistic, Strategy Energy the provided in those especially forecasts, official opinion that of the are experts Most Russian sector. oil for the would beneficial be away that in system fiscal the sion-makers change to at deci lobbying among the aimed also is survey adopted this approach in alarmist the that one if assumes of future–even its picture most realistic 2020 to provides the of Development Industry Scheme Oil of the General sector, oil the Russian for development the the in forecasts situation of the containing institutions state by Russian prepared documents the all Of for oil”.mand the workde geological onanddepend the discovered conducted, new fields 2020 “will production level after the that areservation includes document now. 31.5% be could lower this years than Nevertheless, level twenty its in output oil for a butin Russian few reductionthe notyears offpreventand it, able be hold to will breaks suggested tax the that means 2030. This in tonnes million 346 2025 and in tonnes 2020, in 470 million tonnes million 547 to fall rapidly 2017 production will after that predicts However, Scheme General the
no. 2010. 6, Vertikal Neftegazovaya pessimizma’ vyshe optimizma, ‘Nizhe Y. Podolsky, Kipelman, S. IEA World Energy Outlook 2010, p. 2010, 128. Outlook World Energy IEA 89 . Its authors predict that a production peak at 506.5 million tonnes tonnes at 506.5 aproduction peak million that . Its authors predict 90 ------. , could even fall below 400 million tonnes million 400 below even fall could outproduction that ruled be it cannot circumspect, too appear ernment of gov to tonnes 2030. However, by the of millions taken actions the if by tens production may changes, decrease policy oil state the ronment. If envi fiscal improvement the an and investment of climate above the all government, by the taken measure on depend the will fall of this degree T tonnes. level of million the below 500 to fall start productionter will thereaf and years, to three two next the in annually) tonnes million eral 92 91 cy production efficien improving of use technologies extensive the and drilling of intensification thesignificant of firms, oil investment activity increasing independent of is the fall observed the that warn experts place.ing Russian AO, tak production is oil where over Russian Khanty-Mansi 50% ofthe total in fields oil the badin especially The is situation future. the in continue fall to will mostforecasts, to according and, 2006–2010 in by 5% fell output there tal centre. production oil To the key Russian in tion of fields Siberia, oil Western condi deteriorating the is production fall expected for reason the The main 1.1. R for the scenario likely most the text, opinion author of the In the of this than now.than More rapidly to likely, fall however, start level its will some fields in the present fiscal environment. environment. thefiscal present in some fields unprofitable production is in that fact the 1991, production since and extensive (see2008 Table 6). of depletion degree due old is high of to: This fields, the the level in the to comparison 40% by in 2030 by even more and than years ten in reduced be 20% –output 2030 will Strategy to where province, –according oil Volga-Ural the deterioration in greater Russia’s region, second mostimportant showto even expected fiveis next Thesituation years. the 10% within reach may even fall the and falling, irreversibly and regularly be will Siberia ern West production in oil envisages that forecasts, optimistic its 2030, with egy
ussian oil sector provides for a slight increase in oil production sev oil (by in for provides sector oil aslight increase ussian 91 no. 6, 2009, p. 13. no. 2009, 6, Vertikal Neftegazovaya obvala’ do dobychi otsnizheniya Sibir: ‘Zapadnaya Turukalov, M. Ibid
. At best, output in this region will be maintained at a slightly lower at aslightly level maintained be will region output this . At in best, Eastern Siberia will not replace Western Siberiawill Siberia Eastern . p. 14. . 92 . Even Strat Even . he ------, 59 OSW STUDIES 04/2012 60 OSW STUDIES 04/2012 ages that the significance of oil production in Eastern Siberia and the northern the northern and Siberia Eastern in of production oil significance ages the that envis 2030 Strategy future. immediate put be to the in into operation planned are fields no new large that fact the is sector oil Russian problem the in Another newly to owing found fields. reserves in increase of not production only volume terms the in but years for also twenty at least keyregions the Volga-Ural and remain Westernconclusion Siberia that will same the make documents Russian official longer All and medium term. the in provinces oil traditional the in able be compensate to output for fall the will shelf, Sea theCaspian and Siberia Eastern in fields the i.e. soon, mainly start to where due production is those forof operation amount in timenor been ashort have new fields which the Neither shelf. Sea ment of Caspian production on the the commence and Siberia; Eastern in Verkhnechonsk fields the and Talakan of foreign capital companies; the and technologies for the to production owing readymade fields,were which Sakhalin 2013 the annually); tonnes (25 million 2012– in output its peak reach will 1991, since which developed Russia been in have fieldto Vankor, oil above largest ofput all: the including into operation, being fields new effectan ofseveral mainly was growth production nificant recent insig this good. is Meanwhile, sector this in situation the lusion that il the the creating by government on effect few may have years, areassuring past over observed been the has which production, oil Russian in The increase tonnes) (million 2030 to Strategy 6. Table AL TOT N East Far Eastern Siberia Eastern T Western Siberia R Volga- iman-Pechora egion orthern U Oil production forecast in Russian regions according to the Energy Energy the to according regions Russian in production forecast Oil ral Caucasus 2008 (fact) 487.6 106.7 332.7 29.1 13.8 4.8 0.5 2013-2015 486-495 294-310 94-97 23-25 32-35 21-33 7-11 2020-2022 286-312 505-525 80-86 19-20 30-31 35-36 41-52 2028-2030 301-303 530-535 75-69 59-65 42-43 32-33 21-22 - - - - ing the planned output 10 is to 15 planned years the ing reach and a field finding between period the that mind in borne be to has also low. level of where aregion the exploration geological is still It is Siberia Eastern 2030. Strategy provided in those than tonnes as probable reserves; this is too little to fill ESPO fill to little too is probable as this tonnes reserves; million 857 and proven as reserves tonnes million 667 include distance, a greater new, itwithin to connect to fields located pipelines building oil expensive quire do not which re i.e. pipeline, oil those ESPO of the reach the within reserves 96 95 94 93 work exploration and geological of intensification the blingin adou would require assumed government has the as tonnes level of million 80 the reaching while at best, of tonnes annually oil ablebe produce to million 50 andwill developeddiscovered already The fields reserves. oil on available data to to correspond fail region for this production forecasts that believe experts However, Russian amaximum. many as tonnes million 75 reach will years ty twen in region output this oil in that ordecade so. predicts 2030 Even Strategy next the within attained be will goal this 2015. It impossible that seems after tonnes million 80 reach to is capacity –whose annual construction under ently is pres – which thepipeline ESPO oil government fill to is Russian set by the goals of One the 18–19% overly by reach 2030, are optimistic. production will oil Russian overall in East Far the and regions of these share total the which to grow. (Vankor) However, will Krai according forecasts, its of Krasnoyarsk part billion by 2030 (jointly for Eastern Siberia and the Far East). Another problem East). Far Another the and Siberia for by (jointly 2030 Eastern billion US$160 approximately is investments of value necessary pensive. The estimated ex operation their makes this whatsoever. All no infrastructure with areas in located are predominantly andmore complexmuch require technologies fields 100 million tonnes a few years later afew tonnes years 100 million almost to 2020 rise to after tonnes at be alevel of million 80 approximately will it that assesses Studies for Energy Institute Oxford the turn, 2030. In in tonnes million 87 2020 and in tonnes million 76 reach Academy of Sciences, it will Russian of the Branch rapidly. Siberian by the growing to estimates According be will Siberia output Eastern oil in that believe some experts that admitted be
op. cit.; op. Y. optimizma…’ Podolsky, ‘Nizhe Kipelman, S. zovaya Vertikal zovaya zovaya Vertikal zovaya Neftega gazu’ po ivozmozhno nefti po net Y. WNIGRI: Podolsky, ‘Mneniye O. Prishchepa, tute for Energy Studies, January 2011, p. 60. 2011, January Studies, for Energy tute Insti The Oxford resources’ oil of Russia’s Eastern implications strategic ‘The J. Henderson, Neftegazovaya Vertikal Neftegazovaya Rossii’ vostoka igaza nefti resursov eniya osvoy kompleksnogo perspektivakh Eder, ‘O realnykh L. Filimonova, Korzhubayew, I. A. , no. p.25. 2010, 19, , no. 20, 2010, p. 28. , no. p. 2010, 20, 28. 94 . Such forecasts are much more optimistic much more optimistic are . Suchforecasts 95 . Another problem is the fact that oil oil that problemfact the is . Another ‘ES’2030: ignoriruya realii Neftega realii ignoriruya ‘ES’2030: 96 . Furthermore, the new new the Furthermore, . , no. p. 2010, 20, 22. 93 . It still needs to to needs . It still ------61 OSW STUDIES 04/2012 62 OSW STUDIES 04/2012 98 97 serves re makes up 60% of oil total extract to located (difficult are they which in complicated be structures geological complexity due of the the to will them ing extract and deteriorating, is reserves oil of existing quality the Furthermore, investments. ahuge without in increase this alevel impossible like be reach to will It classification. international the to according a100% increase tion and classifica Russian the to according proven reserves in oil a50% increase mean more would tonnes 2030, to which billion by 5.1 2020 to and tonnes 5.5 billion by reserves oil in increase an include Strategy Energy The ofyears. goals the few past the in underinvestment consequences of chronic its feel to the start development on the –and will sector of new fields. sector The ofoil this future for the exploration on work and geological fundamental is including – which expenditure, level of investment insufficient the is keyissues ment. of One the govern Russian the from of aresponse lack by the aggravated additionally These few years. problems past have over sector oil been the Russian the in of problems anumber have chapters, accumulated previous the in outlined As 1.2. companies conditionoil of Russian financial the fecting is,however, This present tonne. US$61 rate is per direction), the western the af in transport for excessively tariffs sets high time (which same at the Transneft by Since tonne. US$130 it per subsidised is reaches cost real pensive, the since ex is theESPO pipeline via transport that oil is fields oil Siberian Eastern with firms more willing to make investments in Eastern Siberia and the Far East. East. the Far and Siberia Eastern in investments make to willing more firms Japanese make and gas and oil for Russian demand may lead increasing to years ten within of energy use nuclear the from Japanese government to withdraw the foreign investors to become engaged.by 2011 September The in decision made allowing duty)and by export levies (mainly reductionof fiscal the through aged government. However, by the accelerated be could production growth envis at aslower rate to than increase likely very are Siberia Eastern in R foraccess foreign long development investors, new the the and time of this T and necessary technologies. technologies. necessary and
ussian oil province requires; all this indicate that oil production levels production oil levels that indicate this all requires; province oil ussian he existing problems, the need to make large investments, the restricted restricted investments, the large to problems,make need the he existing Interfax ANI, 23–30 December 2009. December 23–30 ANI, Interfax Neftegazovaya Vertikal Neftegazovaya effektivnosti’ nomicheskoy eko otsenka nefti: zapasov trudnoizvlekayemykh ‘Osvoyeniye O. Filatov, S. Belyakova, A crisis or a change in government or in achange A crisis policy 98 ), harsh climate conditions and the lack of a developed infrastructure of a developed lack infrastructure the conditions and ), climate harsh , nos. 23-24, 2010. 23-24, , nos. 97 . ------continental shelf in the Far East. East. Far the in shelf continental the and Siberia Eastern in investors were given access reserves oil to Asian, including if foreign, sector oil the Russian of future the for morebe beneficial 2030. after It would until notstart will ever, flagship project production at this How Sea. Caspian engagement on the the is of ExxonMobil ofexample this 2010. since observed been government’s One investors has the towards policy in Achange time. alater until impossible not –would postponed be – if entirely these fields in production firms, engagementwithout international large from that, fields). unconventional oil Western Siberian means the This and shelf tic (the deposits Arc promising of many case the in necessary technologies out the with still are needed for they would investments, able be funds generate to the companies oil Russian burdens, fiscal lighter with that, it seems tors. Although foreign inves towards policy the is changed be to needs which issue Another production growth. contribute overall to thus and in not interested are rations corpo large improve,fields doing developwhich could oil business many they are they category. belong separate to ain the which conditions If firms Small Russia. in investment climate deterioration of due the the to markets, tional on interna activity intensifying and investment plans their reducing are and may not any countwhich on privileges second category private includes firms The means. administrative use thevarious of through supported and new fields access to receiving favoured in are government which elite, the to linked those and companies categories.categoryincludesstate-owned into two The first of division companies oil informal existing the end to necessary put. It also is out level decide to of on factor only the future not is the reform system Fiscal 2020 would ‘compensated be incomes. by higher after times’ ‘minor’ and many would reduction be this convincing, is scheme general revenues the but, as tax reduce fact in reform would Afiscal abroader vision. lack cautious and very economy of the branch are strategic this regarding actions Therefore their oil-generated in consequences ofbudget adecrease the fear revenues. class ing However, production. in problem of rul a fall imminent the of the aware is the that government though, show the to improve do, situation, insufficient still although regions, oil of for NDPI some future lifting the and 2011 duty in possible.it export make the reform reductionThewould Thoroughof fiscal annually. billion US$5 additional need companies generate to oil an Russian 2011, invested in was Therefore, annually. billion US$25 since billion US$30 at be should alevel years of twenty next the within sector oil Russian the in necessary investments that estimates their in agree IEA the and 2030 Strategy ------63 OSW STUDIES 04/2012 64 OSW STUDIES 04/2012 100 99 2030 until IEA the to according by 7% and 2030 by10% approximately to Strategy according annually tonnes million 125to Russia in slightly increase to expected also is products petroleum of 2030. Consumption in tonnes million 275–311 and 2020–2022 in tonnes 2013–2015, million in tonnes 2010lion 249–260 in tonnes 232–239 to million mil 247 from grow to is which refineries, levels processing atoil Russian in increase assumed due is an to This output growth. forecasted offace the the in present volume, their to this comparison in tonnes 35mately million by 2030 approxi in fall to exports oil government expects the that means below. table the presented in strategy, This are levels, the to according export 2030. The in tonnes most likely million 222–248 and 2022 in tonnes 2013–2015,million in tonnes 240–252 million 243–244 be levels will export to 2030, oil Strategy Energy to the According annually. tonnes 250 million have at been alevel of around exports oil few Russian years, past the Over 2. sector. oil its and Russia would bring this the negative consequences policy, all with fiscal tion of the liberalisa the from government would withdraw the mean likely would very budget condition state of This companies. the oil and Russian for the tastrophe ca for continuing would along spell time Aprice fall barrel. per US$100 than unprofitablebe pricethe ata old will of lowerones and part of mostnew fields price. oil The developmentsector, the oil is factor mentioned. to be needs This Russian of the future on the impact have avast moreOne keyfactor, will which dependence on exports. incomes oil a strong from and on raw materials developed reliance aheavy has few years past over the which economy state have the grave consequences entire for and the will This escalate. to bound is of key source budget trend the as ily revenues, crisis the it primar treating stop and sector this to approach their change class ruling sector. oil the Unless Russian of the future on the impact strongest the has that policy state the be up, it once will it more emphasised Summing be to that needs per capita per consumption of energy terms leader in global become the will United States and the overtake will
Future oil export levels oil export Future Ibid equivalent. of oil tonnes 6.4 reach will Russia in capita per consumption energy By 2035, IEA World Energy Outlook 2010 Outlook World Energy IEA . p. 89. . p. 89. , p. 107. 100 . 99 . The IEA estimates that Russia that estimates . The IEA - - - - - cording to the Russian Ministry of Energy, is 20–25 million tonnes annually tonnes of Energy, million 20–25 is Ministry Russian the to cording volume, ac estimated Its exports. oil crude in increase an thus and refineries levels processing at oil Russian in may lead 2011 adecrease to duced October in intro products petroleum and oil duty on crude rates of export the in changes the refineries, capacity of theRussian in increase envisages2030 asignificant volumes processing oil at and R mand - de domestic however mainly factors, including on depend several will exports. a reduction in inevitably entail will a slow rate in the immediate future, and the state and oil companies make make companies oil and state the and future, immediate a slow rate the in at consumption grows domestic that provided accurate be will prediction T production declines. as decrease gradually then lion will tonnes, and present slightly level above of the mil 250 rise to fourcould years three R that It therefore, assumed be can, sector. this in jobs maintaining and on companies of capitalisation oil the a positive on effect have should which oil, of crude expense at the products of petroleum ports ex increase to wishes the longerin and terms refineries Russian modernise to desire its declared government has the that fact given the especially years, few next over the sustained be level will However, this whether it unclear is 101 T 13. Chart 200 210 220 230 240 250 260 270 he decline in R in he decline
Y. Mazneva, ‘Eksportnyi proval’ Vedomosti proval’ ‘Eksportnyi Y. Mazneva, [million tonnes] 2008 240.0 Forecast for Russian oil exports according to the Strategy to 2030 to Strategy the to according exports oil for Forecast Russian ussian oil production predicted by the author of this text text author by the of production this oil predicted ussian 250.0 2010 2015 260.6 , 5 September 2011. , 5September ussian oil exports within the next next the within exports oil ussian Although Strategy Strategy Although refineries. ussian 2020 261.7 T he degree of this reduction of this he degree 2025 246.1 2030 224.7 his his 101 - - - - . 65 OSW STUDIES 04/2012 66 OSW STUDIES 04/2012 102 12% at from present 22–25% to years double twenty in levels will export oil total in markets of Asian share the that assumes 2030 Strategy countries. to Asian sales its – by increasing exports tal to in 80% share an has currently –which direction European pendence on the reduceto de its efforts clear making been has few Russia years, past the Over tonnes. of 15 capacity million annual an ESPO, with of abranch Skovorodino–Daqing, pipeline, new oil by the 2011 January since by railway, and initially China, to transported been have oil also of Russian quantities small late 1990s, Since the for exports. destinations natural the are the USA theandpossibly of coast west markets Asian the fields, oil Sakhalin of the case the In markets. or Asian have oil American sold been the to sian of Rus quantities small Only times. Soviet in already developed,been starting has direction western the in infrastructure transport a consequence of this, economically. most rational As the are to Europe locations these from Exports Volga the (the deposits Urals, location Western of Siberia). and Russian region geographical the to linked is This oil. exclusive recipients of Russian almost major and traditional have For the been countries decades, European exports. oil diversify to for desire its years declaring been government has The Russian 3. ita reductionin of 10% at probably least and even more. to cause volume likely is and on export precisely impact have greatest the level or 10% lower. T output processing keep to oil at R efforts terms to send this oil in the European direction. direction. European the in oil this send to terms economic in more rational it and would cheaper be distance, the Considering motivated. politically is for years, pipeline many for base this raw material tant importhe most be will which Krai, Krasnoyarsk of part the northern in field Vankor the from ESPO via oil decision transport to the reasons, geographical for understandable is Asia in customers to fields Siberian or Eastern Sakhalin the of from oil sale of While creation province. anew oil contributeto the to is market, European the towards not is directed which Russia project in tural infrastruc first the construction, under The pipeline oil region. ESPO this in output oil on the directly depend volume will future their and Siberia, Eastern development on the in of fields consequence of oil embarking adirect is tries
Export directions: how directions: much how to and Europe Export much to Asia? increasing Asia’s share in Russian oil exports from 3% at that time to 30% in 2020. in 30% to time at 3% that from exports oil Russian in Asia’s share increasing of goal unrealistic atotally set even 2020 to Strategy Energy the that here noting It worth is his means that the decrease in oil production will production oil will in decrease the that means his 102 . The increase in exports to Asian coun Asian to exports in . The increase ussian refineries at the present at refineries ussian ------104 103 annually) tonnes present million one 250 to the of around similar be level will their that by approximately (assuming 28–30% Asia’s exports in total in share increase an mean will this Sakhalin, tonnes in million 20–25 around and fields Siberian Eastern in tonnes approximately million 50 reach will output likely the 2020 in that one If assumes fall. inevitably will direction European Volga-Uralthe in the and output Western Siberia in exports region, oil in reduction expected due the to time, grow. same At the levels will export total in countries of Asian share the forecasted, as increases Sakhalin and Krai Krasnoyarsk northern Siberia, fields Eastern oil of the production in the As Europe will still be the most important outlet for important most R the be still will Europe declarations. such policy. policy. for oil its opportunities greater creating is Russia direction, European the in capacity export its expanding and Asia to pipeline oil anew export opening Thus, by construction. under currently BPS-2 pipeline oil proof the is of which one direction, western the in infrastructure developing is Russia transport its countries, European to of reduction exports few expected decades.Despite the the past over exports for base Russian rawthematerial have been fields which oil the in processes of production decline but decisions natural of the political not aconsequence of be however This afew in years. will direction European the sent be in now will than oil less Russian that likely It also is exports. total of thirds two to around fall will its share although future, the in oil sian duce markets supplies European to re Asia” to and pipelines oil its may “direct Russia that threatened occasions government representatives have on few Russian many years, past the Over now. lower is levelthan time at that export total
19 October 2007. 19 October Financial Times the in of Energy Minister Russian the by article the for example, See, Oil from this region of Russia can however also be transported to the west coast of the USA. USA. of the coast west the to transported be also however can of Russia region this from Oil 103 . T his share may even exceed a third of R athird may even exceed share his 104 . However, it would impossible be fulfil to W ojciech ussian exports if the the if exports ussian K ono ń czuk us - - ,
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