Renat Muslimov: “Oil, in fact, is endless. It is a renewable energy source”

“Suffocation by taxation” and the production on depleted fields

At the Oil, Gas. Petrochemistry International Exhibition held last week in Kazan, they discussed a lot the shortcomings of the existing tax regime, the lack of sufficient benefits for the oil and gas industry, the problem of preserving production in the late depleted fields. For example, President of the Union of Oil and Gas Producers of Russia Gennady Shmal criticized the existing tax regime, calling it nothing but “suffocation by taxation”.

According to him, today the increase in the tax burden on the oil and gas sector, including an increase in the rate of mining and export duties, has led to that the entire tax structure with high world prices has become “unfair” for many companies. This is especially true for small and medium-sized oil companies. According to Director General of the State Commission on Mineral Resources Igor Shpurov, the level of penetration into the industry of the tertiary recovery methods still remains low and needs state support.

Why the recognition of oil renewability is unprofitable for oil companies and states

Renat Muslimov, the Adviser to the President of Tatarstan on development of oil and gas exploration, academician of the Academy of Sciences of the Republic of Tatarstan, considers the current tax system optimal and the extraction on the late depleted deposits not a problem.

“The tax benefits are ok, the fields are working, including strongly depleted ones. The oil production is growing. Oil is endless, really. It's a renewable energy source,” he told Realnoe Vremya.

Today, oil is still classified as a non-renewable resource: as of the end of 2017, the total reserves of world oil are 1706,8 billion barrels. Why don’t they tell about the sustainability of the resource? As Muslimov noted, today no one officially recognizes the fact of oil renewability — because if it is recognized, oil prices will begin to decline.

“It is unprofitable for both oil companies and oil-producing states. It is also unprofitable for those who buy — because it brings an element of instability. That is, it is disadvantageous to everyone. For us, the fact of the renewability of oil is very clear, this is just about the technologies: somewhere it is complex geological conditions, more expensive mining and oil, somewhere you have to invest more, somewhere — less. But in the end, we can say that the depletion of resources threatens neither the world nor Russia!” Renat Muslimov explained.

How can oil production be continued if all reserves have been extracted?

Renat Muslimov has repeatedly written about the constant recharge of oil fields from the bowels of the earth, noting, in particular, the significant efficiency of search for oil by studying the rocks of the crystalline basement (located at depths from 0 to 15 km). The latter is overlaid by sedimentary rocks, in which there are known oil fields.

Scientists from Tatarstan have suggested that the crystalline basement plays a crucial role in the recharge of oil fields of sedimentary cover with new resources due to the inflow of hydrocarbons through hidden cracks and ruptures from the depths. There are a lot of indications of oil inflow from the depths. In particular, there are a number of deposits in Tatarstan, where all reserves have already been extracted but the oil production continues.

The point of view on the genesis of hydrocarbons divided the defenders and opponents of the renewable oil theory. According to one version, the process of formation of hydrocarbon accumulations, including oil, is very long and takes millions of years, so rapid replenishment of reserves is impossible. Hence the inevitable recognition of the exhaustibility of resources, as mentioned, for example, in 2004 in a message to the president by the former minister of geology of the USSR, Yevgeny Kozlovsky: “Especially difficult is the situation in the oil industry: more than 70 per cent of the reserves of oil companies is being on the verge of unprofitability. The oil reserves of highly productive fields giving 60 per cent of the production have been depleted by more than 50 per cent; the proportion of tight oil (55-60 per cent) continues to increase.”

According to another point of view, in the zones of natural catalysts (located under each major oil and gas field) at a depth of 3-15 km, oil formation can occur at temperatures below 400 degrees. According to this theory, it is possible to explain the appearance of oil where, according to all calculations of the first theory, it should no longer exist: on the island of Haiti after the earthquake of 2010, in Tatarstan or Chechnya. MSU scientists also spoke about the renewable nature of oil resources back in 1993, stating that “oil and gas are renewable natural resources, and their development should be based on a scientifically based balance of hydrocarbon generation volumes and extraction opportunities in the course of field exploitation.”

The theory of renewability of oil and gas resources has been supported this year by Vladimir Polevanov, the chief geologist at Rosgeolekspertiza FSI, Doctor of Geological-Mineralogical Sciences, who said that it was important to focus the scientific community on the recognition of the phenomenon of continuous recovery of oil and gas fields and, as a result, the facts of inexhaustibility and indestructibility of hydrocarbons.

Current benefits will not be enough for shale development, oil prices are going to rise

Despite the renewability of oil resources, Renat Muslimov warns against excessive optimism:

“Of course, this does not mean that the oil we have is in abundance and everything will be easy. Every year it becomes more difficult to extract, reserves become less accessible and, therefore, more expensive. We just need to look for the best technology. But I absolutely do not see any catastrophic situation in this.”

New technologies, as noted at the last forum, are needed rather by oil companies with hard-to-recover reserves, which do not have super reserves, as Rosneft or Gazpromneft does. Should we support with tax benefits, for example, Tatneft, which is forced to develop these technologies? No, the academician believes. So far.

“Tax benefits are enough for today. But it will be different when we [Tatarstan] develop tight reservoirs, shale. Then we have to give benefits to these conditions. But with today's taxation, it is unprofitable to develop and operate them,” Muslimov says.

In his opinion, at the present time and with the present technologies in the case of more complex — and more expensive — oil production, its prices will only grow.