Global Energy Review

Russia: Outlook for Oil and Gas

A Report by Dr Paul McDonald
Consulting Editor, Oil and Energy Trends

Contents

List of Tables

Introduction

Russia is the world’s largest producer of natural gas and the second-largest producer of oil. It has ambitious plans to increase the output of both fuels.

Oil reserves are conservatively stated at 60 billion barrels, but are likely to be larger than this. On the other hand, much of Russia’s oil lies in remote and inaccessible areas. The country’s long history of oil production means that the more accessible fields are mainly in long term decline.

The Russians have nevertheless reversed the sharp decline in oil production that followed the break-up of the Soviet Union. Output from the Former Soviet Union (FSU) is now back at its previous high, but Russia’s production remains below its former peak. There are plans to go on increasing output but these will require development of new fields in Siberia, the Russian Far East and the Arctic.

Natural gas production has increased rapidly since the 1960s. Reserves are enormous, at 1,680 trillion cubic feet, and Russia now has ambitious plans for further production and exports. The main destination for exports at present is Europe, but Russia wants to open-up new markets in the US and Asia.

Oil

Russia is the world’s second-largest producer of oil (see Table 1) with an estimated output in 2007 of 10.1 mn bpd. On present trends, it could even overtake the current leader, Saudi Arabia.

Table 1
World’s Ten-largest Oil Producers, 2007
(mn bpd)
Saudi Arabia 10.4
Russia 10.1
United States 7.4
Iran 4.0
China 3.8
Mexico 3.5
Canada 3.4
United Arab Emirates 3.0
Venezuela 2.6
Norway 2.5
Others 31.8
Total 82.5
Includes NGL; Excludes Biofuels & Processing Gains
Source: Pearl Oil estimate

Assessing the Reserves

In terms of reserves, it is less well-endowed than Saudi Arabia. Proven reserves are estimated at 60 bn bbl, compared with Saudi Arabia’s 262 bn bbl. Thus, whilst accounting for 12.2% of world oil production, Russia has only 5.2% of global proven reserves (see Table 2).

It is highly probable that Russian reserves are at present somewhat understated. The BP Statistical Review of World Energy of 2007 gives a figure of 79.5 bn bbl for Russia’s proven reserves, giving it 6.6% of the world total, as calculated by BP. The BP figure also more closely matches the numbers published by the main oil-producing companies inside Russia. These company figures have in the majority of cases the further advantage of having been audited by outside petroleum engineering companies, using definitions of ‘proven’ reserves agreed by the US Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC).

‘Proven’ reserves are those reserves that geological and other data indicate with reasonable certainty can be recovered from reservoirs that have already been discovered under current economic conditions using existing technology. The SPE/WPC figures described above assume probabilities of 90%.

In addition to ‘proven’ reserves, there are other categories covering ‘discovered’ and ‘undiscovered’ fields. There is clearly an element of guesswork in these, particularly those covering ‘undiscovered’ fields. A rough estimate of ‘proven’, ‘non-proven’ and ‘undiscovered’ reserves, however, might be as follows:

(bn bbl)
Proven
Total 60-80
Non-Proven
Probable 20-30
Possible 30-40
Total 50-70
Undiscovered
Total 20-50
Total Resource Base
Total 180-270
Source: Pearl Oil estimate

This somewhat improves the picture, but the numbers given above are much too speculative to allow any firm conclusions to be made concerning future output levels from Russia. A more sensible indication of Russia’s ultimate resource base might be to add the first three numbers as follows:

bn bbl
Proven 60-80
Probable20-30
Possible30-40
Total 110-150

Perhaps the best figure of all, however, would be that covering ‘proven’ and ‘probable’ reserves–as involving the least amount of guesswork, giving the following breakdown:

bn bbl
Proven 60-80
Probable20-30
Total 80-110

Projections of output given later in this report will assume a figure of ‘proven’ plus ‘probable’ of 100 bn bbl. This gives Russia a reserves:production ratio of 27:1 compared with 16:1 using the ‘proven’ reserves total in Table 2.

Table 2
World Proven Oil Reserves, 2007
Country Reserves Share of Total
(bn bbl) (%)
Saudi Arabia* 262.3 22.7
Iran 136.3 11.8
Iraq 115.0 10.0
Kuwait* 101.5 8.8
UAE 97.8 8.5
Venezuela 80.0 6.9
Russia 60.0 5.2
Libya 41.5 3.6
Nigeria 36.2 3.1
Kazakhstan 30.0 2.6
Others 194.7 16.9
Total† 1,155.3 100.0
Totals rounded
* Including half Neutral Zone
† Excluding Canadian oil sands
Source: Oil & Gas Journal

Production

Russia produced some 10.1 mn bbl of crude oil and condensate in 2007. If the lower figure for proven reserves given above is taken, this gives the country a reserves:production ratio of 16.3:1 (see Table 3).

Table 3
Russia: Oil Reserves, Production & Trade, 2007
Proven Reserves: 60.0 bn bbl
Years remaining: 16.3
Oil Balance
(mn bpd)
Production 10.1
Consumption 2.9
Net Trade 7.2
Totals rounded
Source: (Reserves) Oil & Gas Journal
(Other) Pearl Oil estimates

Russia’s current production is some way below that achieved some twenty or more years ago. Output reached a maximum of 11.5 mn bpd in 1987 after which it began to decline. In the 1990s, this decline turned into a near-collapse in production as Russia descended into economic chaos following the break-up of the Soviet Union. By 1996, oil production had fallen by 47% to 6.1 mn bpd.

The collapse of production is perhaps not too surprising given the upstream history of the USSR. Russia is a mature oil producer–one of the world’s oldest–with a continuous production history dating back to the 1860s. The first oil was produced in Azerbaijan1 and was extracted by means of hand-dug pits. This method was replaced by the drilling of wells in 1871. In the decade that followed Azerbaijan became the most important oil production and refining centre outside the United States, exporting oil first by railway and pipeline via the Black Sea, then in 1892 by oil tanker. Between 1871 and 1913, Azeri oil production rose from 660 bpd to 206,000 bpd.

War and revolution led to a sharp decline in output until the late 1920s, when new fields were discovered, first in Central Asia, followed by the Volga-Urals field, which eventually became the most important field-complex in the Soviet Union. Volga-Urals reached its peak in 1976, at 4 mn bpd. By that time, the main exploration effort had shifted to Western Siberia and to the Samotlor field in particular. Soviet output increased rapidly until 1987 when it peaked at 12.7 mn bpd, of which Russia’s contribution was 11.5 mn bpd.

After that came a sharp decline until 1996 when FSU production stood at 7.2 mn bpd, of which Russia accounted for 6.1 mn bpd. Following that, it began to recover until 2007 when the FSU was back at 12.7 mn bpd. This was mainly the result, however, of increasing output in Central Asia and the Trans-Caucasus. Russia’s production remained below its 11.5 mn bpd high of 1987, at 10.1 mn bpd (see Table 4).

It is clear that the downturn between 1987 and 1996 was the result of production policies pursued by the Soviet Union between about 1977 and 1987. Soviet Five Year Plans set successively more ambitious production targets. In order to meet these targets–which carried the force of law–Soviet officials transferred drilling rigs and other resources from exploration to production. Many fields were over-drilled and became depleted too quickly, leading to an accelerating rate of decline in output. Another result of switching the upstream effort from exploration to production was that there were insufficient new discoveries to replace the lost production.

It took the whole of the 1990s to bring about a reversal of this situation, which was mainly brought about by drilling new horizons in existing fields. The arrival of foreign oil companies working in conjunction with the newly-established private and state-owned Russian firms helped to revive exploration activity, which now forms the key to future levels of oil production.

Outlook for Production

As the oilfields of the Trans-Caucasus went into relative decline in the early part of the twentieth century, Russian oil production became concentrated in more northerly and eastern fields. From the 1960s, it became clear that Siberia rather than European Russia would provide an increasing proportion of Russian output. Between 1976 and 2000, production from the Volga-Urals basin fell by more than 60% to 1.5 mn bpd, whilst that of its largest field, Romashkino, declined from about 1.5 mn bpd to 0.3 mn bpd. The decline of the whole basin has slowed down in recent years, but no significant revival looks likely in the foreseeable future.

Table 4
USSR/FSU and Russia: Oil Production, 1985-2007
YearProduction
USSR/FSU Russia Rest of USSR/FSU
(mn bpd)
1985 12.0 10.9 1.1
1986 12.4 11.3 1.1
1987 12.7 11.5 1.2
1988 12.6 11.4 1.2
1989 12.3 11.1 1.2
1990 11.6 10.4 1.2
1991 10.5 9.3 1.2
1992 9.2 8.0 1.2
1993 8.2 7.2 1.0
1994 7.4 6.4 1.0
1995 7.3 6.3 1.0
1996 7.2 6.1 1.1
1997 7.3 6.2 1.1
1998 7.4 6.2 1.2
1999 7.5 6.2 1.3
2000 8.0 6.5 1.5
2001 8.7 7.1 1.6
2002 9.5 7.7 1.8
2003 10.5 8.5 2.0
2004 11.4 9.3 2.1
2005 11.8 9.6 2.2
2006 12.3 9.8 2.5
2007 12.7 10.1 2.6
Totals rounded
Source: (1985-2006) BP Statistical Review of World Energy, 2007
(2007) Pearl Oil estimate

This leaves Western Siberia as the main producing region; but here also many fields are mature and in long term decline. Exploration is being stepped-up, but new discoveries are substantially smaller than the large fields they are meant to replace, such as Samotlor which, at its height in 1980, produced 3.4 mn bpd. The field was one of many that were over-developed during the 1970s and ’80s and declined rapidly thereafter. Output is now below 0.4 mn bpd.

Western Siberia is sufficiently large to contain significant undiscovered reserves, but these will almost certainly have to be supplemented by discoveries along the Arctic coast, in Eastern Siberia and in the Russian Far East off Sakhalin. Eastern Siberia was being spoken of as a major new oil province as long ago as the 1970s, but the region has so far failed to provide new reserves in the expected quantities.

The Arctic Ocean is also being promoted as a major new oil province but production prospects are clouded by economic, technological, political and even geological problems. The economic problems derive mainly from the high cost of operating in such remote and harsh conditions. These conditions also put the Arctic at the frontiers of oil production technology. The political problems stem from arguments about who owns the oil reserves of the Arctic Ocean and where continental shelf boundaries might lie. Finally, there is evidence that the size of reserves under the Arctic Ocean are being over-stated. Any estimate of their size must be considered at best ‘speculative’.

OET ARCHIVE:

‘Arctic gas proves hard to develop’, Gas & Power Feb07

Sakhalin is proving a prospective area with some fields in production already. Many potential fields, however, lie in deep water in the Pacific presenting a major economic and technological challenge to oil companies. There are somewhat easier offshore fields in the Caspian, but these do not appear to be anywhere near as large as those in the Pacific.

The most promising new areas appear to be as follows:

Western Siberia

Here, there are several potential new fields but reserves in individual fields appear in many cases to be in the region of 100 mn bbl. One field, Rosneft’s Komsomolskoye discovery, has the potential to produce over 100,000 bpd, as does Sibir’s West Salymskoye field, but beyond these two fields, there is little sign of further large finds.

Eastern Siberia

This area has considerable potential but its harsh climate and remoteness make it difficult and expensive to exploit. Despite this, the Industry and Energy Ministry forecasts output of 800,000 bpd by 2015. One promising field is Rosneft’s Vankorskoye, which could prove to be a 360,000 bpd discovery, according to the company. Another is Baykit, but its development has been delayed as a result of its forced sale by Yukos. Eastern Siberia may, in any case, turn out to be more gas-prone than rich in oil.

Sakhalin

This is the most promising undeveloped area in the short term. Production has begun at ExxonMobil’s Sakhalin I project, which is scheduled to produce around 250,000 bpd during 2008. Other offshore oil prospects are being evaluated, though there have been delays to some because of licensing disputes.

Northern Caspian

Several deposits have been discovered in the northern waters of the Caspian. Lukoil forecasts an eventual production level of 250,000 bpd, but this looks unlikely to be achieved until after 2010.

Timan-Pechora

This northerly basin suffers from the disadvantages of its neighbour, Western Siberia. The area includes structures underlying the Arctic Ocean, which has its own particular problems (see above). One inshore field–Prirazlomnoye–looks quite promising and could be capable of producing up to 150,000 bpd. The main problem with Timan-Pechora is the small size of most discoveries. There are plans for about 500,000 bpd of additional production over the next 5-10 years.

Artic Ocean

This probably represents the ultimate frontier province in the Russian case. Several basins have been identified, all the way from the Barents to the Chukchi Sea. The only survey work of any note has been done in the two most westerly basins, in the Barents and Kara Seas. No oil is likely to be produced from the Arctic Ocean before 2015 apart possibly from the shallow, small fields of Pechora Bay.

Outlook to 2015

Many discoveries have been reported by both Russian and foreign companies since the 1990s. A large proportion, however, seem to be too small or too remote to develop commercially. This has led to friction between the government and the oil companies, with the latter being accused of being too slow to develop the fields for which they have licences. Several companies appear to have been more interested in purchasing existing reserves rather than exploring for new ones. In 2007, the government said it would penalize firms that produced less crude that their licence agreements stipulated.

Disputes of licensing terms have held up projects and slowed down private investment in Russia’s upstream. Some private investment is also being delayed because of fears that the government will try to carve out a much greater role for state oil companies in future. The government regards fields with reserves of over 511 mn bbl as ‘strategic reserves’. Several foreign companies have come under pressure to reduce their shareholdings in favour of state companies such as Gazprom (see below). Upstream prospects, on the other hand, have been considerably boosted by high world oil prices.

Several western consulting companies have forecast Russian output of 12 mn bpd by 2010. This is most unlikely given output at present of just over 10 mn bpd. Output may not ever reach this level. Even if it were to reach this level, 12 mn bpd is likely to prove the maximum that can be achieved.

Crude oil and condensate production is forecast as follows:

(mn bpd)
200710.1
201511.0-11.5

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Natural Gas

Russia is the world’s largest producer of gas (see Table 5) with an output of 59.2 bn cfd. This represents 21.4% of world production. Net exports of 17.4 bn cfd make Russia the world’s largest exporter of gas as well.

Table 5
World’s Ten-largest Gas Producers, 2006
(bn cfd)
Russia 59.2
United States 50.7
Canada 18.1
Iran 10.2
Norway 8.5
Algeria 8.2
United Kingdom 7.7
Indonesia 7.2
Saudi Arabia 7.1
Turkmenistan 6.0
Others 94.2
Total 277.1
Source: BP Statistical Review of World Energy, 2007

Assessing the Reserves

Russia’s proven reserves of 1,680 trillion cubic feet (tcf) are also the largest in the world (see Table 6). As such, they represent 77.8 years’ output at 2006 levels of production. ‘Proven’ reserves are defined in the same way as those of oil.

There are various official estimates of reserves giving much higher figures. These are often described as ‘resources’, as is the case with the government’s Energy Strategy, which gives a figure of 4,483 tcf. In 2003, the Ministry of Natural Resources supplied the following estimate:

Total Reserves
Proven8,331 tcf
Probable
Possible
Cumulative Production

About 70% of these reserves are so far undiscovered. The Ministry’s level of ‘proven’ reserves appears to be quite close to the 1,680 tcf figure estimated by the Oil & Gas Journal in Table 6. As with oil, the vast majority of ‘proven’ reserves lie onshore.

As also with oil, most of the potential reserves lie in remote and difficult locations, including offshore in the Pacific and along the Artic coast. These reserves will be required in order to offset the decline of the country’s four main fields–Urengoi, Yamburg, Medvezhe and Orenburg–which account for about 60% of national output.

Table 6
World Proven Gas Reserves, 2007
Country Reserves Share of Total
(tcf) (%)
Russia 1,680 27.2
Iran 974 15.8
Qatar 911 14.7
Saudi Arabia* 240 3.9
UAE 214 3.5
US 204 3.3
Nigeria 182 2.9
Algeria 161 2.6
Venezuela 152 2.5
Iraq 112 1.8
Others 1,353 21.9
Total 6,183 100.0
Totals rounded
* Including half Neutral Zone
Source: Oil & Gas Journal

Production

Russia’s gas production was of minor importance until the 1960s, when a number of spectacular discoveries were made, including the Urengoi, Yamburg, Medvezhe and Zapolyarnoye fields, which lie close together in the northern part of Western Siberia, and the Orenburg field, which lies north of the Caspian, in southern Russia. These finds were followed by further large discoveries in the 1970s on the Yamal Peninsula, which lies immediately to the west of the Urengoi field-complex.

Table 7
Russia: Gas Exports, 2006
Destination Volume
(bn cfd)
Germany 3.5
Italy 2.2
Turkey 1.9
France 0.9
Hungary 0.8
Czech Republic 0.7
Austria 0.7
Slovakia 0.6
Finland 0.4
Romania 0.4
Netherlands 0.3
Lithuania 0.3
Bulgaria 0.3
Greece 0.2
Serbia 0.2
Latvia 0.2
Croatia 0.1
Belgium 0.1
Others 0.8
Total 14.6*
Totals rounded
Contract volumes only: actual deliveries may differ
* Excludes exports to FSU countries
Source: BP Statistical Review of World Energy, 2007; Cedigaz

All this gave the then-USSR large surpluses for export and these were delivered via a new network of pipelines to Soviet satellite-countries in Eastern Europe and then to Western Europe. Gas production continued to grow, as did exports, such that by the early 1980s fears were being expressed in both Western Europe and the US that the former was becoming too dependent on the Soviet Union for its gas. During the 1980s, Soviet gas exports roughly doubled, reaching 10 bn cfd at the end of the decade. Nearly all of these were from Russia. By 2006, volumes had gone up by a further 50% (see Table 7).

Russia’s gas exports look set to grow, providing it can continue finding large new gasfields. Given the decline in gas production in the EU, it is likely that the EU’s dependence on Russia will grow despite its ambitious efforts to import gas from further afield through the sponsorship of long and expensive pipelines from the Caspian and West Africa.

OET ARCHIVE:

‘ EU wrongfooted as Russia moves ahead with new export pipelines’, Gas & Power Jan08

‘ Middle East and North Africa take growing share of EU’s gas market’, Focus Aug07

Table 8
Russia: Gas Reserves, Production & Trade, 2007
Proven Reserves: 1,680 tcf
Reserves remaining: 77.8 years
Gas Balance
(bn cfd)
Production
Gazprom 53.0
Others 8.7
Total 61.7
Consumption 43.5
Net Trade 18.2
Production figures collected on different basis to that in Table 5: hence year-on-year comparisons difficult
Totals rounded
Source: (Reserves) Oil & Gas Journal
(Other) Gazprom; Pearl Oil estimate

Outlook for Production

Russia appears well-provided with the reserves necessary to enable it to raise production substantially (see above). Its undeveloped reserves, however, lie mainly in remote areas, many of which involve operating at the edges of current production technology. Some developments have been delayed as a result, including the fields of the Yamal Peninsula, which are meant to offset the decline of the nearby fields in the Urengoi production-complex.

Some of Russia’s largest fields are now in rapid decline. In the period from 2000 to 2015 output from Urengoi, Yamburg, Medvezhe and Orenburg is expected to fall by around 50%. The country’s largest producer, Gazprom, needs to replace approximately 8 bn cfd of production between the beginning of 2008 and the end of 2015. Gazprom2 dominates the Russian gas industry to a far larger extent that the state sector in the oil industry. Its production accounts for over 85% of the national total. It also controls the country’s gas export trade. In 2007, Gazprom produced some 53 bn cfd out of Russia’s estimated total of 62 bn cfd (see Table 8).

Yamal

As output from Russia’s largest fields declines, it is becoming more dependent on small and medium-sized fields. If it is to increase production substantially, Russia must develop large new field-complexes, such as Yamal. There have been plans to bring Yamal on-stream for some years, but these were postponed when the more accessible Zapolyarnoye field was brought on-line in 2001. Output rose rapidly to nearly 10 bn cfd, but has now levelled-off.

Yamal is one of a series of potential new developments by the mouth of the Ob River and in the adjacent Kara Sea. An estimated 25 bn cfd of production is available from the whole area, but development would probably be spread over 20-25 years. As well as the fields themselves there would have to be considerable investment in pipelines and other infrastructure.

Yamal is estimated to contain over 450 tcf of gas. Fields lying to the east of the Yamal Peninsula, along the Ob River are reported to hold around 250 tcf; but the greatest source of new gas could be the Kara Sea, where numbers of over 1,000 tcf have been reported, though these represent pure guesses at present.

Shtokman

Shtokman lies some 350 miles offshore in the Barents Sea at water depths of up to 1,000 feet, in an area affected by drifting ice. Reserves are put at 80-100 tcf and maximum production is forecast around 9 bn cfd. In July 2007, Gazprom announced that it would develop Shtokman in conjunction with Total. The idea is to use the field initially to supply LNG to the US from an onshore export terminal at Murmansk, which is ice-free. The original aim was to begin exporting in 2010, but this date proved over-optimistic and was postponed to 2013.

Sakhalin

Around 90% of Russia’s gas production comes from Western Siberia. This proportion is expected to fall to about 80% by 2015 mainly as a result of developments in Sakhalin. Up to eight separate developments have been proposed for the waters off Sakhalin, of which Sakhalins I and II are the most advanced.

Sakhalin I is an ExxonMobil-led project designed to provide gas to the domestic market, though there have also been proposals to ship some gas as LNG to China. Supplies have been earmarked initially for utilities in the region. Exports will have to await the building of an LNG terminal by the Sakhalin II project.

Sakhalin II was originally a joint-venture between Shell, Mitsui and Mitsubishi but, in December 2006, Gazprom forced the three foreign partners to cede a 51% share to the Russian state company. The aim is to export LNG to various parts of the Pacific Rim. Exports were due to begin in 2008, but look likely to be postponed until 2009. By 2015, Sakhalin II is expected to be exporting 1.3 bn cfd from what is intended to be the world’s largest LNG export plant.

Sakhalin I and II have combined proven reserves of 35 tcf. The remainder of Sakhalin’s offshore sector is forecast to contain 70 tcf or more. All eight phases are expected to produce between 10 bn cfd and 15 bn cfd, though much of this will not happen until after 2015, when output is expected to be only about 2 bn cfd.

Eastern Siberia

The government’s Energy Commission has ambitious plans for Eastern Siberia. Several important fields are slated for development and the Commission forecasts that the combined output of Eastern Siberia and Sakhalin will exceed 20 bn cfd in 2030.

Among the planned developments is the Kovykta field which is to be developed by Gazprom and TNK-BP. Most of the gas is likely to be exported–mainly to China. There is a small amount of production at Kovykta, but full commercial development is not scheduled until 2017.

Another large prospect scheduled for development after 2015 is the Chayandinskoye field, which will also produce gas for export to Asia. Start-up is scheduled for 2016. Other fields are planned for the Krasnoyarsk region. In 2007, a Russian company, Petromir, announced a 52 tcf ‘discovery’ at Angaro-Lenskoye in Irkutsk. The size of the find was immediately discounted by officials in Moscow. Reserve estimates for most parts of Eastern Siberia are at present speculative.

Moscow hopes to have some new Eastern Siberian fields on-stream before 2015 in order to provide gas for a 6.6 bn cfd export pipeline to China, which is due to open in 2011. Most of the gas initially, however, is likely to come from Western Siberia.

Outlook to 2015

Russia undoubtedly possesses the reserves to replace those being depleted in its largest fields such as Urengoi. The main issue is how quickly new fields can be brought on-line. Delays to major projects such as Sakhalin, Shtokman and Yamal suggest that output may not necessarily grow rapidly between now and 2015. Yamal constitutes a major area of uncertainty since there is as yet no firm timetable for the development of the various fields.

In the worst case, Gazprom’s production could remain flat at 53 bn cfd (see Table 8), leaving independent companies to account for any increase in total Russian production. The most they appear likely to add is around 4 bn cfd. Any additions that Gazprom can make are unlikely to total much more than 2 bn cfd. This would give a maximum close to 68 bn cfd in 2015 for Russia as a whole. Allowing for some further delays to development programmes for both Gazprom and the independents, Russian production in 2015 might be around 64 bn cfd.

The output range is forecast as follows:

(bn cfd)
2007 61.7
2015 62.0-68.0

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Latest Developments

Oil Production & Exports

OET ARCHIVE LINK: ‘Russia’s output revival boosts exports’, Focus, May 10

Previous

Oil Exports

Belarus is pressing Russia to supply its crude free of export tax. Russia supplies 126,000 bpd tax-free but a further 304,000 bpd remains subject to duty. Belarus has just agreed to import up to 100,000 bpd of crude from Venezuela from May in an attempt to reduce its dependence on Russia.

Oil Exports

A dispute between Russia and Belarus over the price paid by Belarus for Russian oil threatened to interrupt deliveries to Germany, Poland and the Czech Republic via pipelines passing through Belarus. Russia proposed to impose an export duty on some 300,000 bpd of crude that is refined to make products that are then exported by Belarus. In an echo of recent disagreements between Russia and Ukraine over gas deliveries, Belarus proposed to raise transit charges for Russian crude crossing its territory to compensate for the new export duty. A crisis was averted when the two sides agreed on both the export duty and higher transit fees.

Oil Exports

Russia’s Transneft began exports of crude oil via its terminal ion the Pacific at Kozmino. Exports are expected to reach 300,000 bpd. As a result of the diversion of supplies to the new terminal, exports of Urals to the Atlantic Basin are expected to fall by a roughly similar amount.

Politics

Russia and Azerbaijan both hinted that they were interested in some kind of co-operation with OPEC.

Chechnya

Rebels in Chechnya have begun to target energy installations. An explosion damaged a hydro-electric power station and killed several people.

Gas Exports

OET ARCHIVE LINK: ‘EU seeks gas amid Iraqi confusion’, Focus, Aug 09.

Oil Exports

Russia said it would begin exporting crude oil from Primorsky in December. Exports are eventually meant to reach 600,000 bpd.

Refining

Gazprom plans a 100,000 bpd plant at Murmansk.

Oil Exports

Ukraine says it plans to press ahead with plans to reverse the flow of the pipeline from Odessa to Brody in order to allow the export of Caspian oil to Western Europe, as well as supplying two domestic refineries. The scheme is designed to reduce the reliance of both Ukraine and the EU on Russian energy.

OET ARCHIVE LINK: ‘China looks for more oil’, Focus, March 09.

Gas Exports

OET ARCHIVE LINK: ‘Russia begins LNG exports’, Gas & Power, March 09.

Gas Exports

OET ARCHIVE LINK: ‘EU looks to loosen gas ties with Russia’, Focus, Feb09.

Gas Exports

Ukraine and Russia resumed their by now annual dispute over gas deliveries and Russia, as usual, announced it was cutting supplies to Ukraine.

Investment

Russia signed a co-operation pact with Serbia allowing increased Russian investment, including the sale of a 51% shareholding in the Serbian state oil and gas company, NIS, to Russia’s Gazprom.

Pipelines

Russia has increased the pressure on its partners in the Caspian Pipeline Consortium to allow it to increase its shareholding in the line from Kazakhstan to Novorossiisk by threatening to build a rival pipeline along the same route.

Energy Crisis

OET ARCHIVE LINK: ‘Oil industry looks for ways out of financial crisis’, Looking Ahead, Nov08

OET ARCHIVE LINK: ‘Conflict in Georgia seen as threatening EU’s Energy Supplies’, Focus, Sep08.

Oil Exports

Russian supplies of crude oil to the Czech Republic were cut by 40% following the signing of a defence radar agreement between the Czechs and the US. Moscow cited “technical problems” and said full deliveries, amounting to 120,000 bpd, would be restored in August.

Oil Production

The row between Moscow and BP over the British company’s Russian joint-venture TNK-BP deepened when Russia refused to renew the visa of the venture’s chief executive.

Gas Exports

Russia plans an extra train at its 950 mn cfd Sakhalin-II LNG terminal as part of a plan to increase gas production off Sakhalin.

Gazprom has announced a 2014 start date for its 2.4 bn cfd Sakhalin-III project, which will supply gas to a pipeline to the Russian mainland via Vladivostok, where it may eventually build a further LNG terminal to export some of the gas.

OET ARCHIVE LINK: ‘Falling Russian output prompts fears of long term decline’, Focus, May08

Oil Exports

The opening of the 600,000 bpd crude pipeline from Taishet in Eastern Siberia to Skovorodino, on the Chinese border, is to be delayed by a year to the fourth quarter of 2009. Construction difficulties have been blamed.

Gas Exports

Russia and Ukraine have settled their gas dispute. Ukraine will pay $179.50/1,000 cm for 5 bn cfd during 2008 and will buy directly from Gazprom and not via the joint-venture RosUkrEnergo, to which it had objected acting as middleman. In return, Gazprom will be allowed to sell up to 725 mn cfd directly to customers in Ukraine. This dispute led earlier to cuts in Russian deliveries of 50%.

OET ARCHIVE LINK: ‘Ukraine and Russia again at odds’, Gas & Power, Mar08

Oil Refining

A UAE firm, Quality Energy, is planning to build a 180,000 bpd refinery at Chelyabinsk for completion in 2012. The company does not appear yet to have lined-up a source of crude.

Gas Exports

OET ARCHIVE LINK: ‘Russia ties-up more oil and gas’, Focus, Feb08

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