Russia Is Running Out Of Cheap Oil

The very existence of the Russian Federation on the world oil market is in question.

The share of oil and gas revenues of the Russian budget will decrease in the medium and long term, as the reserves of hydrocarbons with low production costs are running out, said the head of the Ministry of Finance Anton Siluanov.

According to him, the easiest conditions of production in the country have already passed, and production in hard-to-reach formations is becoming more and more expensive, and therefore taxes on the oil and gas industry will have to be reduced.

"We envisage additional preferential taxation regimes and understand perfectly well that we do not have to focus on large levels of oil and gas revenues in the long term," Siluanov is quoted by "Interfax".

The minister said that this year the share of oil and gas revenues in the treasury will drop to 23%, although "a few years ago" it reached 50%, and next year it will decrease by another 1 percentage point.

The long-term budget forecast, which the government approved in December, assumes that oil and gas budget revenues will more than halve by 2042 - from the current 4% of GDP to 1.9% of GDP, the lowest level since the early 2000s. The decline, according to the forecast, will accelerate sharply in the 2030s: it will be less than 3% of GDP by 2033, less than 2.5% of GDP by 2036, and less than 2% of GDP in the early 2040s.

In the baseline scenario, which is based on an oil price of $69 per barrel, the share of oil and gas revenues will fall to 13.4% of the budget in 17 years, while in the conservative scenario, which assumes a lower oil price (it is not specified in the forecast) - to 9.5% of the budget or 1.3% of GDP - the lowest since 1996.

The very existence of Russia on the global oil market is in question, writes The Moscow Times. According to the Energy Strategy-2050, which the government approved in April, without significant investment, a technological breakthrough and changes in regulation, the economy could face a collapse in oil production in the next few years - from the current 520 million tons a year to 477 million tons by 2036 and 287 million tons by 2050, i.e. almost twice. Oil exports will have to be reduced three times - from 234 to 79 million tons per year.

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