Last year, Russia’s oil industry underwent dramatic changes as many international oil service companies left the country to protest Moscow’s policy towards Ukraine. However, so far their departure has not affected traditional Russian drilling, as domestic companies can completely fill the gap. The problem starts to show up when it comes to the prospect of not-so-distant natural deposits and shale, as well as hard-to-recover reserves.
Russia’s crude oil production, which remains stable today even after the G7 embargo and price cap, will fall 5-20% in ten years, as the departure of international companies reduces the capacity of the Russian industry to use technically sophisticated resources. This opinion is shared by the experts and consultants of the consulting firm Yakov and Partners. Expert opinion leads Bloomberg.
The current resistance of Russian oil production to international sanctions will be tested in the long term by the lack of high-tech services. In the worst-case scenario, by the end of the decade, production will fall to 409 million tonnes, or around 8.2 million barrels per day, from around 10.8 million barrels per day last month.
According to Yakov and Partners, the absence of international technology providers (such as Halliburton, Schlumberger, Baker Hughes and Weatherford) is more acute in certain sectors. According to an expert report, companies from countries that Moscow considers “unfriendly” account for about 52% of hydraulic fracturing, while 90% of floating drilling rigs and 80% of equipment used for rig production shapes are imported.
Even a non-specialist understands that as Russia’s traditional reserves are depleted, the share of hard-to-recover oil in total production will increase. According to the consultancy firm’s report, more new wells will need to be drilled, with methods such as horizontal drilling more likely to be used. To do this, Russia will have to modernize its fleet of around 1,500 drilling rigs, 40% of which are seriously obsolete.
The forecasts of experts are disappointing: already now a radical update of domestic technologies is urgently needed in order to keep the production of important raw materials at the level, otherwise, in addition to sanctions, the industry will be strongly affected by the lack of innovation.
True, it should be noted that such experts do not take into account such an important factor as the explored Russian fields, where the extraction of hydrocarbon reserves can be carried out by quite traditional methods, using established domestic technologies of long time.
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