According to the Oil and Gas Journal’s 2008 survey, Russia has proven oil reserves of 60 billion barrels, most of which are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. Eastern Siberia is one area where little exploration has taken place. The Russian Ministry of Natural Resources estimated in 2005 that A+B+C1 reserves (roughly equivalent to Proven + Probable reserves) in E. Siberian provinces totaled 4.7 billion barrels.

With production of 9.8 million bbl/d of liquids (not including oil products), and consumption of roughly 2.8 million bbl/d, Russia exported (in net) around 7 million bbl/d. According to official Russian statistics, roughly 4.4 million bbl/d of this total is crude oil. Over 70 percent of Russian crude oil production is exported, while the remaining 30 percent is refined locally. Crude oil exports via pipeline fall under the exclusive jurisdiction of Russia's state-owned pipeline monopoly, Transneft.

In the 1980s, the Western Siberia region, also known as the “Russian Core,” made the Soviet Union a major world oil producer, allowing for peak production of 12.5 million barrels per day in total liquids in 1988. Following the collapse of the Soviet Union in 1991, Russia’s oil production fell precipitously, reaching a low of roughly 6 million bbl/d, or around one-half of the Soviet-era peak (see Fig. 1). According to observers, several other factors are thought to have caused the decline, including the depletion of the country's largest fields due to state-mandated production surges and the lack of investment in field maintenance.

A turnaround in Russian oil output began in 1999. Many analysts attribute the rebound in production to the privatization of the industry following the collapse of the Soviet Union. The privatization clarified incentives and increased less expensive production. Higher world oil prices beginning in 2002, the use of technology that was standard practice in the West, and the rejuvenation of old oil fields also helped raise production levels. Other experts partially attribute the increase to after-effects of the 1998 financial crisis, the fall in oil prices, and the subsequent devaluation of the ruble.

In 2007 Russian total liquids production averaged over 9.8 million bbl/d, including 9.4 million bbl/d of crude oil, a 200,000 bbl/d increase over 2006. This growth rate was down from annual growth of roughly 700,000 bbl/d annually between 2002-2004.

Growth in output from the Sakhalin projects, (see EIA’s Sakhalin Fact Sheet) will be a main contributor to overall Russian oil output growth. In the upcoming decade, a few major oil fields (listed in Table 1 below) will contribute to most of Russia’s supply growth and others will offset decreasing production from mature fields. In the short term, however, there are only a few large new fields that are planned. They include Gazprom’s 100,000 bbl/d Prirazlomnoye field (2010), Lukoil's 150,000 bbl/d South Khylchuyu field (mid-2008), and year-round production from the Sakhalin II field. Lukoil/ConocoPhillips's TimanPechora project, and Rosneft's Vankorskoye (300,000 bbl/d) and Komsomolskoye fields will also help stem production losses at older fields. Lukoil also expects around 30,000 bbl/d of production from its North Caspian fields after 2010.

In 2006, around 24 percent (or 2.3 million bbl/d) of Russia’s oil production came from fields that had already produced 60 percent of their total recoverable reserves. Achieving continued growth at post-peak fields will become more problematic as oil companies run out of easy and less costly opportunities to manage the rate of decline.

Updated assessments of EIA’s short-term outlook for Russian oil supply growth are available each month from Table 3b of the Short Term Energy Outlook.

Government taxation of production and export revenues along with the continued lack of clarity concerning the ownership of subsoil resources contributed to lower output for 2007 and could possibly contribute to stagnating or even negative output growth during 2008. Export duties on crude oil are directly linked to the global pricing environment. The tariff schedule for export duty for crude oil at $25/bbl and higher is 65 percent of the market price minus $21/ barrel. Using this formula, the government is receiving around $47 per barrel from export taxes at current prices. Therefore, absent changes to the tax structure itself, Russian oil companies are only very modestly affected by changes in global crude prices.

At current oil prices, the government is also receiving an additional $20 per barrel in extraction taxes. The government plans to introduce preferential treatment for those producers that extract resources at fields exceeding 80 percent depletion, which they hope will encourage oil companies (mostly in the Volga-Urals region) to bring some idle wells back into production.

Several proposals are currently being discussed to reduce the tax burden. One is a proposal to raise the non-taxable threshold level from $9 to $15 per barrel. Prime Minister Putin has also proposed a seven-year mineral extraction tax holiday for oil companies that develop fields in Timan-Pechora, Yamal, or on the continental shelf beginning in 2009. A second proposal would provide tax holidays for firms carrying out offshore exploration or granting them mineral extraction tax breaks. Another proposal by the Finance Ministry seeks to reduce annual oil company taxes by $4.2 billion from 2009. According to analysts, this is only a fraction of the $40 billion in extraction taxes and $45 billion in export duties that the government collected from oil companies in 2007.

See the separate section on Oil Exports.

Russia has 41 oil refineries with a total crude oil processing capacity of 5.4 million bbl/d, but many of the refineries are inefficient, aging, and in need of modernization. According to Energy Intelligence, refinery throughput at Russian refineries increased by roughly 4 percent to around 4.6 million bbl/d in 2007. This total includes some crude oil exports from neighboring countries. Russian refineries produced around 1.2 million bbl/d of Mazut (heavy fuel oil), 1.3 million bbl/d of middle distillates, and 815,000 bbl/d of gasoline.

The draft proposals mentioned above for the oil sector are also geared to provide incentives for refiners to produce more high-quality and environmentally cleaner fuels. Currently oil companies pay around $21/barrel ($154/tonne) for high-octane gasoline, $15/barrel for low-octane gasoline, and $6/barrel of diesel.