Russia Hits Peak Oil

[robertpaulsen]

Source: The Daily Reckoning UK

Peak Oil theory gets a shot in the arm...

Russia was the new frontier for oil production a few short years ago. Not any more it seems, according to an FT report today...

Russian oil has peaked already according to Leonid Fedun, vice-president of Russian oil giant Lukoil,

10m barrels a day from the world’s number two oil producing country is as good as it gets in his lifetime he reckons. He’s 52 but given the average life expectancy of Russians that may not be too long. And it’s not going to be stable. Oil rich Western Siberia is more like Mexico and the North Sea i.e. output is sliding fast. “The period of intense oil production growth is over” claims Fedun. They’ve sucked up the oil fast and now the party’s over.

Read more: http://www.dailyreckoning.co.uk/Commodities-Trading/russia-hits-peak-oil-00087.aspx

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Looks like the only regions still capable of exporting are South America and the Middle East. And even the Middle East is looking increasingly suspect as a reliable source of oil exports in the future.

[DJ13]

1. Im going to say this is BS

Russia has only been a major oil producer for how long?

Yet the Saudi's have been the worlds biggest producer for what, 50 years or so?

I think theres a concerted effort by the oil countries to deliberately limit (or even reduce) production in order to maintain these high prices.

Peak oil is the perfect excuse to serve as industry PR.

[hatrack]

2. Russia is the world's 2nd-biggest oil producer, and has repeatedly edged out SA in the past

Though only marginally . . .

They've always been a major producer, from the days of the Rothschilds in Baku up to the Soviet implosion and well beyond that.

Lots more on Russia from EIA:

http://www.eia.doe.gov/emeu/cabs/Russia/Oil.html

[bhikkhu]

3. Which is to say - mature fields, well explored country.

They are in a good position to realistically assess what they have, and what they can expect in the future. The arctic, however, is the biggest question mark, if one wants to propose even the possibility of an oil-rich future.

[kenfrequed]

4. And yet

The talk about energy is limited to what?

Gas prices?

The negative effects of fossil fuels only go as far as the Greenhouse effect and global warming?

It feels like its already too late.

[Phred42]

5. You may be right.

We need more data.

Keep in mind all of the stories form last year reporting that SA had over-stated THEIR reseves to make themselves see more important.

[robertpaulsen]

10. Remember, the Soviet Union peaked back in 1987.

The Soviet Union experienced peak oil first hand—a 43% decline in domestic oil production between 1987 and 1996. This crisis caused Soviet society to fall into devastating economic impoverishment. Can this be proven? Yes. Here is the quick story: The oil decline in the Soviet Union preceded the GDP decline. A statistical test, Granger causality, shows this. Oil decline did not follow the GDP decline, it was ahead of it, and therefore it caused it. However, Granger causality is not always sufficient proof; more evidence is needed.

For example, you could argue that the oil decline happened because of internal economic chaos – independent of oil scarcity. It is possible that due to spending so much of the Soviet GDP on military build-ups, the Soviet Union didn’t have money to pay oil workers. But, Soviet coal production declined after GDP started declining. How could this internal chaos have caused reductions only in oil production but none in coal production prior to the GDP decline? If you argue that Cold War military expansion precluded oil sector spending to keep oil production high, then why would not it have also precluded coal sector spending at the same time? Also, natural gas production was not affected during the Soviet collapse. Again, why would internal chaos arbitrarily affect oil before the collapse, but not natural gas? Thus it was scarcity of oil and not internal inefficiency that caused the oil to decline.

Still, why did oil production increase after post-Soviet markets were freed? After all, if oil production increased after the fall of the Soviet Union then surely that proves the oil production decrease was due to Soviet inefficiency. The answer is that the Soviet Union was a closed system and had its own technologies and market mechanisms within that system. Thus the Soviets hit against scarcity within the confines of their own technological and political world. After the political system changed, their oil fields were reinvigorated with new technology and management from outside the old Soviet system. Under the old system the Soviets were only able to extract about two thirds as much oil as modern western technologies. But that doesn’t mean scarcity did not cause their decline. Scarcity caused the decline within their system.

http://www.energybulletin.net/19837.html

And now, without the constraints of a closed system, we see that Russia hit a post-Soviet collapse peak in 2007.

[Psephos]

13. Follow the money

Putin's not the only one who understands how to manipulate the oil futures markets.

Among others, Iran and Venezuela both understand that game, too.

[happyslug]

14. The US, Russia and Arabia has been 1-2-3 in oil production since the 1960s.

Before WWII, the US was the #1 producer AND #1 exporter of oil. Russia was #2. This stayed that way till about 1980 (Yes ten years AFTER the US had peaked and US domestic production had dropped for ten years) when Russia passed the US in total production. This lasted till 1992, when Soviet production DROPPED and the US became #1 producer of oil, Russia fell to Third, Saudi Arabia became #2. It was NOT till 2003 that Saudi Arabia became the #1 producer passing the US. 2002 is also interesting, while Russia stayed #3, if you include ALL of the countries that made up the Former Soviet Union, it became #2, passing the US. In 2003 the Former States of the Soviet Union would have become the #1 producer, passing Saudi Arabia, through Russian production was still #2. This stayed the same through 2006, i.e 2004-2006 If you count ALL of the production of the Former Soviet Union, it would have been #1, Saudi Arabia #2, the US #3. If you only Count Russian Production, it was Saudi Arabia #1, Russia #2, the US #3.

The reference I used (cited below) used produced production for 2005 and 2006, I have read elsewhere in 2006 Russian production exceeded Saudi Arabia and clearly became the #1 producer of oil.

Now the list of oil exporters is different then oil producer, given that the US has been a net oil IMPORTER since 1970 while still staying at least #3 in total oil production.

Just to point out that Saudi Arabia has NOT been the #1 producer for 50 years, the US was till at least 1980 and afterward it was the former Soviet Union till it collapsed. in 1992. Thus Saudi Arabia claim can only go back 16 years as the # 1 producer (and may no longer be the #1 producer). Saudi Arabia is the $1 Exporter of oil but that is NOT the same as the # 1 producer of oil.

For 2006 Production Numbers:
http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_10.pdf

For detail oil production since 1980 see:
http://www.eia.doe.gov/emeu/international/oilproduction.html
Go to "All Countries, Most Recent Annual Estimates, 1980-2006" and hit the "xis" and the data will appear.

[Fovea]

6. Will this be the start of a series of truth telling about real reserves

and how much of their price structure will be based on scarcity and uncertainty?

[robertpaulsen]

7. I hope so. Here's the Financial Times link on this story.

Fears that Russian oil output has hit its peak

By Carola Hoyos and Javier Blas in London

Published: April 15 2008 03:00 | Last updated: April 15 2008 03:00

Russian oil production has peaked, one of the country's top energy executives has warned, fuelling concerns that the world's biggest oil producers cannot keep up with rampant Asian demand.

The warning comes as crude oil prices trade near their record high of $112 a barrel, -stoking inflation in many countries.

Leonid Fedun, vice-president of Lukoil, Russia's largest independent oil company, told the Financial Times he believed last year's Russian oil production of about 10m barrels a day was the highest he would see "in his lifetime". Russia is the second-biggest oil producer.

Mr Fedun compared Russia with the North Sea and Mexico, where production is declining sharply, saying that in the oil-rich region of western Siberia, the mainstay of Russian output, "the period of intense oil production is over".

http://www.ft.com/cms/s/0/15760b90-0a86-11dd-b5b1-0000779fd2ac.html

If Russia peaked last year, then non-OPEC oil production peaked three years ahead of the IEA's prediction.

[cliss]

8. Well whether it's Peak Oil or not,

the end result is still the same: restricted output. Demand is currently outstripping the supply, hence the daily "new highs" of $100, $109, $112, $114 per barrel.

The oil exporting countries WANT high oil prices. They love it. Hugo Chavez has repeatedly said that "oil needs to be at $100/barrel". Ahmadinejad has said the same thing. OPEC has stated that they will NOT increase production because they like things the way the way they are.

So in a sense, it doesn't really matter; high gas prices are here to stay.

[Amonester]

9. higher, higher, and higher gas prices are here to stay.

[NickB79]

11. This is a far bigger story than most people seem to realize

Yet it only has a handful of posts in response.

We're sleepwalking into the wood chipper, people.

[ronnie624]

15. It is definitely an issue with very frightening implications.

Here is an eye-opening essay that I have printed and shared with a number of acquaintances:

<http://www.oildecline.com/>

[robertpaulsen]

17. The US media is sleepwalking with the people. UK at least has one eye open.

Here's the BBC:

'Threat' to future of Russia oil

The future supply of Russian oil is threatened by a likely decline in production levels, one of the country's top oil executives has warned.

Lukoil's Leonid Fedun said $1 trillion would have to be spent on developing new reserves if current output levels were to be maintained.

snip

One energy expert said the Russian industry was now acknowledging a crisis which had been evident to independent observers for several years.

"We now see production peaked last year," Mikhail Kroutikhin, editor in chief of the Russian Petroleum Investor told the BBC.

"I believe the decline will continue for quite a number of years."

http://news.bbc.co.uk/2/hi/business/7348463.stm

[OKthatsIT]

12. Oh please.

Anything to rake in the dough.

We know they have unlimited abiotic oil.

[NickB79]

16. LOL

That was sarcasm, right? Around here it's sometimes hard to be sure.