"At the current level of production, (Russia's) reserves will have been used up in around 22 years," says a report by the Berlin-based German Institute for Economic Research (DIW) released Dec. 4.

Russian experts are unanimous in their reaction to this gloomy German forecast. They say this is "nonsense and distortion of reality."

The report claims that although Russia is the second-largest oil producer (9.7 million barrels per day) after Saudi Arabia, it holds only the seventh place for proven oil reserves (6 percent to 7 percent of the world's total).

German scientists point to such drawbacks of the Russian energy policy as insufficient investment into increasing commodities production, inadequate energy-saving technologies and low domestic energy prices, which results in mindless burning of hydrocarbons.

They say that Russia must do something now to improve the situation and reassure Western Europe that hydrocarbon supplies from Russia are reliable.

According to the German institute, the EU imports 29 percent of its oil and one-third of its gas from Russia.

Russian oil and gas experts said the gloomy forecast was not true, despite problems in the Russian oil and gas sector.

Timur Khairullin, an analyst with the AntantaPioglobal investment group, described the report as inaccurate. He said that Russia has enough oil for at least 30 years, and the situation in its commodities sector is not deteriorating year-on-year.

Russian oil producers conduct enough prospecting and exploration to replenish between 70 percent and 80 percent of their reserves, which keeps the reserves-production ratio at a stable level.

Khairullin said Russia's seventh place in terms of proven reserves was not a cause for concern. As much as 60 percent of the global oil reserves are located in the Gulf countries, which have enough oil for more than 70 years, he said. However, Russia leads the world in the amount of gas (more than 25 percent of the total).

The pace of oil production in Russia has been slowing down by 2 percent to 2.5 percent annually in the past three years (it grew by 6 percent to 11 percent in 2000-2004), because companies spend only 1 percent of their revenues a year on exploration and the basic deposits in western Siberia are becoming depleted.

But Russia is establishing new oil production centers in eastern Siberia and the shelf, where it offers tax privileges. It is also building the East Siberia-Pacific Ocean pipeline to transport oil from these fields to the rapidly developing Asian countries.

Khairullin said that high oil production and export taxes would hinder a substantial growth of production in Russia in the next few years.

Valery Nesterov, an analyst with the Troika Dialog investment company, believes the replenishment of oil reserves is a problem in Russia. More funds are being invested in oil production at the depleted fields in western Siberia, but this has not increased the production of the local low-quality oil.

However, it is not right to say that Russian reserves will have been exhausted in 22 years, Nesterov said. Many large Western companies have oil reserves that will last only 15 years, but they are replenishing them every year. Russian companies have enough oil for 20-30 years and are currently replenishing their reserves by nearly 100 percent.

The analyst admitted that oil exploration was stalled in the early 1990s, when oil production was turned over to private companies in Russia. He said exploration should become a government task. The Cabinet has approved a state program for developing the mineral sector, which stipulates the replenishment of reserves, and licenses are being issued for the eastern Siberian oilfields.

Nesterov does not think that Russia should increase production at all costs. We should leave something to the future generations, he said.

Oil production has been growing at 2 percent to 2.5 percent in Russia, whereas the global figure is 1.5 percent to 2 percent, and has been the same for years thanks to the efforts of the Organization of Petroleum Exporting Countries. The oil cartel, set up to uphold the interests of oil exporters, is doing its best to prevent oil prices from going down.

The DIW report reflects the fears of consumers that Russia will be unable to meet their growing hydrocarbons requirements. They have an alternative -- look for other options, such as alternative energy or still more effective energy saving technologies.

(Oleg Mityayev is an economic commentator for RIA Novosti. The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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