Natural Resources Minister Alexander Kozlov: Companies focusing on geological exploration in oil- and gas-rich areas, additional exploration of deposits in Russia
Alexander Kozlov
Photo: Press-office
Companies extracting mineral resources are providing a significant share of revenues to the Russian budget. Changes in geopolitics and economy cannot but affect domestic subsoil use where the priorities in geological exploration, production and processing are being adjusted, and financing parameters are being revised. Russian Natural Resources and Environment Minister Alexander Kozlov said in an interview with Interfax at the Eastern Economic Forum what trends have emerged in subsoil use over the past two years, how they affect the physical volume of geological exploration and how Russia intends to renew its mineral resource base.
Q.: The Russian economy has been largely restructured over the past two years. How much have the priorities in the approaches to subsoil development by both the government and companies changed over this time?
A.: The top priority has not changed, as it is essential to ensure the country's technological sovereignty. That is why we are focusing on "high-tech" raw materials in developing the mineral resource base. The demand for technologies, including green technologies, is growing all over the world. We need battery metals, raw materials for producing conductors, hydrogen and solar energy. There are also special alloys for the production of computers, healthcare, space and nuclear industries.
As Russian experts say, the demand for niobium will triple by 2050, for zirconium and tungsten it will rise four times, for graphite 11 times, and for lithium 80 times. We have the richest mineral resource base, in particular, we have 17 world-class lithium deposits, we account for 27% of the global production of platinoids, control 22% of the world's reserves of nickel, 13% of cobalt, 15% of titanium, 12% of tungsten, and 9% of copper. The country has substantial reserves of rare earth metals. It is essential to launch projects for mining and processing of raw materials required for the economy as soon as possible.
Q.: Does the Natural Resources and Environment Ministry see any new trends in hydrocarbon exploration amid the long-term restraint on oil production and a major reduction in gas exports?
A.: The fact that subsoil users are currently concentrating their operations in areas with proven commercial oil- and gas-bearing capacity and are additionally exploring previously discovered fields is turning into a clear trend.
However, the government's objective is to secure the renewal of the mineral resource base and create an exploration reserve for the future [promising areas for exploration]. The country has huge oil and gas reserves, but vast prospective areas for hydrocarbons have not been explored. We believe it essential to step up geological exploration in such areas. These are the Arctic shelf, Eastern Siberia and the Far East. Another trend is to explore and extract hard-to-recover reserves. Companies are realizing this objective and are preparing for the start of a new investment cycle here.
Q.: Russia is voluntarily reducing oil production as part of the OPEC+ deal. How does this fact affect subsoil use?
A.: We do not see any significant impact of the OPEC+ deal on the Russian budget revenues and companies' operations. Subsoil users make decisions to halt wells with low production rates that are operating on the edge of profitability.
Q.: Due to redirecting Russian raw materials supplies to the Asian market, how much has the volume of geological exploration shifted to the eastern part of the country?
A.: In terms of hydrocarbons, Yakutia is of great interest, where 11 deposits have been discovered over the last six years, including five large deposits. There are underexplored promising areas in the region. In accordance with the Geology - Revival of the Legend federal project, work is concentrated in the central and northern parts of Yakutia near the Lena river, a major navigable artery. This is convenient for loading the Northern Sea Route and exporting gas to the Asia-Pacific region. Hence, a new hydrocarbon raw material center is being formed.
The Natural Resources and Environment Ministry is working on extending the Geology - Revival of the Legend federal project until 2030, where we will include a large volume of hydrocarbon exploration work in Yakutia. In the future, this will make it possible to load the Eastern Siberia - Pacific Ocean, Power of Siberia and Power of Siberia-2 oil and gas pipelines. And most importantly, this will enable the gasification of cities and industrial centers in Siberia and the Far East.
As far as solid mineral resources are concerned, the focus is on the Far Eastern regions. We believe that the discovery of large and economically efficient deposits is most likely here, especially since the Far East traditionally accounts for 65% of subsoil users' investment in exploration for solid minerals. The federal center annually allocates at least 40% of the funding for solid mineral resources exploration to the Far East.
Q.: What are the preliminary results of implementing the plan for the renewal of the mineral resource base in 2024? Will the goals set for the year be reached?
A.: Six hydrocarbon fields that are small in terms of reserves - five oil and one gas condensate - were discovered in 2024 as a result of geological exploration at the expense of subsoil users. All the fields were discovered in the Volga Federal District. Active work is continuing this year, the overall growth of reserves in the country in the first half of the year amounted to 47 million tonnes for liquid hydrocarbons in all categories combined, and 567 billion cubic meters for natural gas.
For solid mineral resources, we usually record the largest increases in reserves closer to the end of the year. As of today, we have a significant increase in gold reserves at deposits in Yakutia (up 198 tonnes), Krasnoyarsk Territory (up 55 tonnes) and Khabarovsk Territory (up 35 tonnes). In total, geologists have discovered 94 new deposits since the start of 2024.
The progress of geological exploration work shows that targets for renewal of the mineral resource base for 2024 will certainly be reached.
Q.: The total volume of geological exploration in Russia in physical terms tends to decline. What do you think - when and under what conditions may this indicator switch to growth?
A.: If we talk about the volume of funding for geological exploration of hydrocarbons, it has increased more than 6.5-fold over the last 20 years. In recent years, it has averaged 315 billion to 330 billion rubles annually. At the same time, subsoil users account for the bulk of financing, while the share of the federal budget does not exceed 5%.
As for physical volumes of geological exploration, I would like to say that they are stabilizing. The average annual 2D seismic survey covers 14,000-15,000 linear kilometers, which makes it possible to prepare promising structures in sufficient quantity. The 3D seismic survey is carried out for 25,000-35,000 linear kilometers. Therefore, there is no marked drop in the volume of hydrocarbon geological exploration at the expense of subsoil users.
As for solid mineral resources, subsoil users are showing a positive trend year after year both in terms of funding and physical volumes. We are expecting investment in geological exploration to rise 20% year-on-year to 92 billion rubles in 2024. There are plans to carry out drilling operations for up to 7.4 million linear meters, up 46% year-on-year, and mining operations for up to 23 million cubic meters, up 46% year-on-year.
At the same time, budget financing will remain approximately at the current level as compared to 2023, which is around 4.6 billion rubles.
Q.: As part of the Geology - Revival of the Legend project, a program of subsoil exploration in the Siberian Federal District and the Far Eastern Federal District was being elaborated separately. What are its priority assets?
A.: A group of promising assets in Yakutia is considered as a priority, including tungsten ores in the area of the Agylkinskoye deposit, uranium in the Elkon ore district, and diamonds in new areas in the republic.
Uranium deposits in Buryatia, Trans-Baikal and Krasnoyarsk Territories, porphyry copper deposits in the Khabarovsk Territory and the Magadan region, and polymetallic deposits in Tuva, Trans-Baikal and Altai Territories are also among the priorities.
We have recently completed coordination with the Economic Development Ministry on the parameters of funding for implementation and economic effects for the state. We are currently working with the Finance Ministry on financing parameters.
Q.: What are the prospects for developing the oil and gas province in northern Krasnoyarsk Territory? Are those huge resources that were announced earlier confirmed by drilling?
A.: The potential development of northern Krasnoyarsk Territory directly depends on such an ambitious project as Vostok Oil. Today the estimate for the overall reserves of the project exceeds 6 billion tonnes of light, sweet oil. According to the results of geological exploration work at the project, there is no deviation from the previously announced indicators. There are plans to put the first two fields of the project, Paiyakhskoye and Ichemminskoye, into commercial development in the near future.
The drilling of the Novoyakimovskaya parametric well located 400 kilometers east of the Pyaiyakhskoye field was completed in 2023 as part of regional work financed by the federal budget.
Productive Achimov suite formations similar to the deposits of the Paiyakhskoye field were discovered. This makes it possible to significantly increase the prospects of this region. Prospective targets in the completion string are now being tested.
Q.: At what Caspian structures will exploration and appraisal wells be drilled this year?
A.: Deep-sea drilling is not planned in the Caspian Sea in 2024. Conducting only geological and geophysical operational analysis and integrating drilling and exploration results for licensed areas in the Caspian Sea are planned.
Q.: Is exploratory and appraisal drilling in the northern seas planned this year?
A.: Yes, in the Kara Sea.
Q.: Do subsoil user companies ask for some new gas areas without an auction, in particular, in the east of the country, where intensive development is underway?
A.: In recent years, there have been no initiatives from subsoil user companies to grant subsoil areas with gas fields on an auction-free basis. On the contrary, companies are actively taking part in auctions as the main form of licensing new areas.
Q.: Gas reserves in the Kamchatka offshore and onshore areas have not met expectations. Is exploration there still ongoing? Is there any hope that Kamchatka will be able to supply itself with its own gas one day?
A.: Kamchatka's own gas reserves are currently estimated as moderate. The government has endorsed a roadmap for gasification of the region through LNG supplies. Kamchatka has enough other advantages for development, such as aquatic bioresources, and the region is increasing its share of deep fish processing.
I think that eco-tourism is a promising area for Kamchatka. For example, last year, thanks to the repurposing of the Professor Khromov research vessel, ten cruise voyages were made, including those to Kamchatka. This year, 12 are already planned, with southern Kamchatka also included in the program.
Q.: Have there been any major gold discoveries since the beginning of 2024, either by subsoil users or in the undistributed fund?
A.: In the first quarter, the gold reserves increased by only 4.9 tonnes. But so far the Sabylyg deposit in the Magadan region with the reserves of 12.9 tonnes of gold has been placed on the state balance sheet. The reserves at the Gross deposit in Yakutia grew by 198 tonnes, at Eldorado in the Krasnoyarsk Territory by 55 tonnes, and at Krasivoye in the Khabarovsk Territory by 35 tonnes.
