Russia takes a leaf out the U.S. shale oil playbook

Russia is taking a leaf out of the U.S. shale playbook so it can ramp up oil production quickly and hang on to its share of the global market when demand finally recovers after the coronavirus pandemic.

At least two state-owned banks, Sberbank (SBER.MM) and VEB, plan to lend oil firms some 400 billion roubles ($6 billion) at effectively almost zero interest rates to drill about 3,000 unfinished wells, officials involved in the scheme told Reuters.

Once oil prices recover, the wells can be finished off faster than starting from scratch so Russia can get its output back to levels reached before it agreed along with other leading producers to cut supply because of the fallout from COVID-19.

U.S. shale producers tend to drill but not complete wells when oil prices are low, rather than freezing all activity, so they can finish off the wells and quickly boost production when demand picks up.

While Energy Minister Alexander Novak said last week how much would be invested in the drilling programme, details of how the scheme will work, the number of wells and by how much oil output could increase have not been disclosed.

Russia pumped an average of 11.3 million (bpd) from 180,000 wells last year, according to the energy ministry. Since the OPEC+ deal to curb global crude supplies, its output has fallen by 2 million bpd, Novak said last week.

Russia takes a leaf out the U.S. shale oil playbook, Reuters, Jun 24