The slow demise of Russian oil

Russia has powered its war in Ukraine by keeping its oil flowing. Now, after more than 3 years of conflict, the gusher is slowly starting to peter out.

- Georgi Kantchev, Daniel Kiss & Ming Li

As Russia's crude reserves shrink, extraction costs rise.

(AF)

The toll of the war and Western sanctions have made extracting oil out of Russia’s already shrinking reservoirs harder. Some projections point to at least around a 10% drop in output by the end of the decade, putting the Kremlin’s economy—and the petrodollars it is built on—in peril.

Since the start of the war in Ukraine, Moscow has kept oil production and exports relatively stable by focusing on the maintenance of existing fields rather than the exploration of new ones. But the longer-term outlook is bleak. Up to one-third of Russia’s budget revenue comes from the profits of the energy sector and that proportion is likely to shrink as production slows.

Even before the war, many of Russia’s Soviet-era fields, mainly in Western Siberia and the Volga-Urals region, were starting to run low, leaving oil companies to turn to the harder-to-recover crude in its Arctic and Siberian fields.