Top move: Russia has ensured extended reproduction of gas reserves ahead of schedule
In 2025, due to geological exploration works, the increase in recoverable gas reserves by industrial categories is planned to be at least 645 billion cubic meters, the press service of the Ministry of Natural Resources told Izvestia. In the first 10 months of 2024, it amounted to 788.5 billion cubic meters, exceeding the expected annual production. What are the reasons for such indicators and what figures Russia should reach by 2035 - in the material "Izvestia".
Increase in volumes
From 2019 to 2023, based on the results of geological exploration, the increase in recoverable gas reserves for the sum of all categories amounted to 6.4 trillion cubic meters. In the first 10 months of 2024 - 788.5 billion cubic meters, the press service of the Ministry of Natural Resources told Izvestia.
"In 2025, due to geological exploration works, the increase in recoverable gas reserves by industrial categories is planned to be at least 645 billion cubic meters," the ministry said.
The growth of recoverable gas reserves is primarily associated with active geological exploration and investments in exploration, noted Fedor Sidorov, a private investor and founder of the School of Practical Investment. Thus, in 2023, the increase in natural gas amounted to 705 billion cubic meters, and for the incomplete 2024 - already 788.5 billion.
- The growth rate of recoverable gas and oil reserves is very important for the economy, whose income depends on the sale of natural energy resources by 40%," the expert told Izvestia. - The data update always affects the world stock quotes, just as the corresponding reports from the United States reduce oil prices.
It should be noted that the recoverable reserves are only a part of the actually discovered ones, as it is always necessary to answer the question of how profitable the development will be.
According to the State Commission for Mineral Reserves (SCR), more than half of the recoverable reserves are qualified as TRIZ (hard-to-recover), which means that production at these fields will be expensive, resource- and technology-intensive, and the cost of such gas will always be higher compared to conventional reserves.
- Technologies and equipment are the main sticking point. As a result of sanctions aimed at destroying the gas industry in Russia, foreign companies do not want to be subjected to secondary sanctions, and their own resources and equipment are not always sufficient. Although a lot has been done in this direction over the last five years (in particular, the production of high-tech pumps was fully localized in Russia in a short period of time)," Fyodor Sidorov stressed. - The volume of recoverable reserves that will be discovered next year depends entirely on the investment planning of gas companies. We believe that the increase will be lower.
Different estimates
Estimates of world gas reserves have a significant range of discrepancies and depend on the estimation methodologies used. They may include proved, probable and possible reserves, among others, and range from 173 to 188 trillion cubic meters. According to the May 2024 data of the State Commission for Mineral Reserves, Russia's recoverable gas reserves amounted to 67 trillion cubic meters. In addition, technologically recoverable and economically recoverable reserves are also estimated.
- In 2024, there was an increase in gas reserves due to new and existing fields located in the Arctic zone, on the sea shelf, and in Eastern Siberia. If the existing cargo flows are maintained until the end of the year and payment systems for export gas supplies are optimized, the estimated growth of gas production in Russia in 2024 may reach 8%," Tamara Safonova, associate professor at the Institute of Economics, Mathematics and Information Technology of the Presidential Academy, told Izvestia.
The production growth is connected with the low base of the last year, the growth of gas consumption inside the country and the expansion of supplies to the East, says Lyudmila Rokotianskaya, a stock market expert at BKS Investment World. Next year, according to various estimates, production may grow by 2-4%.
Gas prospects
The fact that recoverable gas reserves in our country are growing faster than production corresponds to the Strategy for the Development of Russia's Mineral Resource Base until 2035, according to which the increase in reserves by the end of the planning period should be 50%, said Evgeny Smirnov, Doctor of Economics, Professor, Head of the Department of World Economy and International Economic Relations of the State University of Management.
- At the same time, gas production is expected to increase in 2024, while in 2023 this indicator was declining," he pointed out.
Global gas supplies have recently become more complex due to new geopolitical challenges, but global gas demand has been growing rapidly in 2024, while gas supply remains constrained by weak growth in liquefied natural gas (LNG) production, as the relevant additional LNG capacity will only come on stream globally in 2025-2026.
- Russia, despite the difficulties of recent years due to the termination of supplies to Europe, is gradually adapting to the new conditions and will strive to continue redirecting its gas to alternative markets," Evgeny Smirnov explained to Izvestia.
However, according to him, new LNG projects will play a major role here, and their commissioning ensures a significant part of the production growth today. In general, prices on the world gas markets remain very sensitive to sudden shocks in supply and demand, so gas prices are still high. Russia is taking advantage of this situation by starting to develop reserves that were previously unprofitable to exploit at lower prices. Thus, consistently high (and rising) prices on world gas markets ensure an increase in recoverable reserves.
- An important marker of gas prices on foreign markets is the termination of Russian gas transit through Ukraine at the end of 2024. It has not yet ended, but gas prices in Europe are already rising, reflecting the increased demand and extra gas withdrawal from underground gas storages in anticipation of transit termination," said Evgeny Smirnov.
Thus, in his opinion, it is highly likely that in 2025 Russia will easily ensure the expanded reproduction of gas, even if its production grows faster than in 2024. The complicated geopolitical situation in other regions, growing demand for gas in Asian markets, and competition between Asia and Europe in the LNG market will also reinforce the upward price trend.
Even in the medium term, gas prices on the global market will remain high, as global LNG supply chains are being restructured, are not flexible and are still struggling to adapt to the current shocks (trade across the Red Sea has practically stopped). It remains unclear how gas demand in Europe will be met, as there are no guarantees of stable LNG supplies from the US, and Europe has almost no reliable alternative routes for importing inexpensive gas. That is why the share of Russian LNG in the European market is growing, the expert believes.
- If sanctions are imposed against it, it will further weaken the market, and prices will continue to grow," Smirnov added. - In general, taking into account the expected increase in competition in the global LNG market in the next five years, as well as the shortage of pipeline gas (Russia will eventually shift it to Asian countries), gas prices will steadily grow until 2030, creating more and more prerequisites for increasing recoverable reserves," he added.
