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EIA posts new Russia energy overview Government employs fiscal incentives to spur oil and gas development; progress seen as mixed on Sakhalin Island, LNG projects Wesley Loy For Petroleum News
Russia isn’t so different from Alaska in trying to encourage oil and gas development with tax and other fiscal incentives.
That’s a key message gleaned from a new Russia overview from the U.S. Energy Information Administration. The report is posted at www.eia.gov.
Most of Russia’s oil production comes from west Siberia, with the Sakhalin group of fields in the Far East contributing only about 3 percent of the country’s total production, the EIA report says.
Russian companies are expanding into the Arctic and eastern Siberia, “spurred on by tax holidays and lower oil export tariffs,” the report says. “While several new fields have come online since 2009, bringing additional fields into production will take time and may require a reformed oil tax regime from the government.”
Global titan Russia was the third-largest producer of oil, after Saudi Arabia and the United States, in 2012, the EIA says. It was the second-largest natural gas producer, after the United States.
Crude oil production was an estimated 9.9 million barrels per day in 2012, the report says.
Oil and gas is hugely important to the Russian economy, accounting for 52 percent of federal budget revenues and more than 70 percent of total exports in 2012, says the EIA, citing PFC Energy figures.
With traditional oil-producing regions in decline, east Siberia fields are expected to be central to expanding production in Russia, the EIA says.
The new 270-mile Eastern Siberia-Pacific Ocean Pipeline has boosted the region’s potential, creating an outlet for east Siberian oil, the report says.
The 2009 startup of the Vankorskoye field, located north of the Arctic Circle, has dramatically increased production in the east Siberia region. Vankor, as the field is called, was the largest oil discovery in nearly three decades, and has produced about 430,000 barrels per day in 2013, the EIA says.
Sakhalin, LNG efforts Sakhalin Island, off Russia’s eastern coast, features a number of large oil and gas fields.
Russian companies and international consortia are developing Sakhalin in phases, generally known as Sakhalin I through III.
But Sakhalin development appears to be somewhat stymied, the EIA says.
“Even though all of the consortia have extensive export plans via liquefied natural gas (LNG) terminals and export pipelines to the mainland, there has been little progress beyond the first two developments on the island: Sakhalin I and Sakhalin II,” the EIA report says.
Sakhalin Energy’s two-train LNG plant has been operating since 2009. Most of the LNG has been contracted to Japanese and South Korean buyers under long-term deals, the report says. Project partners plan to have a third train in operation by 2018, contingent on new gas supplies.
“There are a number of proposals in various stages of planning and construction for new LNG terminals in Russia,” including Yamal LNG, the EIA says.
“The Arctic Yamal peninsula project is technologically, politically, and economically challenging,” the report says. “The plant will be situated on unstable permafrost, and shipping will take place via the Kara Sea, which is icebound for about 10 months of the year.”
The Shtokman LNG project is currently stalled and “highly uncertain,” the EIA says.
Return to state control After the collapse of the Soviet Union, Russian initially privatized its oil industry, the EIA says. But the sector has reverted to state control over the last few years.
The report notes, as an example, BP’s recent sale of its stake in the TNK-BP partnership to the state-owned Russian oil giant Rosneft.
“With the possible exception of ExxonMobil, which signed an agreement with Rosneft to develop the Arctic shelf and the Black Sea, foreign operators experience difficulty operating in Russia,” the EIA report says.
Among other interesting notes in the EIA report, 10 new nuclear reactors were under construction across Russia as of September.
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