Survey

• Published date: 01 February 2020
• DOI: http://doi.org/10.1111/oet.12759
• Date: 01 February 2020

LNG exports with Bulgarian Prime Minister Boyko

Borissov. The United States has been encouraging all

countries in the region to reduce their dependence on

Russian gas.

Russia must also compete with alternative pipeline

gas, including from the Western-backed Trans Adriatic

Pipeline, which will launch later this year carrying

Azerbaijani gas across Turkey to Greece, Albania, and

Italy. That pipeline has an initial capacity of 10 bcm/y

that can be expanded to more than 20 bcm. A pipeline

spur is planned from Greece to Bulgaria, providing it

with another alternative to Russian gas.

Turkey is key to the Azerbaijani and Russian supply,

which must pass through the country. This may give Ankara

more weight in extracting higher tariffs or lower prices from

Russia, although if Turkey pushes too far, Russia could

divert gas back through Ukraine. Turkey already imports

16 bcm/y of Russian gas through Blue Stream, which runs

under the Black Sea and began operations in 2003.

Looking ahead, the United States is also backing

plans to export east Mediterranean gas to Europe to

reduce dependence on Moscow. Israel and Cyprus have

signed a deal to supply Greece through a 1900 km pipe-

line by 2025—although Turkey disputes many of the

Cypriot claims, which makes progress unlikely.

How to cite this article: Oil and Energy Trends.

2020;45:8–9. https://doi.org/10.1111/oet.12758

SURVEY

In response to weaker oil prices and western sanctions,

Russia has provided tax breaks and focused on import

substitution over recent years to support production, but

the country remains reliant on overseas funding and

western technology in many areas, especially unconven-

tional oil and offshore Arctic, where little progress has

been made. However, crude output keeps hitting new

highs and liquefied natural gas (LNG) export plans have

been realized, although Russia now faces a growing

threat from US exports in its established gas and oil mar-

kets. Looking ahead, the cost of developing new reserves

is going up, so Moscow may have to decide between sus-

taining output and tax revenues.

Russia has huge reserves of oil (95 bn bbl) and the

world's largest gas reserves at 95 tn m

3

. In 2019, nearly

1.5 bn boe was discovered, mostly in the Dinkov and

Nyarmeyskoye fields on the Yamal peninsula shelf in the

Arctic's Kara Sea.

1

The country jostles with Saudi Arabia

and the United States for the title of the world's biggest

oil producer, pumping 560 mn mt or 11.20 to 25 mn bpd

in 2019 (slightly above its 11.19 mn bpd OP EC-plus tar-

get), putting it in second place. This was the third record

year for production in a row, with 2018 clocking up

11.1 mn bpd (see Figure 1).

The country is also the world's second largest gas pro-

ducer (after the United States), and its' largest gas

exporter. Under state monopoly, Gazprom, Russia sells

almost 200 bcm to Europe by pipeline, while exports to

China are about 30 bcm and set to rise toward 70 bcm,

with last month's opening of the Power of Siberia line. It

also exports about 30 bcm by pipeline to Turkey. LNG

exports from Sakhalin in the far east and more recently,

Russia's Arctic coast, are increasing rapidly (see gas sec-

tions below).

Revenue from oil makes up 45% of the Russian bud-

get, while gas is at 5%

2

—illustrating the importance of

the sector to the country's finances. An element of uncer-

tainty was introduced into Russia's oil and gas policies

after this year's mid-January resignation of the Russian

government, although President Putin remains in charge

and little change is expected. In December, the then

Energy Minister, Alexander Novak, had said that Russian

output in 2020 would be between 555 mn and 565 mn

tonnes or 11.07 to 11.27 mn bpd—which is a wide range

and also a possible new record for a fourth year in a row.

The projection could put pressure on its OPEC-plus tar-

get, although an exemption for condensate, provides

some leeway (see OPEC section, below).

Looking ahead, Russia's oil and gas sector faces a

growing challenge from the rising cost of developing new

reserves, and has been pushing for higher recovery rates

from established fields. Russia also faces an external

threat from a possible ratcheting up of western sanctions,

and rising US oil and gas exports, which are often pushed

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