Russia Joins Global Dash For Shale In Policy Volte-Face
Russia is launching a strategic drive to unlock its shale oil wealth as crude output stagnates and reserves run low in the West Siberian fields, aiming to replicate America’s technology leap in a near total reversal of policy.
The Kremlin has launched an “action plan” to master fracking methods and lure investors into the Bazhenov prospective, a shale basin the size of France to the east of the Urals. Officials are no longer dismissing shale’s promise as a mirage. “We are clearing away the administrative barriers to exploration. This is the urgent challenge we are now facing,” said Kirill Molodtsov, the deputy energy minister.
The US Energy Department estimates that Russia has 75bn barrels of recoverable shale oil resources, the world’s largest deposits. The Bazhenov field is 80 times bigger than the US Bakken field in North Dakota, which alone produces 1m barrels a day.
BP joined the scramble on Saturday by signing a deal to explore for shale in Volga Urals with Rosneft, even though Rosneft’s chairman Igor Sechin is on the US sanctions list.
“I see BP investing in other projects. We are very pleased to be a part of Russian energy complex,” said BP’s chief executive, Bob Dudley, adding that he had been urged by President Vladimir Putin to start fracking in Russia.
BP owns a 19.75pc stake in Rosneft, though it has been a passive partner until now. The move marks a deeper commitment to Russia.
Andrey Kuzyaev, head of Lukoil Overseas, said Russia has drifted badly and woken up to a changed world. “We’re lagging by ten years. Our traditional reserves are being exhausted. This is the reality for our country and it’s a threat,” he told the St Petersburg Economic Forum.
Russia has a late-mover advantage. It can deploy modern 3-D seismic imaging and computer technology, but it lacks the service industry and the fast-moving wildcat culture that lies behind America’s success, as well as a tax system fit for purpose.
“In Russia a horizontal well-bore of 1.5km costs $15m to $20m. In the US the costs have gone down from $8m to $3.5m for the same length of well. It’s simply not possible to transplant technologies from the US and transport them to East Siberia or the Volga. There are no standard solutions. I hope it won’t take twenty years to fulfil the shale revolution in Russia,” he said.