Russia, the world’s second largest oil producer after Saudi Arabia, has been in a declining state for some years now, its economy is weak, its population is shrinking, and its geopolitical power is not what it once was; add to all that the fact that its oil industry is quickly set to enter decline, and the future does not look too promising.
The FT has reported good news for the Kremlin. According to Leonid Fedun, the vice-president of Lukoil,‘Russia, the world’s second-largest oil producer after Saudi Arabia, will be able to maintain crude output of 10m barrels a day for years to come as output from western Siberia’s Bazhenov Shale offsets declines in the country’s mature oilfields.’
The Bazhenov fields are estimated to be five times larger than the Bakken shale play in the US, so Russia looks set to have a long and healthy future if they can be successfully developed. Russian companies don’t currently have the technology to set up horizontal drilling rigs sued in the US shale boom, and are therefore pushing the Kremlin to offer further tax breaks before any exploration is begun.
The US is pleased that Russia is set to begin extracting its shale reserves, as more oil on the world markets will help to keep prices low, reduce dependence on the Middle East, and increase security of global supplies. The Russians also tend to become more malleable politically when their finances are tight, which is likely to occur if the oil companies are granted their tax breaks.