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Alexander Khurshudov: legal test sites are designed to give new benefits to shale oil

February 21/ 07:15

Moscow. The amendments to the Subsoil Law developed by the Ministry of Natural Resources remove a part of the administrative barriers that prevented the creation of test sites for extracting hard-to-recover oil. The changes provide for a new order in subsoil use “the test site”. It is also supposed to eliminate the requirement to estimate the reserves under the license terms. The signature bonus is also cancelled. The test sites are to be given under the current licenses. The criteria of defining the winner in the bidding for the test sites have been worked out.  

The analyst Grigory Vygon spoke to the Izvestia newspaper about the perspectives of producing hard-to-recover reserves. He said that in the US in 1976 the state had started financing research related to shale gas production. If the innovations were successfully implemented in Russia, the oil production could add over 35 mln tons by 2030 from the Bazhenov formation. 

Alexander Khurshudov, the Oil and Gas Information Agency expert comments on the news

-  Our ministries staffed with dealers and managers have been trying to appear to be doing something useful. All in vain. The idea to create test sites to try the technologies of extracting hard-to-recover reserves appeared almost four years ago in Tomsk region. Then it shifted to KhMAD and now it is seeping into the Federal legislation. Though, it won’t do much harm. Who minds testing new technologies? Nobody does if there are technologies to test. There aren’t any for the Bazhenov formation, as Mr. Vygon noted five years ago. Since we don’t have the technologies, let’s writes laws for them. In case fortune falls from the sky, we’ll come prepared with the laws written…

The test sites are specially invented to give new benefits to the shale oil. There is a procedure for pilot development of oil deposits, specifically designed for trying new technologies. In low permeable formations oil production is associated with losses and oil companies don’t want to encounter them. They are trying to shift the burden to the stupid state and cancel all the taxes for “the oil produced under the experiment”. They want neither to estimate the reserves nor to take any responsibility for production. We’ll do whatever we want and the government shouldn’t pry into our legal experiments.

Can anything like this happen anywhere in the world? No, it can’t. All over the world companies develop technologies and the government stimulates them. But we can’t do this. So, we keep fumbling stillborn laws. Meanwhile the authorities get their salaries, the mass media and analysts try to overdo each other drawing pictures of the wonderful perspectives awaiting us after 2030 or better still after 2040.

What really makes me smile is that we always try to copy the Americans. This is absolutely brilliant. The US in 1970s paid through the nose for the shale development because they were importing half of the oil and had just faced the Arabs’ embargo. Russia is exporting half of its oil and still we need to spend money to be able to sell even more and even cheaper.

America like a heavy drinker is thoughtlessly wasting its shale reserves. The recovery factor there doesn’t exceed 3% and one can only dream about it reaching 6%. 97% of the oil stays in the subsurface. Russia desperately needs to chase the US and ruin its reserves using the state money.

It’s easy to understand the US: the increase in shale production decreases the global prices. Come what may after the oil runs out, but they are currently benefiting from the import. Russia increasing the production also aids the price decrease. But this is impossible to understand, because our export only becomes cheaper. That’s a kind of masochism.

That’s why the curious question came: maybe the Americans work in our ministries?

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