The Oil Drum

Let's keep the focus on Russia for this thread :-)

Yes, thanks for a very nice summary Stuart. Your efforts are greatly aprreciated. With all the talk about Saudi Arabia, we tend to forget that Russia is equally as important.

Picture is getting clearer and clearer thanks to your work and that of other contributors to this site.

Ken

Following is the Russian commentary portion from our draft of the final written report on Brown/Khebab Net Oil Exports by the top five:

Russia’s initial 10 year projected production decline rate is -5.1%/year plus or minus 2%. The projected rate of increase in consumption, which is heavily weighted toward recent consumption and therefore on the low side, is +0.3% plus or minus 0.8%. The initial 10 year projected net export decline rate is -8.2%/year, plus or minus 4%. Our middle case shows Russia hitting zero net exports is 2024, within a range from 2020 to 2029.

We believe that Russia’s recent rebound in production was primarily a result of Russia making up for what was not produced following the collapse of the Soviet Union, and based on our mathematical model, Russia has now “caught up” to where its post-1984 cumulative production should have been.

This summer Alfa Bank warned of problems with mature Russian oil fields because of rapidly rising water cuts. Just recently, Renaissance Capital brokerage said that excluding the Sakhalin-1 Field, daily crude output in Russia has been down year-on-year since May. And there have been recent warnings that new fields in Eastern Siberia are too small and being developed too slowly to offset the production declines in Western Siberia.

The above image is from Jeff Rubin's (CIBC) October 2007 presentation OPEC's Growing Call on itself (PDF).

You probably mean this news which has been circulating for 2 years now:

Russian oil output could peak .... in 2010..... Russian Industry and Energy Minister Victor Khristenko said.

The latest I could find about that was this IHT article:

The oil and gas fields feeding this bonanza are running dry. Russian gas output has leveled off; oil production is expected to peak by 2010. Russia has more gas and oil, but its energy sector has to make the right decisions now to tap new fields. Western energy companies, whose capital and know-how will be essential to sustain Russian oil and gas production, have felt distinctly unwelcome in Putin's Russia

Coincidentally, Rosneft is also renegotiating their deal with China after 2010:

State-controlled Rosneft (ROSN.MM: Quote, Profile, Research), Russia's largest oil firm, said on Tuesday it will not renew its existing crude oil supply contract to China after 2010 unless China offers better terms.

There has also been discussion about overstated reserves:

Mitvol was visiting analysts with several banks in the United States who hold investments in companies operating in Russia, warning them about the dubious reserve accounting methods.

Then again, there's been discussion about Russia capping it's production voluntarily. High prices really is good for Russia (and esp. Putin's cabal):

So Russia may be about to cap its oil production just when the global community is looking for it to produce more oil. Of course, that is the global community's problem, not Russia's.

As for actual export data, exports did fell in 2006 2.4% according to Prime-Tass news agency (article not available on web anymore). Rian reported a 1% fall y-2-y for 2006 exports for Russia.

However, according to Alexander's Gas & Oil Connections, Russia's 1-8/2007 oil exports grew by 4.75% compared to year earlier.

You're right on the swapped legends. I'll fix it tonight.

The lables for rig count and IEA are swapped in the rig/production chart. It freaked me out seeing such a vast difference in the IEA and EIA figures, which are always reasonably close. Blue is rig count and the dark red/green is production. This is very telling and goes a long way in refuting the standard argument that high prices will cause more drilling and more oil. A similar chart for Saudi Arabia would probably look the same.

I agree. I think most people equate Siberia to Saudi Arabia or Texas. Siberia is much larger then all of USA but at the same time the weather is very harsh. I do not think that Siberia is as well explored as Texas or Saudi Arabia, which in turn means that there is potential (but of course no guarantees) that there are additional large oil fields.

claassen,

I wish I had your confidence that supplies are sufficient for the next 50 years. Most of the studies I've seen claiming this use a lot of hand-waving compared to the hard analysis arguing for a near-term peak in oil production.

IMO the urgency of the need to begin mitigation cannot be understated.

Clint

Thanks for this BP...and welcome.

Thanks BulletProof, this is a great link. I had no idea Russia would be so transparent in their energy production numbers, yet this link gives daily numbers. If I read it right, it shows they produced 1348.4 tons of oil on October 30, which at 7.3 barrels per ton is about 9.84 million barrels (I'm not sure 7.3 is the best figure to use, though).

Absolutely brilliant link. Perhaps TOD should get a feed off it :=)

Why would they be ramping up rig count like crazy if they were saving their reserves for later?

Interesting! If so, that would presumably also account for the relatively low recovery factors seen during the soviet era.

Yikes.

That would be the kiss of death for low oil cut REDA / submersible production. As I understand it, the key to managing production from those types of wells is having a large enough pump to pump them down, but not so large a pump as to uncover the pump and have it run free / burn itself up. Having a thousand or more feet of standing fluid could dramatically reduce the oil cut.

Russia's very big part in the global peak can not be considered apart from the very large impact of the very large Soviet Union. The Russian production chart isn't a case of a single peak per Hubbert's theory, but what is going to be a twin peak - the first controlled by Soviet thugs and the present second peak controlled by a state run industry that by many opinions including that of Jim Rogers is as inept as ever (a "disaster going on a catastrophe" as Rogers has phrased it). As the production curve shows, their oil industry was pretty dormant in the 30s and 40s, but then was thrown into high gear in the 50s to the early '80s when the Evil Empire went on the war path for world domination. The Soviet economy had little to offer in world trade except a lot of oil. This was their funding for world conquest to the extent that Deffeyes suggested that a more powerful reason for the Soviet collapse than Reagan's arms race was an oil price war OPEC conducted with the less adept Soviet oilfield "managers" - a price war in the middle of an arms race, and they lost badly. I suspect that, during this desperate race with the free world, Soviet oil field management was done more from the point of a rifle than from a geology 101 textbook. This likely produced a lot of reservoir damage from overproduction, although if they were only tubing 1000' deep or less as Fractional Flow says, I don't know how much they would damage reservoirs. Would this mute or amplify overproduction damage? Anyway, they apparently were endangering the world's oil supply to the extent that the U.S. military was monitoring Russia's oil industry pretty closely during the Soviet years. One interesting article is this one written by an Air Force major in Air University Review in 1980. Way back then, he sounded just like Simmons today only talking about Soviet fields and predicting a production collapse by the mid '80s (which, in fact, did happen). He pointed out the big, easily developed fields playing out and the numerous new fields in inaccessible, hard to develope areas with a lot of technical issues. He points out that Russia ambitiously directed over half of their oil exports to Eastern Europe and other parts of the expanding empire, and other geopolitical factors that led to serious overproduction where "...rewards for exceeding goals are given without regard to productivity over the long term ...The consequences are...overproduction of existing fields using low productivity techniques that reduce the total amount of recoverable oil." The major was thus accurately predicting