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Oil reserves

Renaissance Capital

20 June 2019

Russian oil & gas

Data on oil (but not gas or gas condensate) reserves in Russia were shrouded in mystery until 2013 because, until 5 July 2013, they fell under state secret provisions. Russia’s Federal Law On State Secrets No. 5485-1, of 21 September 1993, defined state secrets to include information on volumes of reserves, production and consumption of platinum, platinum group metals, rough diamonds, and volumes of other strategic natural resources. The official list of what is considered a strategic natural resource, from 2 February 2002, included reserves of oil and associated gas. Matters were made even more complicated by the passage of an amendment to the Federal Law On State Secrets in November 2003. This indicated much more explicitly that information on the remaining volumes of reserves, production and consumption of strategic natural resources are to be considered a state secret. President Vladimir Putin called for the declassification of reserves data on natural resources in February 2013, and it was only on 5 July 2013 that the Russian government removed reserves of oil and associated gas from the list of state secrets by its Decree No. 569.

In July 2013, Sergey Donskoy, then Minister of Natural Resources of the Russian Federation, revealed that ABC1 oil reserves were estimated at 17.8bnt as of 1 January 2012. The most recent official statistics as published by the Ministry of Natural Resources are available for 1 January 2018 and are shown in Figure 31 (reflecting new reserve classification standards adopted in Russia from 1 January 2016 and discussed in Appendix I). Total oil and condensate AB1C1 reserves were reported at 20.8bnt, which makes for 38.6 years of reserve life. Total AB1C1+B2C2 reserves were 33.9bnt (62.7 years). Condensate accounts for 11% of oil and condensate AB1C1 reserves. Oil and condensate contingent and prospective resources were 14.8bnt and 56.9bnt, respectively, as of 1 January 2018. As of last reported 2017 statistics, Russia has 3,074 discovered fields containing crude oil, of which 2,511 are oil fields and 563 are mixed (crude, gas, condensate) fields. MNR also reported there were 2,641 issued licences for fields containing oil at the same date.

Russia’s official oil reserve estimate is 19% above the estimate made by BP in its

Statistical Review of World Energy 2019 (15.0bnt). Igor Schpurov, the head of the State Natural Reserves Auditing Committee, previously said that Russian reserves estimates in accordance with the new methodology (introduced from 1 January 2016) would be in line with BP’s numbers, but official statistics still shows a substantial difference remains.

As of 1 January 2018, only 3.8% of AB1C1 (and 5.9% of B2C2) reserves were undistributed. The single largest oil field in the undistributed fund is Rostovtsevskoye with reported C1+C2 reserves of 61mnt. However, this field is unlikely to be developed due to its location in the Yamalskiy natural preservation area. In addition, undistributed fund also contains 1.1bnt of hard-to-recover layers located within the perimeters of existing giant and super-giant oil fields in Russia.

Figure 31: Russian official reserves and resources estimates for liquid hydrocarbons as of 1 January 2018, bnt

	Oil	Gas condensate	Total liquids
Reserves
AB1C1	18.5	2.4	20.8
B2C2	11.3	1.7	13.0
Total reserves	29.8	4.0	33.9
Resources
Contingent resources (C3)	13.0	1.8	14.8
Prospective resources (D1+D2)	44.9	12.0	56.9
Total resources	57.9	13.8	71.7
Total reserves and resources	87.8	17.8	105.6

Source: Ministry of Natural Resources, Rosnedra, Renaissance Capital

There are 3,074 oil fields in Russia holding 20.8bnt of AB1C1 reserves, equivalent to 38.6 years of reserve life

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vk.com/id446425943

Renaissance Capital

20 June 2019

Russian oil & gas

Although we do not have in-depth reserve dynamics for the period before 2013, there are statistics on crude and condensate production, and reserves additions that were reported regularly (by Rosnedra, the Federal Subsoil Use Agency and the Ministry of Natural Resources). We show these in Figure 32. After the disappointing period of 2002-2005, reserves additions picked up from 2006, with reserve replacement ratios consistently surpassing 100% since then. The ratio was 101% in 2017 and 104% in 2018.

Figure 32: Russian AB1C1 crude and condensate reserves movement, mnt
800			Additions (+)		Production (-)
700
600
500
400
300
200
100
0

2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Note: the reserves were reported as ABC1 prior to 2017
													Source: Rosnedra, Interfax, Renaissance Capital

One of the principal reasons why exploration efforts faltered in the early 2000s was the																						Licence auction activity is stable
hiatus in tenders and auctions for new acreage, following an extensive review of licence
compliance that began in 2002. Matters only began to improve in 2005, as shown below.
In 2018, Rosnedra held 131 auctions (47% of which were successful).
Figure 33: Acreage auctions and tenders
350									Auctions			Tenders
300
250
200
150
100
50
-
2001		2002	2003	2004	2005	2006	2007		2008	2009	2010		2011	2012	2013	2014	2015	2016	2017	2018

Source: Rosnedra, Interfax, Renaissance Capital

The Western view is illustrated by the revised reserves estimates for Russia in BP’s

Statistical Review of World Energy shown in Figure 34. From this it is possible to infer reserves additions (including discoveries, extensions and any revisions) in recent years. BP revised its estimates considerably in 2014, increasing its reserves estimates for Russia. We also note that BP increased its reserves estimate by 7.1bn bls in 2016 (7.0% of 2015 reserves), while there was almost no growth in reserves under the Russian classification that year. BP’s estimate was revised down the following year, and it remains unchanged in the 2019 review.

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vk.com/id446425943

Renaissance Capital

20 June 2019

Russian oil & gas

Figure 34: BP estimates of Russia’s proved crude and condensate reserves, bn bls

	2011 estimates		2012 estimates		2013 estimates		2014 estimates
	2015 estimates		2016 estimates		2017 estimates		2018 estimates

120

100

80

60

40

20

-

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BP’s Statistical Review of World Energy 2019

From a Western perspective, Russia’s crude and condensate reserves appear to have declined by a marginal 0.1% in 2018. If measured over the past five years, the reserve replacement ratio of 106%, under Western standards, is below the Russian figure of 117%. We discuss the Russian oil company-specific reserve replacement performance under Western terms in detail below (see Reserve replacement, page 37).

The incomplete reserves information has made company-by-company analysis very difficult. However, most of the publicly listed companies report SEC-based proven oil reserves annually, if not in a great detail. Some companies, including Surgutneftegas, release no data on reserves. The Western view of Russia’s company-by-company proved reserves is shown in Figure 35, which explains some 62% of the reserves estimate provided by BP. Rosneft is Russia’s largest oil company, which accounts for 25% of the country’s total proved reserves (or 27% including Bashneft), followed by LUKOIL (11%) and Surgutneftegas (10%, although this is our estimate). All large producers except LUKOIL have healthy reserve replacement rates close to, or substantially above, 100%.

Figure 35: Proven reserves, oil and condensate, YE18

	Reserves, bn bls	RRR	R/P
Russia – total	106,223	98%	25.4
Rosneft (ex Bashneft)	26,645	149%	15.9
LUKOIL	12,082	87%	19.0
Surgutneftegas*	10,549	141%	23.7
Tatneft	6,588	293%	30.6
Gazprom Neft	6,373	107%	15.6
Bashneft	2,396	105%	17.3
NOVATEK	1,321	360%	27.7
Other	40,270	-249%	66.7

All figures are SEC-based reserves estimates, except for Tatneft and Bashneft, which only report under PRMS. *Data for Surgutneftegas are our estimate.

Reserves and production data include share of reserves and production from JVs and equity accounted investments. Reserves data for total Russian reserves based on BP’s assessment.

Source: Company data, BP’s Statistical Review of World Energy 2019, Renaissance Capital estimates

From a Western perspective, reserve replacement has amounted to 106% over the past five years

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