According to Putin’s statement, Russia's oil and gas reserves 'underestimated'

Russia's crude oil production growth may be flagging, but President Vladimir Putin said Tuesday that the country's enormous oil and gas reserves were in no danger of running out. Analysts agree, and estimate they could be two to three times higher than currently reported.

According to BP PLC's annual statistics review published in July, Russia is the world's No. 6 in terms of oil reserves with 72 billion barrels, and is No. 1 in terms of gas reserves with 1,700 trillion cubic feet. Saudi Arabia has most crude with 263 billion barrels, while Iran is the world's No. 2 in terms of gas reserves with 950 trillion cubic feet. But unlike Saudi Arabia, Russia's oil reserves are poorly explored, in part due to their comparative inaccessibility, locked under the seabed or permafrost.

No serious exploration work using the latest technologies has been conducted in Russia since the 1980s, according to Chris Weafer, chief strategist with Moscow-based Alfa Bank. "A safe number is probably double that (72 billion barrel) figure," Weafer said. "But it's not impossible it's three times as high." Russia's crude oil production growth rate is slowing at a time when world prices are at record highs over supply concerns.

Investment in production has slowed in Russia following the part renationalization of Russia's once biggest oil producer Yukos, which was seen as Kremlin revenge for its former owner Mikhail Khodorkovsky's political aspirations. An appeal court last week upheld Khodorkovsky's conviction, reducing his original sentence from nine years to eight.

While Putin said that a stifling tax regime was partly to blame for pushing up gasoline prices, oil companies "in essence ... monopolize the market," he said. "They have divided up the regions and set monopoly prices."

Industry and Energy Minister Viktor Khristenko announced last week that all major oil producers had capped their prices until the end of the year. The companies, however, complain that they have been forced to raise prices to compensate for a burdensome customs duty and mineral extraction tax that rise with soaring international prices.

Putin acknowledged their concerns, and noted that the government was preparing to change the system for taxing oil companies. AM