Russia May Have Passed Peak Oil

[Hydrogen]

Russia’s oil production is unlikely to recover to pre-coronavirus levels, according to a government strategy document cited by Kommersant.

In a strategy document outlining prospects for Russia’s critical oil and gas industry, the government said its “base case” — or most likely — scenario, is that Russia’s oil production will never again hit the record levels recorded in 2019.

In the last full year before the pandemic, Russia produced 560 million tons of oil — equivalent to 11.3 million barrels a day. But output dropped for the first time in more than a decade in 2020 as Russia agreed significant production cuts with Saudi Arabia and other members of the OPEC cartel in a bid to support oil prices at the start of the pandemic — pushing production down 9% to 10.3 million barrels per day.

In the scenario labelled most probable, the Energy Ministry predicts Russia’s oil output will grow over the rest of the decade — but fail to hit the record output of 2019, with production hitting a post-coronavirus peak of 11.1 million barrels a day in 2029 before decreasing to to 9.4 million barrels a day by 2035.

Russia vies with Saudi Arabia to be the world’s second-largest oil producer, behind the world-leading U.S. The Russian economy remains heavily dependent on energy exports, with revenues in pre-pandemic years accounting for more than a third of the government’s total budget and all extractive industries — covering oil, gas and other commodities — accounting for almost 40% of Russian GDP, according to the country’s statistics agency Rosstat.

In its most optimistic scenario, the Energy Ministry expects production to pass pre-coronavirus levels, peaking in 2030 at 12.8 million barrels a day before starting to decline. In every scenario presented, the Energy Ministry said Russian oil production had either already peaked, or would hit its maximum level within the next decade, Kommersant reported.

Russia remains poorly positioned to take advantage of the global energy transition to cleaner and renewable sources of energy, experts say. While countries in Europe and the U.S. have put clean energy at the center of their post-coronavirus economic stimulus and investment packages, Russia is reportedly planning to cut state spending on green energy. Analysts estimate that if every project currently in development is completed in time, Russia’s electricity generation from renewable sources, excluding hydro power, will be just 1% by 2024.

“While international oil [majors] are falling over themselves in their business transformation potential to become ‘clean,’ Russians are unlikely to compete with them in this renewables drive,” VTB Capital’s deputy head of oil and gas research Dmitry Loukashov said in a research note last week.

He does believe, however, that the Russian oil and gas industry could capitalize on so-called transition fuels, like hydrogen or ammonia, as well as take a leading role in investment and research into carbon capture technology.

The Energy Ministry strategy outlines that government tax cuts to high-potential oil fields, such as those in the Arctic region, will be crucial in helping the country maximize the potential of the vast energy resources it still sits on.

If oil prices lag, it estimates that only a third of Russia’s proven reserves will be profitable to extract, while even in the most optimistic scenario, with higher global oil prices, only two-thirds of Russia’s recoverable reserves will be taken out of the ground.




https://www.themoscowtimes.com/2021/04/12/russia-may-have-passed-peak-oil-output-government-a73558

....


Should peak production of oil have been reached. It could be defined as a deflationary commodity. Similar to bitcoin's reward halving. Every successive year would be defined by average decreases in production. Accompanied by rising scarcity of resources.

What would the expected performance of such a trend resemble?

It also appears that russia is poorly situated to transition to green and renewable sources of energy. With a whopping 1% or less of its electricity generation being derived from low carbon footprint sources. Putin it seems does not approve of environmentally friendly, sustainable and renewable power.

Peak oil has been a hot topic since the 1970s. Our last era of inflation and high fossil fuel costs. Some analysts conclude that too much of our lifestyle is built upon fossil fuels for them to be replaced. Others claim the opposite is true. Today we can synthesize organic waste products into fossil fuels and manufacture plastics from soybeans and other sources. Perhaps we have better alternatives today. But at one time the peak oil debate was one of a doomsday scenario. Where peak oil was correlated with peak civilization and all humanity could expect afterward would be a decline.

[Argoo]

There is not even a doubt about this. Oil and gas production in Russia will be reduced not only for this reason. Russia unleashed a war in Ukraine, began to blackmail European countries to make the necessary political decisions, using oil and gas as weapons. This blackmail has already been repeated many times, and therefore this time Europe has firmly decided to get rid of Russia's dependence and abandon its oil and gas. This process has been launched and in a few years Russia will lose the main buyer of its carbohydrates.
In addition, many states, due to global climate change, have developed a program for a gradual transition to alternative energy sources, and this is also irrevocable. Demand for oil and gas should fall and Russian in the first place.

[kryptqnick]

I'm happy to hear that the output of oil is down and likely won't get to record numbers. The differences listed in the article don't seem that big though; it's clearly not a dramatic decrease. Unfortunately, it might also have little effect on Russian economy and profits because if they get fewer oil but sell it at a higher price, it can compensate for the lowered amounts. But overall, it's important to start moving away from oil and start building economy on something that doesn't cause lots of harm to the environment. It doesn't seem that Russia understands this simple idea yet, just like it doesn't understand that waging a war is bad. Hopefully, the understanding of both will come sooner rather than later.

[DrBeer]

Oil and gas have a peculiarity. This is not tap water, when you want to drink, you open the tap, and when you don’t need it, you close it.
And this is a product that cannot be taken and simply started selling in a completely different direction - the logistics of oil and gas is a very difficult decision.
And it is worth disturbing the usual balance of this market, as the "old" supplier has problems:
1. Gas or oil that has been abandoned must be stored. Question - where and how, and how much? There are no huge storage facilities in Russia.
2. In Russia, it is very primitive, from the point of view of the flexibility of supply directions, both the gas system and oil pipelines.
They simply cannot begin to drive the oil that went through pipelines, for example, to China. The situation is exactly the same with gas. At the same time, remember - China always twists the arms of the weak, and now Russia is selling excess oil (tanker oil) at a dumping price. No, not at the low price set by Russia, but at the price at which China ordered them to sell. While the cost of transportation has increased markedly.
3. Temporary stop of production - impossible. Only conservation of wells is possible. It is very expensive. But this is half the trouble. Even more expensive and technologically more difficult - deconservation. It's not like corking a bottle of wine and then opening it. This is essentially to develop a well from the beginning. Commensurate in complexity and cost. And given the technological backwardness of Russia in these technologies, the depreservation of wells becomes almost impossible. This is not nonsense, it is a fact, no matter how idiotic it may sound, but Russia uses 75+% of imported technologies and equipment from developed countries in oil and gas production!

[Jaksjol675]

Russia’s oil production is unlikely to recover to pre-coronavirus levels, according to a government strategy document cited by Kommersant.

Russian oil production might never recover to pre-coronavirus levels, the country’s Energy Ministry has forecast, according to the Kommersant business paper.

In a strategy document outlining prospects for Russia’s critical oil and gas industry, the government said its “base case” — or most likely — scenario, is that Russia’s oil production will never again hit the record levels recorded in 2019.

[davis196]

1. Gas or oil that has been abandoned must be stored. Question - where and how, and how much? There are no huge storage facilities

I've seen news(several weeks ago) that the natural gas, which is not being transported to Germany via the Nord stream pipeline is simply getting burned in Russia. I don't know if this is true or western propaganda.
I don't believe that Russia doesn't have any gas storage facilities, all countries in Europe have such facilities(usually underground) where they store their natural gas reserves. Most EU countries will have to replenish their gas reserves for up to 85%. AFAIK, this is a requirement that is being set by the European Commission.

This is not nonsense, it is a fact, no matter how idiotic it may sound, but Russia uses 75+% of imported technologies and equipment from developed countries in oil and gas production!

Who is saying that this is a nonsense? There Russians don't have the technology to extract oil and gas from the Arctic ocean.
They don't have the technology to extract shale gas. USA corporations have all those technologies.

[Leviathan.007]

I was thinking about this a few weeks ago just after the war started and Europe face the oil and gas crisis I was thinking that if the European countries won't buy any oil and Russia is taking benefits from the producing oil and gas and this is definitely a big share of the Russian income then Russia will have problems too because they won't be able to sell these products freely like the old days and this will definitely damage their economy but in the other side of the story there are many other countries they will still buy gas from Russia and even some of them will do a proxy deal with Russia to help Russia deliver their product to other countries, that's how Russia can pass the problem with oil buy still passing this step won't be free for them.

[Sithara007]

I was thinking about this a few weeks ago just after the war started and Europe face the oil and gas crisis I was thinking that if the European countries won't buy any oil and Russia is taking benefits from the producing oil and gas and this is definitely a big share of the Russian income then Russia will have problems too because they won't be able to sell these products freely like the old days and this will definitely damage their economy but in the other side of the story there are many other countries they will still buy gas from Russia and even some of them will do a proxy deal with Russia to help Russia deliver their product to other countries, that's how Russia can pass the problem with oil buy still passing this step won't be free for them.

First of all, even now EU remains the top importer of Russian crude and finished products. Out of around 6 million barrels (3m crude, 3m products) exported per day, more than 50% is directly purchased by the EU nations. And even more end up in the EU, in the form of "blended products" from countries such as India and Turkey. They are planning to phase out Russian oil and products by end of this year. Even that looks doubtful, as some of the EU members such as Hungary have claimed that it will be impossible to secure supplies from other sources. If Russia want, they can redirect most of these exports to Asia and Europe. But Europe won't be able to secure supplies to replace all the Russian imports. 

[DrBeer]

You can try to draw an "alternative reality" for a long time, sing about the "powerful economy of Russia" and "you will buy oil at the price that the Kremlin says" .... but the reality will not change from this
And the reality is this:
1. A deficit-free budget in Russia can be at the cost of Urals oil at a price of $62.2/bbl. at a dollar exchange rate of about 80 rubles per dollar (budget indicators are partially classified, but you can find the data)
2. The peak price was about 90 barrels per dollar. With the dollar exchange rate... 57-59 rubles per dollar
3. Now the price is going down. $79.8/bbl at a dollar exchange rate of about 59 rubles per dollar.
4. China and India are buying up to $40/bbl.

Concluding about the stability of the Russian oil budget, do it yourself

[el kaka22]

I did not know that there was a price point where it would be waste of money to get oil from the ground. From what I gather in this article that if the price is under X dollars, it would be useless to extract oil in some places, and as long as price does go back up, then it would be stopped and not really dealt with. But, isn't it smarter to just do it, store it, and do not sell it until price goes up and then only after the price goes up, you can sell?

This way you would have a ton of oil stored in barrels everywhere, and when the price goes up you could cash them and make a ton of money? Maybe I do not know how oil business works so that is why it sounds weird to me.

[Sithara007]

I did not know that there was a price point where it would be waste of money to get oil from the ground. From what I gather in this article that if the price is under X dollars, it would be useless to extract oil in some places, and as long as price does go back up, then it would be stopped and not really dealt with. But, isn't it smarter to just do it, store it, and do not sell it until price goes up and then only after the price goes up, you can sell?

This way you would have a ton of oil stored in barrels everywhere, and when the price goes up you could cash them and make a ton of money? Maybe I do not know how oil business works so that is why it sounds weird to me.

That is not a very viable option IMO. Oil storage is not very cheap. I am not sure, but from what I heard it costs $6 per barrel or above to store crude oil for one year. If the crude needs to be stored for 5 years, the storage alone will cost $30-$40 per barrel. So unless it is required for strategic purposes, crude oil storage can't be used to make profit. It can be very risky as well. For example, now crude is trading at $100 per barrel. What will happen in case the prices go down to $40 per barrel all of a sudden and stay there for 5-6 years? 

[blue_hurricanger]

I did not know that there was a price point where it would be waste of money to get oil from the ground. From what I gather in this article that if the price is under X dollars, it would be useless to extract oil in some places, and as long as price does go back up, then it would be stopped and not really dealt with. But, isn't it smarter to just do it, store it, and do not sell it until price goes up and then only after the price goes up, you can sell?

This way you would have a ton of oil stored in barrels everywhere, and when the price goes up you could cash them and make a ton of money? Maybe I do not know how oil business works so that is why it sounds weird to me.

That is not a very viable option IMO. Oil storage is not very cheap. I am not sure, but from what I heard it costs $6 per barrel or above to store crude oil for one year. If the crude needs to be stored for 5 years, the storage alone will cost $30-$40 per barrel. So unless it is required for strategic purposes, crude oil storage can't be used to make profit. It can be very risky as well. For example, now crude is trading at $100 per barrel. What will happen in case the prices go down to $40 per barrel all of a sudden and stay there for 5-6 years? 

Exactly. From the latest news below indicate Russia can now offload its oil at 30% discount to customers and still see a profit from it. If they keep their oil in storage, it'll hurt their overall balance as the amount of money to upkeep it as you've said. If the oil price keeps going lower, their profit margin could be lower as well so they can't keep hoarding oil in their storage or reserve.

Russia mulls up to 30% oil discounts for some Asian buyers: Report
https://www.business-standard.com/article/economy-policy/russia-mulls-up-to-30-oil-discounts-for-some-asian-buyers-report-122082401057_1.html

[DrBeer]

As the facts show, the gas market and maximum income, Russia is also losing. Yes, yesterday the price jumped up, but this is an artificial influence on the market, which will end soon.
And here's some good news, from reality: Norway has taken the lead in delivering natural gas to Europe, pushing Russia to cut supplies to the EU countries.
About it writes Business Insider with reference to Reuters.
Norway's energy minister, Terje Asland, said his country plans to keep natural gas production at current high levels as Europe grapples with a power generation crisis that could undermine its industry.
"I expect that we will be able to maintain the level of production that we have now until 2030," Asland added.

https://markets.businessinsider.com/news/commodities/european-energy-crisis-natural-gas-price-outlook-norway-russia-supply-2022-8

[be.open]

Should peak production of oil have been reached. It could be defined as a deflationary commodity. Similar to bitcoin's reward halving. Every successive year would be defined by average decreases in production. Accompanied by rising scarcity of resources.

Now Russia produces more than 10 million barrels of oil per day, slightly ahead of Saudi Arabia in this indicator and second only to the United States. I don't understand what kind of decline in production you are talking about when the country is in the top 3 in the world ranking (in second place)?

[DrBeer]

Should peak production of oil have been reached. It could be defined as a deflationary commodity. Similar to bitcoin's reward halving. Every successive year would be defined by average decreases in production. Accompanied by rising scarcity of resources.

Now Russia produces more than 10 million barrels of oil per day, slightly ahead of Saudi Arabia in this indicator and second only to the United States. I don't understand what kind of decline in production you are talking about when the country is in the top 3 in the world ranking (in second place)?

In addition to the fact that oil and gas production in Russia has ALREADY decreased, this is reflected even in official statistics, there is another side to this coin.
Even if the level of oil production is maintained, Russia still does not receive the profit it was counting on. Imagine - not everything is as joyful as propaganda is trying with all its might to drive into the heads of the inhabitants of Russia
Let me explain:
Ruble / dollar exchange rate. I’ve said it more than once, now I won’t say exactly to the penny, but the budget was drawn up on the assumption that oil costs (of course, the most poor quality is Urals), something like 62 dollars per barrel, and a dollar costs about 85 rubles. What do we have for today? A dollar costs about 60 rubles, a barrel of Urals costs about 80+ dollars per barrel. It seems like it's time to say - "hey dude, everything is so cool, why are you winding around here ?!", right? But as they say, the devil is in the details! The problem here is where it is the price "here and now". And contract deliveries come with significant discounts. It comes to the EU at a discount of up to about 25%, but the surplus of oil that Russia does not know where to put, China and India are buying up with a 40% discount! And it's still the EU has not imposed an embargo on Russian oil tankers! BUT, another trifle - tanker transportation for Russia has risen in price, due to problems with insurance of tanker transportation!
In total, in reality:
1. The volume of production has really decreased
2. The cost of oil, although higher than budgeted, but this high price is leveled by the artificially low dollar exchange rate in Russia
3. Russia sells most of its oil at a 25% discount
4. Russia is FORCED to sell a significant part of oil at a 40% discount
5. After the EU abandons Russian oil, the discount will become even higher, and budget revenues will naturally be significantly lower.

[be.open]

Should peak production of oil have been reached. It could be defined as a deflationary commodity. Similar to bitcoin's reward halving. Every successive year would be defined by average decreases in production. Accompanied by rising scarcity of resources.

Now Russia produces more than 10 million barrels of oil per day, slightly ahead of Saudi Arabia in this indicator and second only to the United States. I don't understand what kind of decline in production you are talking about when the country is in the top 3 in the world ranking (in second place)?

In addition to the fact that oil and gas production in Russia has ALREADY decreased, this is reflected even in official statistics, there is another side to this coin.
Even if the level of oil production is maintained, Russia still does not receive the profit it was counting on. Imagine - not everything is as joyful as propaganda is trying with all its might to drive into the heads of the inhabitants of Russia
Let me explain:
Ruble / dollar exchange rate. I’ve said it more than once, now I won’t say exactly to the penny, but the budget was drawn up on the assumption that oil costs (of course, the most poor quality is Urals), something like 62 dollars per barrel, and a dollar costs about 85 rubles. What do we have for today? A dollar costs about 60 rubles, a barrel of Urals costs about 80+ dollars per barrel. It seems like it's time to say - "hey dude, everything is so cool, why are you winding around here ?!", right? But as they say, the devil is in the details! The problem here is where it is the price "here and now". And contract deliveries come with significant discounts. It comes to the EU at a discount of up to about 25%, but the surplus of oil that Russia does not know where to put, China and India are buying up with a 40% discount! And it's still the EU has not imposed an embargo on Russian oil tankers! BUT, another trifle - tanker transportation for Russia has risen in price, due to problems with insurance of tanker transportation!
In total, in reality:
1. The volume of production has really decreased
2. The cost of oil, although higher than budgeted, but this high price is leveled by the artificially low dollar exchange rate in Russia
3. Russia sells most of its oil at a 25% discount
4. Russia is FORCED to sell a significant part of oil at a 40% discount
5. After the EU abandons Russian oil, the discount will become even higher, and budget revenues will naturally be significantly lower.

I don’t know where you get all this nonsense from, but just in case, I advise you not to miss the scheduled intake of haloperidol. The cost of a barrel of Ural oil is now $83. The dollar is in a very comfortable corridor for Russia and now costs 60 rubles. Russia's budget for 2022 is based on the assumption that oil costs $46.6 per barrel. According to the results of seven months, the budget surplus amounted to 482 billion rubles (revenues amounted to 15.777 trillion rubles, expenses were executed by 15.295 trillion rubles). Let me repeat, if you don't understand, in the first seven months of the year, Russia has a budget surplus of almost half a trillion rubles, against the backdrop of unprecedented economic sanctions and additional spending on a military special operation in Ukraine. These are facts, as opposed to your wet fantasies.

Russia lives within its means and earns more than it spends. And this is what the entire civilized world, mired in debt, should learn from her.

[Sithara007]

I don’t know where you get all this nonsense from, but just in case, I advise you not to miss the scheduled intake of haloperidol. The cost of a barrel of Ural oil is now $83. The dollar is in a very comfortable corridor for Russia and now costs 60 rubles. Russia's budget for 2022 is based on the assumption that oil costs $46.6 per barrel. According to the results of seven months, the budget surplus amounted to 482 billion rubles (revenues amounted to 15.777 trillion rubles, expenses were executed by 15.295 trillion rubles). Let me repeat, if you don't understand, in the first seven months of the year, Russia has a budget surplus of almost half a trillion rubles, against the backdrop of unprecedented economic sanctions and additional spending on a military special operation in Ukraine. These are facts, as opposed to your wet fantasies.

Russia lives within its means and earns more than it spends. And this is what the entire civilized world, mired in debt, should learn from her.

The embargo against Russian oil will kick in only by the end of this year. It will be interesting to see whether they will be able to maintain the budget surplus then. And there is some disturbing development from India. The Americans claim that the Indian government has given them assurances regarding the price cap on Russian crude. If they do that, then China will remain as the sole major importer of Russian crude. As of now, India imports around 1 million barrels of crude per month from Russia.

[be.open]

The embargo against Russian oil will kick in only by the end of this year. It will be interesting to see whether they will be able to maintain the budget surplus then. And there is some disturbing development from India. The Americans claim that the Indian government has given them assurances regarding the price cap on Russian crude. If they do that, then China will remain as the sole major importer of Russian crude. As of now, India imports around 1 million barrels of crude per month from Russia.

The accumulated funds of the National Welfare Fund make it possible to compensate for the budget deficit up to 20% within three years without the risk of complete depletion of financial reserves. The financial system of Russia has a large enough margin of safety to feel confident even with sharp changes in market conditions.

[bittraffic]

There isn't a shortage of gas and oil yet. For Russia, they have vast land to drill for gas which it is all of us face the problem of where we buy without the burden of freight cost. EU for instance still hasn't found where to get gas this winter. Asia also has to buy from Russia also. Even if Russia have passed peak oil, do we have an alternative source? 

Saudi is also not willing to cooperate with Biden. Gas drilling countries including Russia are just not working with EU or US since they were trying to kill this industry thru that kid Great Thunberg.

China drilling the South China Sea for gas is about to happen, by the way, I recently read the news about it and they were to partner with a drilling company from the Philippines.

[FanEagle]

It is obvious that Russia will be impacted from this but there is no guarantee on who will make the profit from this, China? India? Saudi Arabia? Like who would be the one that could provide something to the world when it needs it the most. Also we have to accept the fact that cars are just one part of the problem, yeah we use oil/petrol for our cars, you can name it anything you want but it is definitely tied to crypto in the long run.

On the other hand, we are talking about something that is a bit more careless with Russia who still attacks Ukraine in the face of all the upcoming problems, they are "not afraid" but they should be, it is going to hurt them big time.