History
Russian Oil & Gas History Summary
According to the Oil and Gas Journal’s 2008 survey, Russia has proven oil reserves of 60 billion barrels, most of which is located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. Russia’s gas reserves are the largest in the world and the state controlled company, Gazprom, through its national and international gas reserves controls approximately 25% of the world’s proven gas reserves. In addition the EIA has now stated that Russia is the world’s largest crude oil exporter, exporting 9.5 million barrels a day.
Russia has the earliest known oil industry, there is evidence of its use in trade as early as the third and fourth centuries from the Apsheron peninsula. Marco Polo is believed to have made reference to Baku oil: “Near the Georgian border there is a spring from which gushes a stream of oil, in such abundance that a hundred ships may load there at once. This oil is not good to eat; but it is good for burning and as a salve for men and camels affected with itch or scab. Men come from a long distance to fetch this oil, and in all the neighbourhood no other oil is burnt but this“.
Baku’s oil industry was mentioned in correspondence by E. Kempfer, Secretary of Swedish Embassy to Persia (Iran) in 1683. In 1806 the Russian empire occupied Baku Khanate and monopolized control of oil production. In 1846, under supervision of state advisor V.N. Semyonov engineer Alekseev drilled a 21 m deep well using a primitive percussion drilling mechanism. In 1872 an auction to local and Russian-born investors led to an explosion of investment and subsequent production. In the early years of the twentieth century, Russian oil meant oil from the Caucasus, Baku, Grozny, Emba and Maikop. The oil age had arrived, displacing coal as the fuel with which to power the economic and military strength of the Russia empire.
At the beginning of the twentieth century, Russian oil accounted for just about one-half of all oil produced in the world. A short ten years later, however, the very rapid growth in oil production in the United States and elsewhere, coupled with Russia’s own slight decline, caused the relative importance of Russian oil to fall to about 20 percent of the world’s total.
By 1950, before the resurgence of Soviet oil and based on development first of the Urals-Volga oil fields (popularly known as the Second Baku) and then of Western Siberia around Tomsk & Omsk, Soviet oil provided barely more than 7 percent of the world total. In the 1980s, the Western Siberia region, also known as the “Russian Core,” made the Ministry of Oil for the Soviet Union a major world oil producer, allowing for peak production of 12.5 million barrels per day in total liquids in 1988.
Following the collapse of the Soviet Union in 1991, Russia’s oil production fell precipitously, reaching a low of roughly 6 million bbl/d, or around one-half of the Soviet-era peak. According to observers, several other factors are thought to have caused the decline, including the depletion of the country’s largest fields due to state-mandated production surges and lack of ownership clarity & security that led to the lack of investment in exploration, production, field maintenance and downstream refining and distribution.
After 1991 Oil Industry Privatisation: emerging companies.
From 2002 onwards there was a sharp increase in interest and investment in Russian oil assets, fueled by the remarkable rise in its value. By the end of 2003 the distribution of power in the oil industry was such that the primary shares in the producers were divided between four private companies (Lukoil, Yukos, TNK-BP and Surgutneftegaz), secondary players were represented by the formidable private companies Sibneft, Itera Group, KMOC and the tertiary older companies such as Tatneft, Slavneft, Bashneft. Rosneft took over the main production units of Yukos. Gazprom, in addition to Sibneft, has acquired controlling packets of Sakhalin Energy (Sakhalin-2), Russia Petroleum (the Kovyktin deposit), Nortgaza, Salavatnefteorgsinteza, Mosenergo and 19.9% in Novatek, the largest independent producer of natural gas. Two other Wholesale Generating Companies (WGCs) and the largest producer of carbon fuels, Siberian Carbon Fuel Company, are preparing to be taken over by Gazprom. The major gas producers, in addition to some of the above, include; Northgas, Soyuzneftegaz, Surgutneftegas, Urengoigazprom.
Russia’s “Fuel and Power Complex” or FPC as the industry is referred to in Russia produces in 2008 9.8 million bbl/d of liquids (not including oil production), and consumption of roughly 2.8 million bbl/d, Russia exported (in net) around 7 million bbl/d. According to official Russian statistics, roughly 4.4 million bbl/d of this total is crude oil. Over 70 percent of Russian crude oil production is exported, while the remaining 30 percent is refined locally.
Russia, has 41 oil refineries with a total crude oil processing capacity of 5.4 million bbl/d (TONS), but many of the refineries are in need of modernization. Russian refineries produced around 1.2 million bbl/d of Mazut (heavy fuel oil), 1.3 million bbl/d of middle distillates, and 815,000 bbl/d of gasoline.
Russia holds the world’s largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. Russia is also the world’s largest exporter of natural gas, the second largest oil exporter and the third largest energy consumer.
Crude oil exports via pipeline fall under the exclusive jurisdiction (except the Caspian Pipeline Consortium route) of Russia’s state-owned pipeline monopoly, Transneft. In addition to the Transneft oil pipelines the main exporting points are Vladivostok, Nakhodka, Vanino, Novorossiysk, St. Petersburg.
Over the last decade Moscow has emerged as the pre-eminent energy exporting capital of the world within which Alchemie Technology now has a significant access to supply base of hydrocarbon related Commodities. Partial deregulation of the industry has lead to a fragmentation of supply base, which created much wider range of supply opportunities for Alchemie Energy to work with.