Wood Mackenzie: Russia Must Refocus In Order to Maintain Production
Research from UK-based energy analyst Wood Mackenzie states that Russia needs to refocus investment from easier, conventional onshore projects to more difficult and expensive tight oil, liquefied natural gas (LNG) and Arctic developments if it is to maintain production in the long term.
WoodMac said that tight oil, LNG and Arctic projects have a much greater cost and will require a "step change" in investment and involvement by international oil companies to accelerate their development.
Addressing the Exploration, Production and Processing (EPP) conference in Moscow the WoodMac Head of Russian Upstream Research Ian said:
"Russia is looking to make a shift from easier conventional onshore projects to more difficult and expensive tight oil, LNG and Arctic projects, in order to maintain and secure long-term production levels. These resource themes have a much higher cost base and greater technical complexity.
"Russia currently accounts for 15 percent of global oil and gas production but only seven percent of global capex – so a significant increase in international investment is required to promote development and realise the production potential from these areas. Over the next three-to-five years we expect significant growth in offshore exploration, progress with pilot projects in tight-oil activity and improved definition of LNG projects.
"This could result in more than $100 billion of development capex being invested in these resource themes by 2025."
Thom also pointed out that the Russian upstream sector is dominated by indigenous companies.
"Gazprom and Rosneft control the vast majority of Russia's reserves, production, upstream value and net acreage – with International Oil Companies (IOCs) barely registering in the top ten," he said.
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