The Oil Drum

This article from "Oil of Russia" magazine seems pretty sobering regarding future Russian oil production and is at odds with the EDTM's forecasts. It's Lukoil's magazine though, and reads as a poorly-disguised plea for lower taxation.

The statistics of the last 60 years show that Russia's oil-producing industry has been subject to the classical laws of phased development. According to these laws, the industry had already completed its buildup stage in the years before 1975 and moved on to the level of producing approximately 400 to 500 million tons per year. At this level, the volume of oil produced in Russia has been held constant for approximately 30 years; now, however, there are signs justifying the assertion that the stage of stable oil production has ended, and we are entering a new phase in which the volumes of oil produced will gradually decline.

And later:

Starting in 1945, the systemic decline in the rates of oil production growth has been approximately 2% every five years, and is now leading to an inevitable transition to the stage of negative yearly growth in production. Our linear and polynomial forecasting models, constructed for extreme cases with a high correlation coefficient of 77–92%, show that rates of production growth could be negative as early as the 2005–2010 interval. In 2011, the two forecasting models meet at negative rates of approximately 6–7% production growth annually.

One of the main reasons for the decline in the volume of oil production is the increasingly difficult geological and technical conditions in the development of oilfields. This progressive worsening of conditions has led to an increase in the amount of labor involved in recovering oil reserves. In fact, since 1990s every newly produced ton of oil has been more labor intensive than the previous one.

Reserves are getting more and more difficult to recover. As the statistics show, there has been (since 1990) a doubling every ten years in the labor intensity in oil production.

I don't understand the point that's made several times that an increasing oil price leads to a decline in production growth rates, e.g. this bit:

High world prices for oil (more than $30 per barrel since 2004) are merely accelerating the systemic trend toward the decline in average annual rates of growth in the production of oil. Throughout the last 35 years, the rise in the price of Urals crude (more than $30 per barrel) has led to a decline in the average annual rates of growth in oil production.

With a price of more than $30 per barrel for Urals crude, there is obviously an additional increase in oil companies' operating and tax costs that forces them to shut down increasingly less productive reserves of oil. As a result, higher rates of production decommissioning lead to a drop in overall volumes of oil production.

Can anyone explain this? Seems counter-intuitive to me, but maybe I'm misunderstanding what he's saying.