Oil Resource experts discuss the key tasks of the oil industry in the coming years in the “Izvestia” article.

The oil industry once again confirmed its role as the main donor of the federal budget in 2024. Despite sanctions pressure, reorganization of logistics routes and changes in sales markets, oil continues to be the main source of foreign exchange earnings - RUB 8.5 trillion by the end of 2023, according to the Ministry of Energy. However, these figures conceal a serious technological challenge: the share of hard-to-recover reserves (HTR) is growing, the development of which requires significant investment and innovative solutions.

The foundation of the budget is in question

In January-September 2024, oil and gas revenues accounted for 31.7% of the federal budget, exceeding both last year's figure (28.3%) and the target benchmark (31.3%) according to the Finance Ministry's report. The dominance of oil in this structure is undeniable: 80% of the revenue is provided by its extraction. The sector's tax system is based on three key elements: mineral extraction tax (MET), windfall profit tax (WPT) and export duties. The dynamics of these components are multidirectional: the share of MET increased from 80% in 2023 to 83.5% in 2024, WPT increased from 11% to 13.9%, while export duties, as part of the tax maneuver, decreased from 21.6% (2022) to 2.5%.

The increasing role of oil in oil and gas revenues is obvious: in the first nine months of 2024, its share reached 77.7% against 66.5% in 2022. On the contrary, the gas sector shows a decline - 16.3% against 30.2% two years ago. The main reasons are lower gas prices and the abolition of the MET surcharge for Gazprom.

The growth of oil revenues is impressive: RUB 6.5 trillion in the reporting period, which is 1.6 times higher than in 2023. In parallel, non-oil and gas revenues are growing (+26.9%), which experts regard as a sign of successful diversification of the economy. However, the government projects that the share of oil and gas in the budget will fall to 22.6% by 2027 - a consequence of tax reform, including an increase in the profit tax rate to 25%. Nevertheless, even in this scenario, the industry will retain its status as a critical source of financing.

From records to deterrence strategy

Russia maintains its position as one of the world's leading oil producers despite foreign policy restrictions. From 2013 to 2019, production volumes grew steadily, reaching an all-time high of 560 million tons. However, the pandemic and participation in the OPEC+ deal adjusted the trajectory: in 2024, the figure was 516 million tons.

“Today our goal is not extensive growth, but to maintain stable production levels through rational use of infrastructure and enhanced oil recovery technologies at mature fields”

— notes Semyon Garagul, CEO of Oil Resource.

OPEC+ restrictions, sanctions, offshore oil embargoes, price ceilings and seasonal factors (e.g. logistical challenges in the Arctic) are shaping the new industry landscape. An additional risk is a slowdown in reserve growth: in 2023 it amounted to 550 million tons, which was the minimum value since 2016.

Oil Resource experts emphasize that the key task for the industry in the coming years is to maintain production volumes and tax payments, avoiding a sharp rise in production costs. New technologies should help with this.

Challenges and technological response

The transition to the development of hard-to-recover reserves (HTR) is one of the main trends in the industry. They already account for over 50% of the country's resource base and 32% of current production.

The level of production from HTR was about 30% as noted in January 2024 by Igor Shpurov, Head of the State Reserve Commission (SRC). Over the past year, their share has only increased. By 2030, the share of HTR in total Russian oil production will amount to 80% and more, according to the estimates of Pavel Sorokin, First Deputy Head of the Ministry of Energy, who spoke at the session “Drilling Can't Stop: Industry Development Strategy for 10 Years”. The process is already underway: according to the Ministry of Energy referred to by “Vedomosti”, by the end of 2024, horizontal drilling increased by 9.5% and amounted to 20.5 million meters, which indicates a more active development of reserves in old fields.

Development of fields with HTR - Tyumen suite, Bazhenov suite, Domanic suite, Abalak suite, Khadum suite, Achimov and pre-Jurassic deposits - requires implementation of breakthrough technologies: thermal flooding, gas injection, multistage hydraulic fracturing (HF), horizontal drilling and multifluid thermal technology (MTT). Oil Resource plans to begin testing its own version of MTT in 2025. As part of this project, the company signed a cooperation agreement with the Institute of Geology and Petroleum Technologies (IGPT) of Kazan Federal University in February 2025, which conducts scientific work on the development of hard-to-recover reserves in Russian fields.

“HTR is a strategic direction. We are redefining the potential of mature oil regions without expanding geography at the expense of high-risk projects”

— Semyon Garagul emphasizes.

Between stability and recession

If the current production strategy is maintained, the main burden will fall on Western Siberia and the Urals-Volga region, while Eastern Siberia is seen as a promising region for development, as Academician Anatoly Dmitrievsky, scientific director of the Institute of Oil and Gas Problems of the Russian Academy of Sciences, notes in his work.

It should be noted that the Energy Strategy of the Russian Federation for the period until 2050, approved by the Russian government on April 12, 2025, sets the target scenario as maintaining production at the level of at least 540 million tons per year. For this purpose, it is necessary to create conditions for bringing unprofitable reserves, which amount to more than 10 billion tons, into production, especially at complex sites with low permeability using horizontal drilling. As part of the government's strategy, a set of measures to develop the HTR will bring more than 5 billion tons of reserves into development and ensure the development of new production regions that will yield about 80 million tons of production on the horizon of 2036.

If the current approaches are maintained and without significant investments, i.e. in the inertial scenario of the Government's strategy, oil production is projected to decline to 477 million tons per year by 2036 and to 360 million tons per year by 2050.

In search of balance

As a key OPEC+ player, Russia has demonstrated strategic discipline by curbing oil production, balancing market interests and domestic objectives. This course is especially important against the backdrop of the onslaught of the “green” agenda – global energy transition, decarbonization and the growing popularity of RES.

The oil industry remains the pillar of the economy in the face of sanctions and global transformations. It not only supports the economy, but also provides maneuver for strategic decisions, allowing a balance between the challenges of today and the uncertainty of tomorrow. The emphasis on the stability of production, processing and HTR reflects a change in vector: from quantitative records to technological efficiency.

According to experts, while reality poses contradictory challenges to the energy sector: both decarbonization and reliable supplies, Russia is betting on multitasking and testing an approach in which oil will become the future rather than the past.

Source