@article{eage:/content/journals/0.3997/1365-2397.24.1100.27143, author = "Gelb, B.A.", title = "Russian oil and gas challenges", journal= "First Break", year = "2006", volume = "24", number = "10", pages = "", doi = "https://doi.org/10.3997/1365-2397.24.1100.27143", url = "https://www.earthdoc.org/content/journals/0.3997/1365-2397.24.1100.27143", publisher = "European Association of Geoscientists & Engineers", issn = "1365-2397", type = "Journal Article", abstract = "This concise overview of Russian oil and gas policy and activities comes from an independent research report to the US Congress by Bernard A. Gelb, specialist in industry economics, resources, science, and industry division, Congressional Research Service, the Library of Congress. This is a slightly abridged, unreferenced version, but the specific discussion of US interests has been left unedited. All photos in this article are from the major ongoing Sakhalin-1 project in the Russian Far East. The Russian Federation is a major player in world energy markets. It has more proven natural gas reserves than any other country and is among the top 10 countries in proven oil reserves. It is the world’s largest exporter of natural gas, the second largest oil producer and exporter, and the third largest energy consumer. Oil and gas reserves and production Most of Russia’s 60-72 billion barrels of proven oil reserves are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. This ample endowment made the Soviet Union a major world oil producer in the 1980s, reaching production of 12.5 million barrels per day (bbl/d) in 1988. Roughly 25% of Russia’s oil reserves and 6% of its gas reserves are on Sakhalin Island in the far eastern region of the country, just north of Japan. Russian oil production, which had begun to decline before the Soviet Union dissolved in 1991, fell more steeply afterward - to less than six million bbl/d in 1997 and 1998. State-mandated production surges had accelerated depletion of the large Western Siberian fields and the Soviet central planning system collapsed. Russian oil output started to recover in 1999. Many analysts attribute this to privatization of the industry, which clarified incentives and shifted activity to less expensive production. Increases in world oil prices, application of technology that was standard practice in the West, and rejuvenation of old oil fields helped boost output. After-effects of the 1998 financial crisis and subsequent devaluation of the ruble may well have contributed. After reaching about nine million bbl/d in 2004 depending upon the estimating source, Russian oil production continued to rise in 2005, but only slightly. Several consortia have begun producing and exporting oil (mainly to East Asia at present) from Sakhalin island. They also plan to export gas to the US via pipelines to the Siberian mainland and then from liquefied natural gas (LNG) terminals. With about 1700 trillion cu ft (tcf), Russia has the world’s largest natural gas reserves. In 2004, it was the world’s largest natural gas producer and the world’s largest exporter. However, its natural gas industry has not done as well as its oil industry in recent years, as production has increased only a little and exports only have re-attained their level of the late 1990s. Growth of Russia’s natural gas sector has been impaired by ageing fields, near monopolistic domination over the industry by Gazprom (with substantial government holdings), state regulation, and insufficient export pipelines. Gazprom, Russia’s 51%-owned state-run natural gas monopoly, holds more than one-fourth of the world’s natural gas reserves, produces nearly 90% of Russia’s natural gas, and operates the country’s natural gas pipeline network. The company’s tax payments account for around 25% of Russian federal tax revenues. Gazprom is heavily regulated, however. By law, it must supply the natural gas used to heat and power Russia’s domestic market at government-regulated below-mar-ket prices. Potential growth of both oil and natural gas production in Russia is limited by the lack of full introduction of the most modern western oil and gas exploration, development, and production technology. ", }