Russia pumps faster, but at a future cost
Nation is eating into its reserves as it tries to beat sanctions
WASHINGTON — Between international sanctions against Russia and a global drop in commodity prices, dark days might seem ahead for the Russian oil and gas sector.
Revenues are down from the boom times of 2014, as they are everywhere. But at the same time Russian crude production is up 6 percent from 2012, and gas exports to Europe are increasing, said Tatiana Mitrova, a fellow at Columbia University’s Center on Global Energy Policy.
The question circulating around international leaders and financiers is how long that can continue, as Russia eats into its reserves and is limited in its ability to develop new ones by international sanctions that prevent the import of fracking and advanced drilling technology, the result of Russia’s invasion of Ukraine in 2014.
“Technological sanctions will have an impact over time,” Mitrova said Wednesday at the Atlantic Council in Washington. “There is no expertise in Russia. Rosneft tried to do it in-house. They’re realizing you cannot replace the global oil service industry.”
Mitrova forecasts that without access to new technology, Russian oil production will peak in 2020 and fall 10 percent by 2030.
In the meantime, Russia is racing to get as much of its already developed oil and gas to markets as quickly as possible. With new U.S. sanctions looming, Russia is working to get pipeline projects like Nordstream 2 and Turkstream completed, Mitrova said.
The question for investors is how new sanctions could affect those and other projects, said Richard Morningstar, former U.S. ambassador to Azerbaijan.
“That creates uncertainty,” he said.
Worldwide, oil companies are facing increasing competition, not only as more reserves are accessed through better technology but as wind farms and solar panels take larger and larger shares of the global market.
Russian executives were dismissive of those developments early on, but attitudes in Moscow are changing, Mitrova said.
“The understanding begins, but the strategy is not designed for a global energy economy in transition,” she said of Russia.