The Russian Ministry of Energy made a proposal to the government to include only non-recovered oil into the state reserve. According to Ministry of Energy officials, forming a reserve from oil that has already been produced is not practicable due to the high cost associated with the construction and operation of reservoirs. In the view of industry analysts, the government’s plan would envision setting aside several non-producing oilfields that are not being actively explored by Russia’s state-owned energy companies.

Minister of Energy Sergei Shmatko noted that the government’s idea of maintaining an emergency supply of oil is based on a broad definition of the word “reserve.” The Ministry currently expressed recommendations that at least ten fields should be designated as Russia’s reserves. Two of the fields on the list are the Trebs and the Titov oilfields in the Nenets autonomous okrug.

The directive to develop a state oil reserve came from Deputy Prime Minister Igor Sechin last June. At a time of high fuel prices, maintaining substantial reserves would allow for a lower cost of oil outside of Russia. With the onset of the global recession, discussing Russia’s plans to set up an oil reserve shifted to the international arena. The issue was raised with OPEC at the end of 2009. Under current circumstances, the position of the Ministry of Energy that only non-recovered oil should comprise the state reserve is not likely to be altered. Construction of additional reservoirs for permanent storage would be high.  

Oilfields that have not yet been distributed to Russia’s energy producers will comprise the reserve. The Russian government does not expect the allocation of oilfields to have any reflection on the price of oil on world markets. According to RusEnergy representatives, the government will essentially freeze the development of oilfields it chooses to include in the reserve.

Russian company LUKoil stated that it does have significant interests in the Trebs and the Titov oilfields in the Nenets autonomous okrug.  Company’s spokesperson indicated that LUKoil’s management is puzzled at the government’s decision to allocate the two fields for the reserve. The head of LUKoil Vagit Alekperov does not agree with the Ministry’s decision.

According to economic analysts, the allocation of oilfields for the state reserve might not be of any real significance at this time, since very little interest has been demonstrated on the part of energy companies. In the first several months of 2009, only 10 percent of auctions planned for the distribution of oilfields actually happened in Russia. No bids were made for other fields initially assigned for distribution.