U.S. Tight Oil Threatens CIS Crude Exports, Russian Academy Says

Crude oil exports from the Commonwealth of Independent States may drop 17 percent by 2040 as tight oil production in the U.S. soars, the Russian Academy of Sciences said in a presentation on its website.

CIS exports will decline to 293 million metric tons in 2040 from 355 million tons in 2010, according to the academy’s base scenario. Russian crude output will fall by as much as 50 million tons annually by 2020 in the report’s “shale breakthrough” scenario, as high costs and the current tax system limit competitiveness on global energy markets.

New drilling technology including hydraulic fracking will transform the U.S. into the largest crude producer and a net exporter starting around 2020, the International Energy Agency said in November. Russian President Vladimir Putin has called for his country to maintain output at 10 million barrels a day for the next decade. Oil and gas provide about half of the government’s budget revenue.

Russia is a price-taker on the oil market that will export as much as it can,” Ildar Davletshin, a Moscow-based oil and gas analyst at Renaissance Capital Ltd., said by phone today. “There is some concern that Russia will be left behind as it is still reliant on old technology, and a 10 percent decline in output by 2020 is not unreasonable.”

Russia produced 518 million tons, or 10.4 million barrels a day, of crude and gas condensate in 2012, according to the Energy Ministry.

“The Russian Academy of Sciences is not known for its expertise in shale oil production,” Alexander Burgansky, a Moscow-based oil and gas analyst at Otkritie Financial Corp., said by e-mail.

Burgansky cited Leonid Fedun, vice president of OAO Lukoil, Russia’s biggest private oil producer, who told the Vedomosti newspaper that U.S. shale output won’t exceed 3 million to 4 million barrels a day. There is no threat of oversupply, he said.

The CIS includes most former Soviet republics, including oil exporters Russia, Kazakhstan and Azerbaijan.

To contact the reporter on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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