| Report | 11 June 2012 |
The fragile foundations of the Russian oil sector
By Wojciech Konoñczuk
In 2011, oil production in Russia reached 511.3 million tonnes (10.26 million barrels per day), the highest level since the collapse of the Soviet Union and the highest in the world together with Saudi Arabia. Russia's declared goal in its oil policy is to maintain annual output at around 505 million tonnes over the next few years and increase it to 535 million tonnes by 2030. However, despite the fact that proven Russian oil reserves are still vast, and that Russia probably has very large undiscovered deposits, it will be practically impossible to achieve this goal. As a result of structural deficiencies in the market structure, a significant fall of Russian oil production is almost inevitable. The degree of the decline will depend on the actions the government takes in its fiscal policy and the investment climate in general. The opening of Arctic deposits for some Western oil majors, widely reported on recently, will not be a solution for the problems of the Russian oil sector.
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