LONDON, May 13 (Reuters) – Russia has the potential to keep increasing its oil output at a rate of 2 percent per year as long as it establishes a stable tax environment to attract the necessary foreign investors, a senior TNK-BP official said. Russia’s oil production has steadily been increasing, and production from green fields will be necessary to maintain that growth, said Jonathan Kollek, TNK-BP’s senior vice president of sales, trading and logistics.
“There are enough (potential) new projects to sustain the growth of about 2 percent per year of the entire Russian production,” Kollek told an oil conference in London.
But the projects will require increasingly sophisticated technology that is not now available in Russia, he said.
“The question is: Will it materialise? Will people really come to invest and try to develop it, and will they do it in the right way? Because the more we go, the more complicated it is, the more technology you need and the more difficult it becomes.”
Maintaining Russia’s mature fields will also need the participation of foreign companies, he said, describing the decline from those fields as worrying.
Meanwhile, heavy taxes, nearly daily government intervention and the lack of consistent incentives are scaring off many foreign investors, Kollek said.
“You need to have transparency and a robust system which does not have last-minute changes all the time.”
Kollek said TNK-BP, the joint venture with BP, has recently had a tax break taken away worth $450 million for the Verkhnechonskoye oilfield, and its rivals have had similar experiences, he said.
In April, Russia’s crude oil production totalled 10.26 million barrels per day, Kollek said, much more than Saudi Arabia’s 8.5 million bpd production.
Saudi Arabia is still the world top exporter, selling most of its oil overseas. Russia consumes about half its output domestically and exports the rest.