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“Pipe economy”: coming Soon Russia and “pipe” will not

«Экономика трубы»: Скоро у России и «трубы» не будет

Already in the first years of its existence the Russian Federation has finally lost it inherited the remnants of the manufacturing industry and has become a “tube economy”. Ie, in single-crop economy whose structure is dominated by oil and natural gas. Despite the loud slogans of the authorities on the need for structural reforms in the economy and reducing the country’s dependence on hydrocarbon exports, nothing changed. As was Russia in the 90-ies “of the economy pipe”, and so it remained until the present day. Even continued to strengthen its hydrocarbon specialization.

So, in 2000 the export of crude oil from the country was $ 144,4 million tons and last year it rose to 260,6 mln. t Export of petroleum products for the years 2000-2018 rose from 62.6 million to 150,3 million tonnes.

During the same period, the supply of natural gas abroad increased from for 193.9 billion to 220,6 billion cubic meters should Also consider the export of liquefied natural gas. In 2000 it did not exist. And in 2018, it already amounted to 36.7 billion cubic meters And by the end of the current year deliveries of liquefied natural gas may reach 60 billion cubic meters.

Even the government admits that in the Federal budget in 2018 the share of oil revenues was approximately 45%. She did not fall and even grows: in 2017 was equal to 40%, and in 2000, among other things, to 20%. It seems that the authorities already resigned to the fact that Russia has become a “tube economy” (sometimes it is called the “economy of the gas station”). Referring to the fact that, well, you can with the help of oil and gas become “developed” and “civilized” country. Giving often the example of Norway, where the share of oil in exports, GDP and the budget is even higher than that of Russia.

No, if Russia claims the status of an independent sovereign state, it cannot stay “of the economy pipe”. It seems that this axiom does not require special proof. Especially in recent years when organized against Russia economic sanctions by the United States and its allies. Moscow claims a special role in world politics. But this requires military force. This is also an axiom that does not require special proof. And military force can be created and maintained only on the Foundation of a strong, diversified economy, the core of which is engineering and other high-tech manufacturing industries. It is also axiomatic, proven, among other things, its own historical experience of Russia.

But, alas, Russia has all the prospects of finally becoming a colony of the West and even to disappear from the political map of the world. This can happen even faster than we think. Many believed that this would happen due to the complete inaction of the authorities, but slowly and gradually. No, it could happen in the next decade, rather suddenly. For the simple reason, Russia could quickly lose its status as the “tube economy” and will turn into a poorly inhabited “territory.”

The Russian authorities had long been under the illusion that the reserves of “black gold” in the country are innumerable. Enough, they say, for generations. Indeed, geologists in the USSR worked on fear, and on conscience, left the “democratic” Russia has large proven reserves.

In 2013, the government declassified data on stocks of “black gold”. Ministry said that in 2012, proved reserves amounted to 17,80 billion tons. This puts Russia in sixth place in the world on this indicator after Venezuela, Saudi Arabia, Canada, Iran and Iraq. In 2014, the company “British petroleum” (BP) prepared a review of the world oil reserves as of 2013. The experts of BP considered that the data the Ministry of natural resources is too high and gave their assessment — of 12.74 billion tons. The experts of the CIA were adjusted estimate of Russian reserves even more — to 10.92 billion tons. Russian officials described such “adjustments” as “the machinations of the West.” According to Western estimates, Russia has the largest proven reserves was not already in sixth and eighth place, behind such smaller States like Kuwait and the United Arab Emirates (UAE).

But, it appears that the country’s leadership recently began to realize that the situation with oil, to put it mildly, not as major as it seemed before. Last year, the Ministry of natural resources intensive was developed a document called “development Strategy of the mineral resource base of Russia until 2035.” Even at the stage when the Strategy has been a project in the media began to leak a separate document fragments.

It turned out that about two-thirds of the volume of reserves, which was released by the Ministry of environment in 2013, accounts for hard to recover reserves — mostly shale and oil that can be extracted only through deep-water projects on the Arctic shelf (the cost of Arctic oil could reach $ 150 per barrel). It turns out that real, commercial oil reserves in Russia — three times below the official data of the Ministry. Something like 6 billion tons, which is comparable to the reserves of Libya and the United States. It turns out that Russia barely fit in the top ten countries for reserves of “black gold”.

Before the new year, Prime Minister Dmitry Medvedev has approved the Strategy (order of the RF Government of 22 December 2018 No. 2914-R). Now this document is available to all. From this it follows that the old Soviet deposits are being rapidly depleted, and new deposits with easy and cheap to extract oil is still not detected.

The document diplomatically stated that the current levels of oil production in Russia “insufficiently secured by stocks of developed deposits”. The peak value of the rate of production is expected in 2021, the year — 570 million tons. From 2025 onwards, the resource base of oil production will no longer handle the load, there will be a sharp decline in production. If you believe the document, until a critical point is about 6 years old. Evaluation of the MEP is almost at odds with the estimates of the energy Ministry.

According to the calculations of the energy Ministry, the volume of production due to the narrowing of the resource base can be reduced with 555,8 million tonnes in 2018 per year (11.4 million barrels per day), up to 310 million tons (6.3 million barrels per day) in 2035. Ie is expected to nearly double collapse.

A year ago, the Minister of energy Alexander Novak at the session of the government said that in case of inactivity (meaning the search and discovery of new deposits) will be particularly sharp decline of production in Western Siberia, which gives the bulk of production to the industry. Last year was 330 million tons, and by 2035 will only be 146 million tonnes. The lion’s share of the fall of the Russian production will be in Siberia, where exports of light oil with low sulfur content. Siberian fields are in decline and obvodnaya. At Samotlor and Priobskoye (the leading fields of the region) extracted on the surface of the mixture can hardly be called oil. There is only 10%, rest is water and dirt.

The overall production decline in the country during the period 2018 — 2035 years will exceed the annual volume of crude oil exports last year. Export is simply nothing.

Critical situation with reserves of “black gold” in Russia is well-known to its main competitors on the world oil market. In an interview with “Bloomberg” the crown Prince of Saudi Arabia Mohammed bin Salman said confidently, by the mid 30-ies of our century, Russia will completely disappear from the world oil market. Not especially hesitating, he added that Riyadh hopes to occupy the vacant on the market place.

As reported by Minister of energy Alexander Novak, Russian oil companies have given to the Treasury in taxes, approximately 68% of total revenue. One of the highest rates in the world. But almost all the cream “cut.” The cost of producing one ton of oil has soared over the last decade in 2.4 times, capital costs increased 2.8 times. Tax return industry starts to fall, the flow of petrodollars into the coffers and nefterubli will dry out.

The sudden concern showed and the Ministry of Finance. They prepared a document entitled “the Budget forecast of the Russian Federation for the period up to 2036” In the baseline scenario of the forecast by 2036, the oil revenues of the Federal budget will crash by 40%. If in 2018 they amounted to 8.8% of GDP, in 2036, their level will fall to 3.3% of GDP. In the current situation of the company the oil industry will not only reduce the tax burden, but also to demand that the state subsidies for development of resource base. The company’s exploration, little has been done.

Under the auspices of the Ministry of environment in 2011, we formed a joint-stock company Rosgeo — Russian state holding company uniting the state geological enterprises of Russia. This organization is no sensational discoveries of “black gold” did not. The balance of the state put a small Deposit (with reserves of less than 5 million tons) of dubious profitability of production. New Samotarev yet in sight.

The theme of the depletion of the resource base of oil production in the last days was especially resonant sound due to the fact that the Duma and the government of the Russian Federation began a heated debate about the national welfare Fund (NWF). This sovereign Fund administered by the Ministry of Finance, recently growing by leaps and bounds. The source of its replenishment — revenues from oil exports, calculated using the so-called “budget rule” (all income is calculated on an oil price of $ 40 per barrel go to the budget; all that is over 40 dollars in the NWF). Today, the volume of funds accumulated in the Fund, has already exceeded 7% of GDP. The position of the Fund in such savings money from the Fund should begin to spend. But what is the big question. Applicants for the use of the Fund — more than enough.

The Ministry of environment and the Ministry of energy actively joined the discussion. In their opinion, the options can not be: if the Fund is based on hydrocarbon revenue, and consumed the resources of the Fund have on the development of the resource base of the industry for the extraction and export of hydrocarbons. On 30 October, the head of Rosgeologia Sergey Gorkov spoke at a meeting in the Ministry and drew attention to the critical condition of the resource base the oil and gas industry. Exploration was for many years on starvation money rations. Finally, according to Gor, the industry in connection with preparing the “unsealing” of the Fund have a chance to do large-scale geological projects:

“The Fund was established from the money generated by the income of the oil industry. We have yet to decide what part of the income from the oil industry should be focused on the formation of a future touched, otherwise it is unclear how it will be formed; the budget money on all will not suffice.” Gorkov said: “This should be done in cooperation with the major oil companies, they have enough experience”.

Well, I believe that this use of the Fund is justified. There are, of course, and other offers. For example, the chief economist VEB Andrei Klepach advocates the use of the Fund to support enterprises of the military-industrial complex. Well, I guess such a proposal is justified (military expenditure in the draft budget for the next three years can be significantly reduced). But the idea of using Fund assets to revitalize the search for new hydrocarbon deposits, certainly better than the proposals of some officials who have suddenly declared that the accumulation of funds in the Fund should continue, increasing the upper limit of accumulation of 7% to 8 or even 10%. However, according to preliminary estimates, by the end of the year net assets of the Fund will reach 178 billion, or 10% of GDP.

If we continue to engage in reckless monetary hoarding (and in fact financing of other States through the national welfare Fund, foreign buying of Treasury securities), you must first destroy “tube economy” and then the whole of Russia.

© 2019, paradox. All rights reserved.

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