Russian producing associations have spelled out how their survival is threatened by nonpayment of bills for oil they have delivered (OGJ, Mar. 14, p. 31).
Now, one man sees a way out of energy crisis in the former Soviet Union.
Vadim Dvurechensky, deputy minister of fuel and energy of the Russian Federation, reckons it is possible to reverse the dec ne in Russia's oil production and stabilize output at 400-450 million metric tons/year.
Dvurechensky said this is not an astronomical target because it is about the level of Russian production in 1992. However, from a peak of 570 million metric tons of oil produced in 1987, production was down to 354 million metric tons in 1993 and sill falling.
Dvurechensky said, "If Russia changed its tax and pricing policy as soon as possible, followed by, liberalizing regulations on exports, Russian oil producers would be capable of building their industry again."
He hopes the Russian federal assembly this year will approve draft legislation under consideration to remove the "artificial" problems facing oil and gas development.
CONTINUING CRISIS
Dvurechensky said, "Legal measures are being planned and adopted which, in a year or two, will enable Russia's energy industry to begin solving its problems. Unfortunately, tax and price policy has not been changed, and today we have to speak about continuing crisis in our oil industry."
There are no new fields operating while development drilling continues to decrease. The largest fields are in decline, and production rates are falling even in new wells.
Lack of investment in exploration means the reserves base is not keeping pace with projected depletion levels.
Dvurechensky said, "In 1993, only 900 wildcats and exploratory wells were drilled, 2 1/2 times less than in 1989. In 1993 the increase in oil and condensate reserves was only 445 million metric tons and for gas only 712 billion cu m. When volumes of geological exploration return to the late 1980s level, we can count on getting reserves increases up to 1 billion metric tons/year of oil and 1.5 trillion cu m/year of natural gas."
CAPITAL REQUIRED
Dvurechensky has no radical new plan to revive Russia's oil industry. He sees foreign investment as the solution. To return to the 1992 production level will require $5-6 billion/year of foreign investment for the next 3-5 years.
The remaining question for Dvurechensky is how difficult it will be to attract foreign capital, given opportunities in other countries, difficulties with Russian government, and low world oil prices.
Jonathan Stern, associate fellow of the Royal Institute of International Affairs, London, provided an answer: "It will be difficult to attract foreign investment in Russia's frontier areas. Foreign companies will look only for straightforward developments, at least until the oil price recovers."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
