Tax policy will shape Russia’s oil future

The consensus among market observers is that the country’s oil output will fall in the long term. Yet few recognise how Moscow’s shifting tax regime is designed to keep the next barrel commercially viable

As Petroleum Economist wrote in September, it appears most observers are pessimistic about Russia’s oil production in the short term, doubting its ability to meet its rising OPEC+ quotas. In that article we disagreed, explaining why we think Russia can likely raise output back to 10.8m b/d in the short-term—a c.400,000b/d increase from October’s level. Although most commentators focus on Russia’s near-term production outlook, we think the conventional wisdom is also excessively pessimistic about the country’s long-term production potential. Our relative optimism on that matter is built on two foundational theses. First, Russia has abundant technically recoverable reserves that—taxes aside—ar