Top industry leaders call for huge investments into small oil wells development
Today, opening of new large oil fields is rare in Russia. This brings exploration for small-sized oil well deposits to the forefront. Lots of such wells exist in Tatarstan, Bashkortostan, Udmurtia and Samara Region. According to Tatneft CEO Shafagat Takhautdinov, the exploration for small oil deposits can partially compensate the decrease in outputs from large oil wells.
Launching of new wells would positively impact on oil production and employment rates, as it will lead to increase in workloads in other related industries and taxes in the treasury. “If this problem is not solved in a planned order today, then we will be forced to solve it as an emergency in the future,” Takhautdinov added.
In recent times, policymakers at the federal level are considering the necessity of developing of small oil deposits in view of declining outputs in large wells. However, Rosnedr’s auctions that offered small oil deposits did not generate huge interest among oil companies. The explanation for such lukewarm reaction was offered by heads of LUKOIL, Rosneft and Tatneft in their joint letter to the Russian government, where they stressed the necessity for state’s stimulation for development of small oil deposits. “This is because under the existing taxation system, the development of fields with less than 10mln tons of oil reserves is not profitable,” they noted.
Small oil well deposits account for about 14% of Russia’s gross reserves. Therefore, their development, apart from compensating for falling outputs from large wells, can also improve the economic situation of small- and medium-sized oil companies. However, the development of small deposits requires practically the same amounts of investments into geological explorations and drillings as for larger ones. The investments into such projects do not pay off or can be recouped only over a long period. “Therefore, small oil deposits cannot not be developed without state’s support,” the industry leaders said.
There was a specific proposal in the letter: developers of sites, whose oil reserves are estimated at less than or equal to 3mln tons, should completely be freed from payment of natural mineral extraction taxes, while investors into plots holding reserves between 3mln-10mln tons should be given a tax vacation for seven years. Preliminary calculations have shown that development of small wells can boost Russia’s overall oil output by 1.5mln tons in 2010 and 6.2mln tons by 2012 and increase additional revenues into the state coffers over the next three years by over four times.
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