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Russia to cut export duty on ultra-heavy oil to stimulate production

Business Mir reports that the Russian government has decided to cut the export duty on ultra-heavy oil to a mere 10% of the standard rate for 10 years to stimulate production.

The decision on the so-called “10-10-10” scheme was made last Friday by the government commission on fuel and energy chaired by Deputy Prime Minister Igor Sechin. According to estimates, oil companies will save $100mn with current production levels and as much as $1.3bn if output of that grade increases according to Energy Ministry forecasts.

The decision will mostly benefit Tatneft, LUKoil and Alliance Oil, according to the report.

Natural bitumen (oil sands) and heavy oils differ from light oils by their high viscosity (resistance to flow) at reservoir temperatures, high density (low API gravity), and significant contents of nitrogen, oxygen, and sulfur compounds and heavy-metal contaminants, according to the US Geological Survey (USGS). The USGS classifies extra-heavy oil as that portion of heavy oil having an API gravity of less than 10°. Natural bitumen shares the attributes of heavy oil but is yet more dense and viscous. Natural bitumen is oil having a viscosity greater than 10,000 cP.

The USGS has estimated that Rusia has some 182 billion barrels of heavy oil (original oil in place, OOIP), and 347 billion barrels of bitumen. (Kazakhstan and Russia have the largest amounts of bitumen after Canada.) Recovery rates vary with technology and economic drivers; several years ago, USGS estimated that Russia had roughly 13.4 billion barrels of technically recoverable heavy oil and 33.7 billion barrels of technically recoverable barrels of bitumen.

Resources

  • Meyer, R.F., Attanasi, E.D., and Freeman, P.A., 2007, Heavy oil and natural bitumen resources in geological basins of the world: US Geological Survey Open-File Report 2007-1084

Comments

HarveyD

Wonder why Canada is not applying a 10% to 20% export duty on the 2.7 million barrels exported daily. Instead of applying an export duty, Canada is selling its crude oil from Alberta for a $15/barrel discount. It is pure non-sense.

SJC

This is why they want the Keystone XL pipeline, so that they can get a higher market price for the product.

HarveyD

Market price!!!!! that is so easily fixed, with or without a Keystone XL pipeline. One of the best way to get higher price would be with a large diameter Trans-Mountain pipeline + a new Pacific Coast deep sea port to ship that black stuff to Asian countries like China, Japan, South-Korean, India etc. A second similar pipeline could do the same for NG.

With high demand and potential higher prices, Canada could apply a Russian style export tax of up to $15/barrel and make a killing.

China is willing to fully finance the two pipelines plus a new adjacent highway. The $10+B cost could be paid back in a few short years with a $15/barrel export tax on crude oil and a similar export tax on NG.

SJC

Then that is what they should do, just convince the native people and the BC government that this is in their best interests.

Stan Peterson

The Obamunistas don't want America to get the security of a safe and secure oil suupply, nor the added value of refining the heavy oils of the Alberta tar sands.

Let the Canadians give it to the Chinese instead.

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