Russian Tax Breaks Now, Tight Oil Boom Later

Long Way To Go

Soviet geologists first extracted oil from Bazhenov in the late 1960s but the deposits went undeveloped due to a lack of viable extraction technology, while abundant reserves of easily tapped crude existed in different strata in the same region.

"Unconventional reserves were considered to be a special case, with only long-term perspective," Natural Resources Minister Sergei Donskoy said in a newspaper interview this year.

The Energy Ministry hopes the new law will boost the share of tight oil production to 11 percent of the Russian total by 2020 from a tiny 0.2 percent now.

Natalia Komarova, governor of Khanty-Mansiysk, Russia's biggest oil-producing region and home to most of Bazhenov's recoverable reserves, has told Reuters the formation could produce 400,000-600,000 bpd by 2020.

"It looks very, very much like the Bakken from a geological point of view in that you have limestone that can be fracked," Tim Dodson, exploration chief at Norway's Statoil, told Reuters.

The Bakken formation in the U.S. states of North Dakota and Montana has become the leading producer of shale oil thanks to its good geology and infrastructure, and a supportive regulatory framework.

"The geology is absolutely fantastic and the scale of it is just enormous," Dodson said. "The Bakken looks minute compared to it."


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