Russia’s oil economy, built on selling “black gold” abroad in exchange for technology and consumer goods, is living out its last years.

Russia has enough profitable proven oil reserves to last 25 years of basic production, Oleg Kazanov, head of Rosnedra, said at a meeting of the State Council’s Energy Commission.

Of the total oil resource potential, which the Ministry of Natural Resources estimates at 81.6 billion tons, only 13.2 billion tons are profitable, or about 16%, according to the agency’s estimates. At the same time, almost all discovered oil deposits – 96% of the subsoil fund – have already been involved in production, Kazanov said.

“To call a spade a spade, we have transferred almost all sites with reserves to subsoil users,” he lamented. “No matter how we stimulate production at existing fields, sooner or later they will run out,” Kazanov added (he is quoted by Izvestia ).

Attempts to find new large oil deposits in Russia have been fruitless year after year. Last year, 39 fields were discovered, but their total reserves amounted to only 21 million tons. This is “laughable,” says oil and gas expert Mikhail Krutikhin: at current production (around 520 million tons per year), Russia pumps out this volume in about two weeks.

Moreover, these reserves can hardly be called proven, Krutikhin continues: “This is the sum of reserves in all categories in the Russian classification, including those presumably existing but not confirmed by geological exploration, not to mention wells. It would be good if half or even a third of the said estimate remained in the reserves prepared for industrial development.”

In total, oil companies put 592 million tons of new oil on the state balance sheet last year. However, this is the result of additional exploration and drilling of new wells in depleted fields discovered back in the Soviet era. Due to the high level of geological exploration of the “old” and long-exploited oil and gas regions, the state has almost no potential areas left that could be offered to companies for exploration, notes Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation.

The authorities see and acknowledge the problem. According to the Energy Strategy until 2050, which was approved by the government in April, without significant investments and new technological solutions, oil production in the country may begin to rapidly decline in the coming years . In the inertial scenario, from the current 520 million tons per year, it will decrease to 477 million tons by 2036, and by 2050, to 287 million tons. Oil exports will have to be reduced by three times – from 234 to 79 million tons per year.

In the “stress scenario,” which includes increased Western sanctions and the world’s accelerated rejection of hydrocarbons, Russia will produce only 171 million tons of oil annually by 2050 — three times less than it does now. And there will be no barrels left for export: its volume will drop to zero.

“The reduction in oil reserves, which can be considered profitable under current tax conditions and at current export prices, may soon force the country’s leadership to make a difficult choice: either watch oil revenues fall in the state budget due to the impossibility of selling oil at prices above cost, or subsidize oil producers by cutting taxes — which again means a blow to the budget,” warns Krutikhin.

(C)THE MOSCOW TIMES 2025