Energy in Russia: No consensus on oil production shortages

Anatoly Dmitrievsky, director of the Institute of Oil and Gas Problems (Russian Academy of Sciences), points out that $280bn of investment into the development of global oil reserves has been postponed due to the global financial crisis.

Mr Dmitrievsky further notes that, while it might take from several months to a couple of years to overcome the crisis, it takes at least five to seven years to kick-start development of a new oil field.
Mr Dmitrievsky, who shares IEA concerns regarding the low rate of new developments, believes peak production forecasts are driven by economic as well as resource factors. Low oil prices are hardly conducive to investment.

For example, shale oil production passes the breakeven point only at $90-100 per barrel, to say nothing of new developments in Eastern Siberia, the Arctic shelf and other regions of the world. Of course, oil is a non-renewable resource, but some reserves are yet to be explored. Mr Dmitrievsky is sure that “Russia will launch 60pc of new oil fields”.

Although these discoveries have nothing to do with the “cheap oil” era, they let us hope that we are not past the peak just yet.

“There could be different views as to when the peak will be reached, but it is obvious the world might possibly run out of proven reserves,” believes Valery Nesterov, an analyst with the Troika Dialog Investment Company.

Russian oil companies share this view. More than a year ago, Leonid Fedun, vice president of Lukoil, said that Russia would never produce as much oil as in 2007 – almost 10m barrels a day – and would be able to maintain a production level of 8.5-9m barrels a day for the next 20 years only given billions of investment in exploration.

The problem is that investment is uneven and mirrors price cycles, since oil corporations prefer to spend money only when oil is expensive, says Mr Nesterov.

Telegraph/Rossiyskaya Gazeta