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Since Russia's domestic consumption is a small part of its total production (six million bpd gets shipped abroad) it does not make sense that there would be shortages from declining production at this stage. I also doubt that Russia's production decline would mirror that of the North Sea or worse. As the articles state, there are hefty export tarriffs and domestic gasoline prices are comparabale to those in the USA. This is most likely political games associated with the Putin succession.
Okay Dissident, but what is Russian production doing? Have they plateaued or is production still increasing from one and one half percent to two percent per year? Or, are thy in slow decline.
But a better question would be; just how the hell can we tell?
Ron Patterson
Judging by all of the press clippings they are in a plateau state or going into one. But I do not see any evidence for 15% production drops that would explain shortages.
Why wouldn't Russia's production decline mirror North Sea's or worse?
The decline will be entirely dependent on the state of their fields(not taxes, tarriffs, and prices)...which would be poor in a conservative estimate.
Those fields had a rest since all time peak in the 90s, but recently (last 10) have been abused, mismanaged, and then nationalized(indirectly, of course).
So, worse, seems more plausible.
This site and other peak oil sites discuss differences between sea-bed oil extraction and dry land extraction. The sea-bed cases have quicker decline rates. US oil production certainly has not mirrored the North Sea. The US is a more realistic analogue for Russia than the North Sea. It is not credible that Russian oil exports could decline 15% in few months for geological reasons. The export land model does not apply either since there has been no spike in domestic demand that would eat into exports on this scale. The validity of ELM and future natural production declines are besides the point for the current shortage and oil export drop situation.
Yes...and NO!
Yes, it will not drop 15% in a few months, and it's model will not *normally* mirror a sea-bed extraction.
However, the age (very old) and state of fields suggests *strongly* that Russian fields will decline rapidly and at a greater rate than a well managed group of fields.
I don't think ELM is relevant to the immediate comment.
One would tend to think that the extraction techniques used might also have some bearing on this.
Reading Lukoil's old annual reports, they were mostly using hydrofracturing (physical EOR) for their Enhanced Oil Recovery. Much of the gains for production was coming from EOR, but I think the growth trend from 2003->2004 was already abating. In the annual 2006, 27% of Lukoil's Russian oil field production came from EOR wells.
Maybe it is export land model. But maybe those figures are for 12 months, and october shares most of the september period.
Russia's consumption, relative to production, is on the high side about 33% (total liquids). Also, as noted below our model indicates a rapid production decline, at least in the mature basins, and our middle case indicates that Russia will hit zero net exports in 17 years.
But you can not expect a 15% drop in exports over the timescale of a few months. Assuming the production has changed 0% over the last year would require that there was a 15% increase in domestic consumption. Automobile/truck use is nowhere near this growth rate in Russia. Of course, one can choose to believe that there is a real decline rate of over 10% in Russia. Since this rate is not going to drop (bar significant new discoveries) it should be pretty clear in the next three years if such a rate is realistic since it will wipe out exports much quicker than in 17 years.
edit: it would be more like a 30% increase in consumption not 15% since the consumption is half of the exports.
The key point about the Russian production base is that it is by and large very old. IMO, the rebound in recent years was just making up for what was not produced after the Soviet collapse. So, when the production decline begins, it will probably be very abrupt.
It's easy to do some "what if' scenarios. Round off 2006 total liquids production to 10 mbpd and consumption to 3 mbpd.
At a -5%year decline rate and a +5%/year rate of increase in consumption, using the Rule of 72 production would be down to 5 mbpd in 14 years and consumption would be up to 6 mbpd in 14 years--net importer status.