Russia is forecast to account for 13% of world crude oil production and 18% of world natural gas production in 2014. While its prodigious Siberian flows tend to receive most of the credit for this feat, fields located off the country’s 16 million km of coastline are nonetheless projected to produce 390,000 bpd oil and 2.64 bcfd gas in 2014. So where exactly is Russian offshore production to be found? And what is the outlook?
Mastering the Arctic
As the Graph of the Month shows, offshore oil and gas production in Baltic & Arctic Russia stagnated after the break-up of the USSR, declining to 0.03m boepd in 2013, when it accounted for 4% of Russian offshore production. This trend was thrown into reverse when the Prirazlomnoye field came onstream in December 2013. Located 23km from shore in the Pechora Sea, the field is exploited via a ice-class platform and production is scheduled to reach 120,000 bpd by 2019. New technologies and robust oil prices are thus unlocking reserves hitherto stranded, and by 2023 Arctic oil and gas is forecast to constitute 11% of Russia’s offshore production.
Caspian and Crimean Conquests
Russia’s southern offshore fields, mainly in the Caspian, accounted for 9% of Russian offshore production in 2013. In the Caspian, as in the Arctic, harsh conditions have limited field development and disincentivised efforts to halt production decline. However, as in the Arctic, decline is now forecast to be arrested. Lukoil, for example, are planning substantial investment over the next four years at fields like Khvalynskoye and Yuri S. Kuvykin, where ice-class jack-up production units are likely to make development feasible. By 2023, the area is forecast to account for 24% of Russian offshore oil and gas production (excluding gas produced by fields off the Crimea, over which Russia now has de facto control, and which produced 410m cfd in 2013).
The Russian Far East is a relatively new area of offshore E&P. The Sakhalin-2 project started up in 1996 but offshore activity is still geographically limited, even if production volumes, at 0.78m boepd, are significant. The area accounted for 88% of Russian offshore production in 2013. Moreover, the Far East is Russia’s window on the developing economies of the Asia Pacific region, so companies are seeking to increase activity there, particularly with regards to LNG. In October 2013, the first Sakhalin-3 field, Kirinskoye, a subsea-to-shore development, began ramping up to 580m cfd. Further such field developments are planned out to 2023, when the area is projected to produce 0.95m boepd, its share falling to 65% despite new Capex due to faster Arctic and Caspian growth.
Thus production is forecast to grow in each of Russia’s offshore areas, driven largely by investment in high-spec jack-up, fixed platform and subsea field solutions. Total offshore oil production is projected to grow with a CAGR of 8.9% from 2014 to reach 890,000 bpd in 2023, and gas production likewise at 2.5% to reach 3.36 bcfd. Offshore would then account for 6.7% of the country’s oil and gas production, a far cry from the 2% nadir of post-Soviet decay.