With the United States recently overtaking Russia as the largest oil and natural gas producer in the world, Russia is being pushed towards tapping shale to preserve its stake in the global energy market, according to experts.
Russia is the holder of the world’s largest natural gas reserves with approximately 48 trillion cubic metres (tcm) of conventional gas, five times the amount held by the USA. Russia is also estimated to have 680 tcm in unconventional gas resources of which just over 20 tcm is shale gas.
While natural gas is cheaper to obtain than unconventional resources there has been little economic justification for Russia to develop it’s unconventional gas sector. Now, 10 years after the beginning of the US shale boom, Russia is at least 15 years off commercial production, according to government projections.
However, in order to maintain a strong leadership position among gas producers, Russia is developing its unconventional gas industry more and more boldly according to a recent bulletin published by the Polish Institute of International Affairs (PISM). “The change in Moscow’s strategy is essential if the country is to maintain a strong leadership position among gas producers, as well as for the attainment of Russia’s geopolitical aspirations” wrote analysts Zuzanna Nowak and Sonia Boczek.
While Gazprom predicts a decline in gas production from existing conventional sources of 25% by 2020 and 75% by 2030, new reserves from the Yamal Peninsula and Siberian deposits may be sufficient to meet
domestic needs and fulfil existing export contracts.
Russia may, however, may look towards expanding it’s unconventional gas production out of geopolitical motives, which have often overshadowed its economic rationality. With the EIA anticipating an increase in global demand for gas by more than 50% by 2040, Russia will need to significantly enhance the supply of gas and open up new export opportunities in order to maintain its current share of almost 20% of the global gas market.
While energy companies, Gazprom, Rosneft and Lukoil have expressed interest in exploring unconventional deposits, foreign investment and expertise is required for any scale-up. Russia is looking toward Asian economies, such as India and China, who are conducting research programmes in their own territories, as it pivots away from old markets in Europe.
Even Russia and Japan may move past historically tense relations in order to exploit clathrate reserves on the shelf of the Kurils. This trading of Japanese experience for Russia’s accessible hydrates deposits could open the way for Russia to develop clathrate deposits in the Arctic and justify the already increased activity of Gazprom and Rosneft in the region.
Priority access to prospective unconventional gas resources in other countries also serves the strategic interests of Russia, the report states. For example, the memorandum signed in April 2015, between Gazprom and the Argentine YPF, on joint shale gas production from the Vaca Muerta field, gives Russia access to the world’s second-largest shale-gas reserve, and establishes a counterweight to Chinese and U.S. influences.
As the report outlines “change in Moscow’s strategy is essential if the country is to maintain a strong leadership position among gas producers, as well as for the attainment of Russia’s geopolitical aspirations”, concluding with “Dexterity in shifts between East and West, and the ability to use unconventional gas to build new alliances, will determine the effective realisation of Russia’s interests”.
You can read the full report here.
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