Media: Russia may reduce oil production by 14% by 2020, while maintaining low prices

Media: Russia may reduce oil production by 14% by 2020, while maintaining low prices

MOSCOW, February 18. The Ministry of energy provided the stress scenario in the energy strategy of Russia until 2035, from the presentation of the Minister Alexander Novak on the government Commission on the fuel and Energy sector on February 17. According to the newspaper “Vedomosti” with reference to the copy of the document stress scenario considers an option in which the price of oil will be at $31-33/bbl. in 2016-2017, and by 2020 will grow to $42/bbl. Oil production may decline to 460 million tonnes per year in 2020-2025, with subsequent slight growth, i.e. by 14% by 2015.

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The newspaper notes that after 2020 it will become apparent “acute crisis of underfunding for the development of the global oil and gas industry”, will begin growth first in oil prices, and after 2025, and natural gas. But the barrel can exceed $100 not earlier than 2035

When the stress scenario, the oil industry will not reach the indicators of the strategy. So, the target version of the document (the rebound in prices this year to $65-75/bbl. followed by a slow rise to $100/bbl. by 2035) assumes that production will remain stable until 2035 – 525 million tonnes and will grow in good conditions, conservative ($55/bbl. in 2015 with growth 2020 to $80/bbl. and $95-105/bbl. to 2035) – a drop to 476 million tonnes (assuming Urals by 2020, will return to $80/bbl).

When the stress scenario, the accumulated tax payments will decrease by 60-65%, the contribution to GDP will decrease by 60-65% to 2022, while capex by 10-15%.

Gas prices, according to the document, will grow by 2020 to $175 per 1,000 cubic meters and by 2025 will be almost at this level. The gas industry will not reach the target scenario, but in General, a possible implementation is conservative, i.e. gas production by 2035 could increase to 821 billion cubic meters compared with 635,3 billion last year. Accumulated tax payments will be reduced by 20-25% until 2025, contribution to GDP by 30-38% in the next three years, and capital investments – by 7-10%.

This scenario suggests a strategy that will slow down the economic growth of China and other Asian countries, to grow the supply of cheap middle East oil projects, shale oil and gas from the US, as well as reduced costs due to the devaluation of the currencies of oil-producing countries and a corresponding growth in the production of hydrocarbons. And in Russia, the company will fail to attract new loans for servicing previously taken.

Negative risk assessment – a mandatory requirement for strategy, said the representative of the Ministry.


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