Letter from Moscow: November 2014

摘要

On the face of it Russia has plenty of crude oil. Reserves have been replaced at around 120%-140% over the last ten years; some 4-5 billion mt of oil equivalent in forecast reserves have been added annually; around 50 new fields are being discovered each year; and the replacement cost is between $5/mt-$15/mt ($36.5-$109.5/b), at 2012 prices, which is much lower than in many parts of the globe, according to Viktor Orlov, president of Russia’s Geological Society. These figures could easily be used to paint a picture of optimism, but Russia’s geologists, and others, see a more worrying malaise when it comes to the country’s exploration activities. Russian companies have not considered primary exploration as a priority because they have reserve-to-production ratios that exceed 20 years on average, compared with a “normal level” of 10-15 years for their western peers, said Valery Nesterov, an analyst with Sberbank CIB.