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Increasing the Efficiency of Oil Production: Responding to the Challenges
4 October 2018
14:00—15:15
Hydrocarbon extraction is currently declining in Western Siberia, the country’s main oil and gas region. This is in spite of significant increases in expenditure and work. This decline can be explained by worsening geological conditions in the development of fields. Experts are predicting this trend to continue, which will lead to increased oil production costs and declining profitability. In order to avoid a fall in investment activity in the Russian hydrocarbon extraction segment, a range of mineral extraction tax benefits and special export duty rates have been put forward. What’s more, an experiment is due to begin on 1 January 2019, whereby a tax will be levied on additional income from hydrocarbon production, in which assessment will be partially based on the real extraction economy. That said, over the last six years the fiscal regime affecting the oil industry has worsened overall. For oil production in traditional regions not qualifying for benefits (around 60% of the total), this is even more apparent. Frequent changes to tax legislation and the introduction of additional levies have played a part in this regard. Crucially, this is in sharp contrast with the fiscal policy affecting major oil producers around the globe, where additional stimuli are being introduced and the tax burden reduced in order to accelerate the monetization of oil reserves. Russia has one of the highest levels of taxation in the world for oil production companies. Deductions are on average 68% of vertically integrated oil company revenues. Today, some of the most promising areas of investment in oil production are in developing hard-to-recover reserves (in the Khanty-Mansiysk Autonomous Area, for example, they account for 33% of all reserves) and enhanced oil recovery methods (which enable the industrial development of as-yet untapped oil reservoirs). However, these areas of increasing oil production efficiency are fairly costly, and are unprofitable in the current fiscal environment. The development of fundamental approaches and areas for boosting investment in oil production and methods of intensifying extraction is therefore a priority for the Russian oil industry.
Topics for discussion:
1. The overall state of the Russian oil production industry, current challenges, and the need to encourage increased production.
2. The introduction of a windfall profit tax on hydrocarbon extraction.
3. Encouraging enhanced oil recovery methods to fully realize resource potential.
4. The potential to extract oil in traditional regions.
5. Encouraging oil production in fields containing hard-to-recover reserves.
Date
04.10.2018
Forum
Russian Energy Week
Started at
14:00—15:15
Conference hall
Manege, –2nd floor, conference hall A
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