Lukoil, which is Russia’s second largest oil producer, predicts Russia’s oil production could increase to more than 12 barrels per day by 2035, as demand continues to grow globally.
The Moscow-based oil producer has published a report called ‘Major Trends in the Global Liquid Hydrocarbon Market to 2035’, which drafts three different scenarios for Russia’s oil and energy sector. The report takes into consideration factors such as demand, climate policies, taxation and sanctions on oil.
Lukoil believes stricter climate policies will result in oil and condensate production coming down to 8 million bpd by 2035.
Also, a change in the current tax system to a system based on taxation of revenue rather than profits will lead to oil and condensate production to gradually fall to just over 10 million bpd by 2035.
Currently, Russia pumps around 11.2 million bpd of oil and condensate.
The Lukoil report also pointed out that Russia’s low oil recovery factor is a potential area for development, especially if the government introduces tax incentives for enhanced oil recovery.
According to Lukoil, Russia’s oil recovery factor should be 38 percent; however, under the current taxation framework it stands at 22 percent only.
In the report, Lukoil said, “Were the government to provide extra tax incentives, the oil recovery factor may increase to 45 percent, which is comparable to that of the US and Norway.”
“Our estimate is that as early as 2030, Russia will be able to significantly reduce its dependence on imports in all areas critical to the efficient development of the oil industry.”
According to Russia’s finance ministry, its oil export duty is likely to decline to $77.2 per ton in January from $90.5 per ton in December. The decline is attributed to the changes to the tax code in a bid to boosting oil production in the country.