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Reserves

Russia has some of the world’s largest hydrocarbon resources. At YE18, according to

BP’s Statistical Review of World Energy, Russia’s proved oil & gas reserves stood at 106.2bn bls and 38.9tcm, respectively. Russia’s gas reserves were equivalent to 234.0bn bls of oil equivalent (boe), using a standard conversion ratio of 6,000 cubic feet/bl.

Renaissance Capital

20 June 2019

Russian oil & gas

These oil & gas reserves estimates were down by 0.1% and zero YoY, respectively, vs the revised YE17 assessments. As of YE18, estimated oil reserves in Russia represented 6.1% of the world total (down from 6.2% as of YE17), while its gas reserves comprised 19.8% of the global total, down from 19.9% in YE17.

Russia oil & gas reserves account for 6.1% and 19.8% of the world totals

Figure 1: Share of worldwide oil reserves				Figure 2: Share of worldwide gas reserves
	Asia Pacific				Asia Pacific
Africa	3%					North America	South&Central
					9%
						7%
							America
7%
							4%
				Africa
	North
				7%			Other
	America
			South&Central				Europe&Eurasi
	14%
			America				a
			19%				14%
Middle East					Middle East
48%						Russia
			Other		39%
						20%
			Europe&Eurasi
		Russia	a
			3%
		6%
	Source: BP's Statistical Review of World Energy 2019					Source: BP's Statistical Review of World Energy 2019

The difference in global oil reserves assessments by BP and by the Oil & Gas Journal (OGJ) was just 3.3% as of YE18, as shown in Figure 3.

Figure 3: Worldwide oil reserves distribution, bn bls

	BP Survey	% of total	O&GJ Survey	% of total
Total North America	236.7	13.7%	236.7	14.2%
Of which Canada (incl. oil sands)	167.8	9.7%	167.4	10.0%
Total South and Central America	325.1	18.8%	328.2	19.6%
Of which Venezuela	303.3	17.5%	302.8	18.1%
Total Europe and Eurasia	159.0	9.2%	132.8	7.9%
Of which other FSU	38.4	2.2%	38.8	2.3%
Of which Russian Federation	106.2	6.1%	80.0	4.8%
Total Middle East	836.1	48.3%	804.6	48.1%
Of which Iran	155.6	9.0%	155.6	9.3%
Of which Iraq	147.2	8.5%	147.2	8.8%
Of which Kuwait	101.5	5.9%	101.5	6.1%
Of which Qatar	25.2	1.5%	25.2	1.5%
Of which Saudi Arabia	297.7	17.2%	266.3	15.9%
Of which United Arab Emirates	97.8	5.7%	97.8	5.8%
Total Africa	125.3	7.2%	123.9	7.4%
Of which Algeria	12.2	0.7%	12.2	0.7%
Of which Libya	48.4	2.8%	48.4	2.9%
Of which Nigeria	37.5	2.2%	36.2	2.2%
Total Asia Pacific	47.6	2.8%	46.3	2.8%
Of which China	25.9	1.5%	25.9	1.6%
Total World	1,729.7	100.0%	1,672	100.0%
OPEC	1,242.2	71.8%	1,214.7	72.6%
Non-OPEC	487.5	28.2%	457.7	27.4%
Canadian oil sands	162.3	9.4%	n/a	n/a
Former Soviet Union	261.4	15.1%	n/a	n/a

Source: BP's Statistical Review of World Energy 2019, Oil & Gas Journal Worldwide Production Report 2018

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Renaissance Capital

20 June 2019

Russian oil & gas

The main difference between the surveys is lower reserves estimates for Russia and Saudi Arabia, which are 25% and 11% lower than BP’s estimate.

OPEC’s share of total reserves is estimated at 72.6% in OGJ’s 2018 Worldwide Production Report, and 71.8% in BP’s Statistical Review of World Energy 2019.

According to BP’s Statistical Review of World Energy, Russia’s estimated reserves-to- production (R/P) ratio at YE18 was 25.4 years for oil and 58.2 years for natural gas reserves (vs 25.9 years and 61.3 years, respectively, at YE17). These compare with the global averages of 50.0 years and 50.9 years, respectively, while the corresponding figures for OECD hydrocarbon resources are 26.4 years and 13.7 years. Russia’s reserves remain very large indeed, although the comparison of oil reserves in recent years has been affected by the inclusion of hard-to-recover Canadian oil sands and

Venezuelan’s Orinoco Belt reserves into the world total.

Given the high R/P ratios and the limited exploration undertaken in the 1990s, the Russian oil & gas industry tended to deliver lacklustre reserve replacement figures during the mid-2000s. However, matters have improved significantly since that time, with Russian producers adding 578mnt and 550mnt, respectively, of new ABC1 oil reserves in 2018 and 2017, vs the 556mnt and 547mnt produced.

In the gas arena, the reserve replacement record has been more stable. ABC1 additions of natural gas represented 107% of production last year. The rising level of exploration activity by both Gazprom and independent gas producers (including oil companies) has helped to maintain an average reserve replacement ratio above 100% in recent years.

The reserves replacement performance inferred from the FASB ASC 032 (formerly SFAS No. 69) disclosures contained in Russian oil companies’ financial statements confirms the earlier reported statistics. In particular, we estimate these companies reported a 136% replacement ratio for the oil & gas they produced in the five-year period spanning 2014-2018. Eliminating acquisitions, drill-bit reserves replacement has been 106% (see

Reserves, page 31).

Stable reserve replacement ratios have led to high R/P ratios, indicating that exploration is not a pressing problem for the industry. Arguably, lowering the R/P ratios by boosting production would substantially boost the NPV of reserves in place, and would be a better option for investors. This would also boost sustainable medium-term cash flows and strengthen the industry, enabling it to undertake exploration at a later stage, when it is more pressing. Moreover, the widespread exploration activity undertaken during the Soviet era means the current wave of exploration simply looks to confirm already discovered resources. Vast potential oil & gas resources, lying either offshore (Barents, Caspian, Sakhalin, Kamchatka) or in frontier onshore areas (such as East Siberia or Timan-Pechora) have already been found, but still need appraising and tapping. Equally important, a greater focus on increased recovery rates from existing producing fields should help to maintain reserves in a cost-efficient manner.

Some differences remain between the assessments of the world’s reserves base by BP and OGJ

Reserve replacement rates are consistently above 100%

Figure 4: FSU undiscovered hydrocarbon resources

		Oil (mn bls)				Gas (bcm)			Natural gas liquids (NGL; mn bls)
	F95	F50	F5	Mean	F95	F50	F5	Mean	F95	F50	F5	Mean
Oil fields	15,984	45,559	165,821	63,762	1,555	5,061	16,671	6,619	2,083	6,487	19,258	8,090
Gas fields					9,728	29,984	94,872	38,590	8,009	25,058	74,276	31,178
Total	15,984	45,559	165,821	63,762	11,283	35,045	111,542	45,210	10,092	31,545	93,534	39,268

Note 1: F95 represents a 95% chance of at least the amount tabulated. Other percentiles are defined similarly.

Note 2: The percentiles show the probability (geologic and from accessibility) of at least one field equal to or greater than the minimum assessed field size. Results shown are fully-risked estimates.

Source: USGS World Petroleum Assessment 2012

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On this note, the US Geological Survey (USGS), in its 2012 World Petroleum Assessment, said the FSU’s mean probability shares of worldwide undiscovered oil (and condensate) & gas were 14.1% and 28.5%, respectively – i.e. 103.0bn bls of oil (and condensate) and 45.2tcm (266.0bn boe) of gas are still to be discovered. This would be in addition to the

FSU’s current proved reserves and its estimated future reserves growth, as reserves are shifted from the ‘possible’ category to the ‘probable’ and ‘proved’ categories with development. In future years, special attention will be given to the development of so-called hard-to-recover oil resources in Russia, of which shale oil alone accounts for 75bn bls, or 22.4% of the world total, according to a June 2013 report by the EIA/ARI entitled, World Shale Gas and Shale Oil Resource Assessment. The same study estimates Russia’s shale gas resources at 285tcf, 3.7% of the world total. Estimates in the Russian press vary but reach much higher figures of up to 146bn bls in the Bazhenov suite and up to 175bn bls in the Domanik suite, vs 3.65bn bls officially registered.

Renaissance Capital

20 June 2019

Russian oil & gas

FSU’s share of worldwide undiscovered resources is enviable

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