Future of Russian Oil Production:

Transcription

1 Future of Russian Oil Production: challenges and opportunities Tatiana Mitrova SKOLKOVO Energy Centre 23 October 2018, Moscow

2 Factors defining global oil market

3 Prospects of oil demand growth slowing down Vehicle park Biofuels млн т н.э Factors defining oil demand in road transportation sector by 2040, mln tonnes Mileage EVs Fuel consumpt ion Natural Gas Прирост подтребления Vehicle park за счет роста growth автомобилей Снижение за счет энергоэфеткивности Energy efficiency Межтопливная конкуренция Interfuel competition 2040 Sources: SKOLKOVO Energy Centre, ERI RAS 3

4 Oil supply is subject to vulnerability Sanctions on Iran Sanctions on Russia Future sustainability of the OPEC+ deal OPEC oil production! Competition between oil producers is increasing, but at the same time supply shocks are quite probable? No-OPEC oil production Upstream oil investments 4

5 Russian oil production

6 Russian oil output keeps growing Russian oil production, mln tonnes +6% Greenfields +60 mt Factors which have substantially supported oil production: Ruble devaluation given the prevalence of Ruble costs, significantly cut US Dollar production costs Greenfields Other brownfields West Siberia brownfields Brownfields -30 mt Russian tax system price decline reduces budget revenues ahead of company revenues Tax breaks adopted for greenfields in 2013 (primarily in Eastern Siberia) 6 Sources: Energy Ministry, SKOLKOVO Energy Centre 6

7 Will it be possible to sustain oil production in the longer term? Russian oil production forecast by scenario, thousand tonnes Production decline drivers: Natural depletion of the brownfields Deterioration of the resource base Brownfields Greenfields Witout technology development Without sanctions 2x Sanctions on the equipment supply: o o for hydraulic fracturing inhibits the production of shale oil, as well as may affect production at brownfields for deep-offshore and Arctic oil Absence of tax incentives for EOR does not allow to develop huge potential resources Source: SKOLKOVO Energy Centre 7

8 How to maintain oil production volumes? 1 New conventional fields 2 3 Unconventional oil Enhanced oil recovery (EOR) 8

9 Maintaining oil production in Russia will require new technologies and tax incentives Oil production in Russia by type, thousand tonnes 250 mt By 2030: 500 mt oil production 250 mt brownfiellds 50% of production due to new technologies Unconventional oil and EOR unprofitable without tax breaks Exploration EOR Greenfields Other unconventional oil Shale oil Offshore! state To maintain the volume of oil production it is necessary to reallocate the rent between the and oil companies Brownfields Source: The Ministry of Energy of the Russian Federation, company data, SKOLKOVO Energy Centre 9

10 In the long-term importance of unconventional oil will increase OIL PRODUCTION BY TYPE PROVED OIL RESERVES IN RUSSIA Other unconv. oil 24 mt [ПРОЦЕНТ] [ИМЯ КАТЕГОРИИ] 514 mt Unconv. 33 mt [ИМЯ КАТЕГОРИИ] 9 mt Unconv. [ПРОЦЕНТ] Source: The Ministry of Energy of the Russian Federation, company data, SKOLKOVO Energy Centre Source: The Ministry of Energy of the Russian Federation, State Reserves Committee! Development of unconventional reserves associated with stimulating the creation of technologies and equipment (in particular for hydraulic fracturing) 10

11 $/bbl $/bbl EOR potential in Russia is over 40 million tonnes per annum by 2030 Oil production without EOR Oil production with EOR CAPEX OPEX Transport Tax 0 CAPEX OPEX Transport Tax Oil price $ 60 per barrel.! Source: The Ministry of Energy of the Russian Federation, company data, SKOLKOVO Energy Centre Current tax prevents the application of EOR and deprives the budget of additional revenue 11 11

12 Conclusions > Expectations of oil demand slowdown after 2030 are increase competition in the market right now > Maintaining Ruble weak increases the competitive advantages of the Russian oil companies > Russian oil companies adapted to the sanctions. Production has been growing for the last 5 years. Prior to 2020 there is a potential of additional growth due to the prepared greenfields. > Production at brownfields will decrease by 2 times in The sources of growth are unconventionals, EOR and exploration. > Unconventionals and EOR require active support measures for the technological development - both from the state and companies side. > Unconventionals and EOR require the reallocation of the tax rent between oil companies and the state, otherwise these reserves will not be developed