Preparing for the age of peak oil

Russia


In Russia, the problem is not so much a lack of oil but an investment drought. This has been caused by high taxes and hostile treatment of foreign and some domestic companies by a government reasserting control over its energy sector.

Russia will have to act quickly if it is to avoid a long-term decline in oil output. Bringing on stream untapped reserves in the Arctic and eastern Siberia will take years.

The government should therefore cut production taxes steeply. Only a large tax reduction will stimulate spending on domestic supply infrastructure. As long as there is little incentive to develop hard-to-access oil deposits at home, Russian energy firms will continue to make acquisitions abroad. The estimated $4bn extra a year that would be available to the industry under current proposals is a tiny fraction of what companies will need if they are to mitigate the output loss from declining fields in western Siberia.

Financial Times