Oil extraction and inflow of petrodollars may drop in Russia because of financial crisis

Russia may experience another serious reduction of oil output in the medium term. It is not ruled out that the inflow of petrodollars in the country will drop as well. Such a development of the situation is almost inevitable, taking into consideration the fact that the financial crisis has cut many opportunities for investments in new deposits. As a result, oil companies are forced to cut their investment programs, The Nezavisimaya Gazeta reports.

Photo: Oil extraction and inflow of petrodollars may drop in Russia because of financial crisis

Russia ’s Minister for Energy, Sergei Shmatko, stated yesterday that the state-approved measures to support oil companies, particularly the reduction of export duties during the forthcoming two months, are supposed to make oil companies refuse from possible changes in their oil mining plans.

Vice Prime Minister of the Russian government, Igor Sechin, offered to raise the tax-free mining operation minimum from the current $9 per barrel to $25 per barrel. Nevertheless, experts believe that oil companies will be cutting their capital spending anyway.

Spokespeople for several Russian oil companies have already expressed their views on the need to reevaluate their investments. Lukoil’s President Vagit Alekperov said September 21 that his company could cut the investment program because of the fact that the program had been developed on the price of $105 per barrel, not $90.

Nikolai Manvelov, an official spokesman for Rosneft stated that a correction of investment plans was a prerogative of the board of directors of the company. “There was no meeting of the board of directors held on the issue, and I have no information of whether it is going to take place in the nearest future either,” the official said.

TNK-BP press secretary Vladimir Bobylev said that the board of directors of the parent company would make the decision on the investment program. Approximate numbers for 2009 were outlined on the level of 3.5-4 billion dollars.

In the meantime, a reduction of oil output can already be noticed in Russia. About 325 million tons of crude were mined in January-August of the current year, which is 0.7 percent less than was reported in the same period of the previous year, Rosstat statistics agency said.

Experts believe that the oil extraction in Russia may drop by two percent by the end of the year in comparison with the previous year. However, they add that the extraction may grow in the future.

“There is nothing paradoxical about it. In spite of the fact that oil companies will most likely cut their investments in future projects, the action will produce its effect only after 2010-2011, whereas the extraction will grow next year owing to new deposits introduced by Lukoil and Rosneft,” an analyst at Financial Corporation Uralsib said.