Peak Oil news – Russian production declines with an irony alert

Russian oil production declined, for the first quarter of this year, for the first time in a year. The WSJ quotes various sources, blaming various causes:

Industry watchers and Russian officials generally blame the country's production slowdown on a combination of weather and tight electricity supplies in some parts of the country. …

In an interview, Leonid Fedun, vice president of OAO Lukoil, one of Russia's biggest oil companies, said a mild winter and higher temperatures mean Siberia's icy ground is less stable, making it harder to move drilling rigs between oil wells.

How ironic that Big Oil would get hoist by the petard of global warming, especially since “former” Russian President Vladimir Putin once welcomed global warning. And, this should give MUCH more pause to the idea of drilling in the Arctic National Wildlife Refuge, certain to soon have similar conditions.

And, speaking of Peak Oil, take a look at the graph at the left. Russian output has been plateauing for more than a year. And, Russian oil industry watchers know it.

In a longer-term worry, they also point to aging Siberian fields that once fueled its production growth.

There’s the rub. Russian oil producers, obviously learning too much from the U.S., think more tax breaks are the answer. And, Moscow is obliging.

In an effort to kick-start investment, Russia's government recently unveiled a $4.2 billion tax cut for the sector. It was broadly welcomed in the industry. “It’s a very important point that the Russian government has realized that with cost growth and inflation, there needs to be additional relief for companies to develop fields,” said Bob Dudley, chief executive of TNK-BP, BP PLC’s Russian joint venture.

But, is it enough? Maybe not. Probably not.

Lukoil’s Fedun says Russia's oil industry needs $1 trillion of investment during the next 20 years just to maintain production of 10 million barrels a day. Analysts worry the tax cut is inadequate to achieve that. "We still do not see it generating enough free cash flow to the industry...to support higher investment levels," Citigroup said in its report.

If it’s true that production costs in Alberta’s oil sands are now up to $65/bbl, Russia probably needs massive infusions to get its fields up to snuff.

Remember, its original oilfields, some now in Azerbaijan, are more than 100 years old. That’s part of why I couldn’t believe all the hype about them in recent years.

Oh, and all of you, rein in your Petrobras enthusiasm. The Brazilian national oil company just denied a state oil regulatory agency’s “massive oilfield” claims. Interesting I found this news on the website for Xinhua, China’s national media company.

And, even there is major oil there, it’s beneath 23,000 feet or more of ocean water, sand and rock, and a massive salt dome. The second exploratory well in the area hasn’t even gotten to the salt dome yet, which has an estimated thickness of 6,500 feet.


Among other new board members? Donna J. Barrett, president and chief executive officer of Community Newspaper Holdings Inc. CHNI is the “Chainsaw Al” of small-town daily newspaper operations. They buy a newspaper, or small group thereof, and immediately attempt to recoup their money ASAP.

Oh, and all of you, rein in your Petrobras enthusiasm. The Brazilian national oil company just retracted its “massive oilfield” claims.