Begging for Technology: Why Russia is Lost Without Foreign Expertise

Russia faces a dilemma: it still needs Exxon Mobil Corp. (XOM), Halliburton Co. (HAL) and BP Plc (BP/) to maintain output from Soviet-era oil fields and develop Arctic and shale reserves.

Russia will require Western companies to provide the modern drilling and production gear — and techniques such as hydraulic fracturing — that are essential to unlocking its $8.2 trillion worth of barrels still underground. __ David Wethe in Bloomberg

Russia’s Soviet era oil infrastructure is being pushed to its limits. Old oil fields are in decline years before their time. Russia’s corrupt state oil companies are at a loss as to how to develop the massive Siberian hydrocarbon wealth. Rusting oil pipelines are spilling out oil onto the tundra at rates that would make a corrupt Nigerian oil minister blush. The clock is ticking for Russia to get its act together before it collapses from its worsening demographic decline. Putin’s aggressive posturing and criminal land-grabs are not winning him any friends.

Oil spills in Russia are… more numerous than in any other oil-producing nation including insurgency-hit Nigeria, and combined they spill far more than anywhere else in the world, scientists say. __SFGate

To maintain its oil production — and to continue holding the loyalty of most of its citizens — the Russian state oil apparatus must upgrade its production and transportation infrastructure using western technologies.

Enhancing production from decades-old fields is needed to maintain Russia’s crude production above 10 million barrels a day for a fourth year…

… To help postpone production declines at existing fields, oil services companies are exporting expertise to Russia. Houston-based Schlumberger, the world’s largest oilfield- services provider, is vying with U.S. rivals such as Weatherford and Russian operators led by C.A.T. Oil.

Schlumberger has 12 separate fracturing fleets — the combination of machines and people needed for fracking –working in Russia, a company executive said. C.A.T., which says it has a market-leading share of 31 percent, has 15. _Stephen Bierman in Bloomberg

The combination of fracking and horizontal drilling will allow for increased exploitation of both conventional and unconventional oil reserves. In addition, Russia will need to seek other foreign solutions to enhanced oil recovery:

The global average recovery factor for a typical oilfield is approximately 40%. This results in a large amount of identified oil left behind despite an existing production infrastructure. The need to improve the recovery factor and the accelerating of the associated production is the main driver behind the many EOR schemes in practice around the world.

… To ensure successful long-term recovery, engineers and geoscientists use earth models, numerical simulators, pilot studies, and sophisticated monitoring tools to make the best decisions. A dynamic reservoir model, using the full-field model built from the initial development plan, is constantly updated with the latest monitoring data acquired from surface seismic, single well logs, and inter-well data. It is the application of this collective knowledge of accurate reservoir data coupled with detailed production history that leads to the best decisions for these complex EOR problems. _EOR

It is not only Russia’s oil & gas infrastructure that is rusting and in decline, it is Russia’s overall industrial infrastructure that is declining in concert with the ongoing demographic decline. Russia has never recovered from the devastation caused by the “command economy” of the USSR. Putin re-instated a “quasi-command” economic approach in the middle of the post-Soviet turmoil much too quickly. Russia was never given a chance to develop its own evolved market structure, free from corrupt top-down interference. As a result, too many imported “alien” technologies are being used without proper domestic support.

So just like third world Arab and African oil producing countries, Russia must import not only advanced technologies, but also the expertise to keep them running.

Ordinarily, we would assume that Russia would be capable of adopting outside technologies and making them their own — much like China, Japan, and Korea have done. But unfortunately for Russia, its demographic substrate is in rapid decay — as reflected in the combination of low birth rates and very high death rates. The underlying reasons for Russia’s embarrassing and well-hidden decay would fill a book. And unfortunately, almost everything Putin has been doing, is making the problem worse.


We will look back at 2014 as the year Russian President Vladimir Putin pushed all his chips into the center of the table — risking everything to make Russia a world power again…

… A cornerstone in Putin’s power play, Russian oil and gas supplies are essential to a resurgent Russia. Only Saudi Arabia exports more oil than Russia, which boasts nearly a quarter of the world’s (non-OPEC) oil production. But Russia’s lopsided dependence on its petroleum revenues (which account for 70 percent of the country’s annual exports and 52 percent of the federal budget) undermines its political stability in the long run. Putin’s recapture of the mineral extraction industry from the private sector has hastened the country’s slide into authoritarianism and state-controlled capitalism. __ Paul Hockenos: Russia’s Oil Curse

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2 Responses to Begging for Technology: Why Russia is Lost Without Foreign Expertise

  1. jabowery says:

    All Putin has to do is pursue a citizens’ dividend-founded autarky and he’ll have talent streaming into Russia to work for slave’s wages. Its _really_ hard to get tru talent motivated for a regime that is committing suicide — and that is true whether the suicidal regime is under Putin or under the current idiocracy of the West. All Putin has to do is stop committing suicide. I know this is unlikely given the history of “big man” politics, but global dominance really is an opportunity staring him in the face as the West offers it to him on a silver platter.

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