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Russia Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 143
This latest Russia Oil & Gas Report from BMI comes during a record-breaking year of oil production for the country. Output reached a fresh post-Soviet high of 10.3mn barrels per day (b/d) in September 2011, helping the country maintain its position ahead of Saudi Arabia as the world’s largest oil producer. For 2011 as a whole, BMI expects oil output to average 10.19mn b/d. Although oil production has been rising rapidly, we do not see the country being able to surpass the 11mn b/d mark in the next few years. We forecast output reaching 10.92mn b/d by 2015.
Russia will likely remain the world’s largest gas exporter for the foreseeable future, but an increasing share of production will have to come from outside the country’s traditional gas heartland of West Siberia. Gas output will continue to rise over the medium term as new fields offset declining volumes in existing producers. Russia produced 622bn cubic metres (bcm) in 2010 and will produce 728bcm by 2015. Consumption will rise along with production, albeit more slowly, as Russia gradually reforms domestic gas pricing and increases energy efficiency in line with state targets. We forecast demand growing from 447bcm in 2011 to 511bcm by 2015.
Over the longer term, Russian oil production is likely to peak before 2020 and begin to fall back towards current levels. Output will rise to 10.98mn b/d in 2016, but Russia is unlikely to produce more than 10.72mn b/d by 2020. Maturation of existing fields will accelerate with new projects unable to keep pace. Oil consumption will continue to grow regardless, rising from 3.12mn b/d in 2015 to 3.62mn b/d in 2020. As a result, export volumes will peak in 2015 at 7.80mn b/d before falling to 7.11mn b/d by 2020.
Russian gas production is also likely to peak within the next 10 years, with BMI currently expecting this to occur in 2017 when the country will produce 754bcm. By 2020 Russia should be producing no more than 730bcm, a level which is nevertheless 17.5% higher than in 2010. Gas consumption will, however, continue to rise, growing to 600bcm by 2020, a level that will eat significantly into the volumes available for export, which will fall by 25% from 175bcm in 2010 to 131bcm in 2020.
Although Russia will continue to dominate oil supply in the region, backed by huge and under-exploited reserves, the Caspian states have an important role to play, with Azerbaijan and Kazakhstan playing increasingly significant role. The growth rate in Russian oil supply has slowed appreciably since the early-2000s but the acceleration of Caspian expansion means that the region will make a growing contribution to world oil production.
Russia holds fourth place, below Kazakhstan, in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It holds sixth place, below Croatia, in BMI’s updated upstream Business Environment ratings, aided by unrivalled hydrocarbons resources. Its oil and gas reserves account for much of the upstream score, but licensing, privatisation and country risk factors are less impressive. Russia is in fourth place in BMI’s updated downstream Business Environment ratings.
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