The future of Russian oil reserves

Timon Singh

Russia has a lot of oil. A LOT. Recently, overtaking Saudi Arabia as the world's No.1 oil producer, Russia essentially supplies most of Europe with its oil and recently signed a lucrative contract with China to supply them for the next 20 years. But how big are the Russian oil reserves? And how long will they last?

Actual definitive figures of Russian oil reserves vary depending on who you ask, but estimates range from 70-150 billion barrels. In comparison, Saudi Arabia - arguably the holder of the largest reserves in the world - has approximately 260 billion barrels. However, the Russian government believe that there still may be undiscovered reserves in Eastern Siberia with the potential of containing another 68 billion barrels.

Peak oil

Oil and gas exports are the lifeblood of the Russia's economy and account for 20.5 percent of the country's GDP. Not just that, but the oil and gas sector generates more than 60 percent of Russia's export revenues (6 percent in 2007 and increasing ever since), and accounted for 30 percent of all foreign direct investment (FDI) in the country. This figure is set to also increase with the reversal of policy not allowing foreign oil companies to help in production.

Despite recent 'peak oil' production and lucrative deals with China, Russia is very aware of the limits of their reserves and as such, have set up deals in Sri Lanka and Cuba to explore possible oil reserves in those countries. Also in August, Russia's Finance Ministry revealed that oil production was to decline year-on-year over the next two years to prevent the current oil fields drying out and 'limited opportunities' at new sites.

The Ministry stated that they expected oil production to decline 0.6 percent to 485 million metric tons (3.638 billion barrels) in 2010 from 2009, and drop a further 0.4 percent to 483 million tons in 2011.

Potential trouble?

The U-turn in government policy was seen as a shock in industry circles, as Russia has shown an inclination to advance her influence in the energy sector. However, with countries worldwide tackling the climate change issue, and taxes on oil exports and extraction remaining high, the Russian government isn't too concerned about losing out, especially with the reliance of the West on their product.

It shows great foresight on Russia's part that whilst their reserves may currently be plentiful, their interest in obtaining controlling stakes in foreign-led projects and striking partnerships with other countries means that they are ensuring their future in the oil business.

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