The question of Russian oil is of enormous importance, both in a purely economic sense, as well as being an issue of no small geopolitical concern. Russia is a major player in the energy industry, with production in Siberia, substantial deposits on her portion of the Arctic Shelf, and the largest network of pipelines running throughout the region, to locations as diverse as the Black Sea, the Pacific Ocean, China, the North Sea by way of former soviet countries in Europe, and a planned expansion into Central Asia which could result in Russian control of over 16 million barrels per day, double Saudi Arabia’s current production. Furthermore, oil and gas are a major component of the Russian economy. They are estimated to account for 16 percent of Russia’s GDP, over half of her federal government’s revenue, and 70% of Russia’s exports. Even disregarding the strategic nature of oil as a resource, the revenue itself speaks to oil’s importance in the nation.
Russia is in 7th place worldwide in terms of oil reserves, with 103.2 billion barrels located mainly in the Siberian plains (the United States, for comparison, is in 11th place, with 36.52 billion barrels). Despite this massive reserve, Russia’s Natural Resource Ministry predicts that at current consumption rates, these resources will be depleted by 2044. Western analysts, however, are quick to point out the extreme conservatism of this Ministry, as well as acknowledging the difficulties experienced by the industry in post-Soviet Russia, which could signal an under-estimate. The fall of the Soviet Union created a long interrupt in the country’s oil exploration, as well as her maintenance and capacity. The present pipeline system is falling into disrepair, and although oil production recovered by 1998, deep-hole exploration drilling remains at a fraction of its 1989 levels. Despite this lack of exploration, vast fields are suspected. The Arctic Seas have only been superficially appraised, and the Barents Sea – adjacent to the Kara Sea, well known for its vast gaseous deposits since their discovery in 1983 – is considered by Russia’s Federal Agency on Subsoil Usage to be one of the most likely areas to yield hydrocarbon discoveries in the next few years.
In addition to this there are vast shale and tight oil reserves such as Bazhenov Suite (the biggest world deposit), the Abalak Suite underlying it, and the Domanik Suite. At present these areas are not viable until the price reaches 55-60 USD per barrel. Russia has lagged behind the U.S. in the shale revolution, but over the long-term this could prove to be to her benefit. By the time these areas come on stream, it is possible that the sanctions and frosty relations between her and Western Europe could be a thing of the past. As for now, Russian oil development is used to working on narrower margins, and as technology progresses these areas are likely to slowly come online, even though they are still in their infancy.
Russia’s distribution network is the largest in the world, of particular note is the Druzhba Pipeline, which carries oil over 4000 kilometres from Eastern Russia to Eastern Europe, countries including the Ukraine, Poland, Hungary, and Germany, with outlets on the Baltic Sea and the Black Sea. The operating capacity of these Western pipelines is 3.9 million barrels per day, while those going east – either to Daqing, China, or to ports on the Pacific Ocean – have a capacity of 5.6 million barrels per day. In addition to this, a number of pipelines transport oil domestically.
At present the Russian pipelines have fallen into a state of disrepair. The climatic conditions of Siberia add difficulties to maintenance, and it is only recently that Russia’s oil and gas industry has fully recovered from the post-Soviet turbulence, and begun reinvesting in maintenance and exploration. While the pipelines are not considered to be in critical condition, this long-deferred cost of maintenance and upgrading will be an added expense for Russian oil companies for some time to come.
While the expansion into Kazakhstan and Central Asia is a major project which is moving forward for Russia, of greater geopolitical interest is the Caspian Sea pipeline. Running from Russia’s outlet in the Black Sea to the Caspian Sea, it is vulnerable to sabotage during the 150 kilometres of line running through Chechnya. For tankers to go to the Black Sea outlet, thus avoiding the potential sabotage by Chechnyan rebels, requires that they pass through the already crowded Straight of Bosporos; and Turkey has been threatening to shut down super-tanker traffic in the area. Further threatening Russian interests is the Baku-Tbilisi-Ceyhan (BTC) Pipeline. Connecting Azerbaijan and Georgia to the Turkish Mediterranean, and financed by a BP-led consortium. The BTC was dubbed “the world’s largest energy scheme” due to its $4 billion dollar price tag, and 1 million barrel per day capacity.
Russia’s oil connections to China, the Pacific, and Central Asia are relatively secure, but her Western connections which provide access to the North Sea and the Mediterranean are under threat. The ongoing conflict in Syria – from a Russian point of view – is purely an economic matter, she hopes to develop a pipeline which will enable oil shipments to the Mediterranean. Similarly, the tension in Poland is due to the extensive network which is already present in the form of the Druzhba Pipeline. It is inevitable that oil will continue to dictate Russia’s interests, as well as her foreign policy for the foreseeable future.
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- Samofalova, Olga. “Are Russia’s oil wells truly in danger of drying up?” Russia Beyond the Headlines. TV-Novosti, 30 Mar. 2017. Web. 06 Jun. 2017. https://www.rbth.com/business/2017/03/30/are-russias-oil-wells-truly-in-danger-of-drying-up_730697
- Hays, Jeffrey. “Russian Oil and Natural Gas Pipelines.” Facts and Details. May 2016. Web. 06 Jun. 2017. http://factsanddetails.com/russia/Education_Health_Transportation_Energy/sub9_6c/entry-5152.html
- Slav, Irina. “OPEC Cuts Send Russia’s Oil Heartland Into Decline.” OilPrice.com. OilPrice.com. 06 Jun. 2017. Web. 06 Jun. 2017. http://oilprice.com/Energy/Crude-Oil/The-Worlds-Top-Oil-Consumers.html
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