Updated August 6, 2008

According to the new basic version of Conception for long-term social and economic Russia’s development by 2020 published by the Ministry of Economic Development and Trade (MEDT), after Urals oil price reaches its maximum in 2008 it will be falling within the nearest 3 years and attains $88 per barrel by 2011.

The institution employees link "black gold" price drop to the forecasted capacities launch of oil extraction and refining, investments growth into scientific researches and the industry development, as well as weakening of the speculative situation component and deceleration of the world demand growth. "It is assumed that within the next years expenditures growth related to the decline of extraction conditions will determine oil prices growth outstripping inflation level by 1-2%", as it is said in the institution document. "In terms of this, by 2015 oil price growths to $97 per barrel, and by 2020 – to $116".

On the other hand, according to the MEDT forecasts, at the turn of 2020 the role of alternative fuel sources, including bio-fuel, grows rapidly, and in terms of that demand for hydrocarbons can go sharply down. "Due to that fact, both scenario of sharper oil prices drop from 2009-2010 (price cuts to $75 per barrel by 2011) and tendency keeping of their growth – to $130 per barrel by 2010 – are quite obvious", as say in MEDT.

Forecasts of Veles Capital Investment Company analyst Dmitry Lyutyagin quite differ from the MEDT calculations. The expert supposes oil attains its minimum at $90-95 per barrel by 2012 only, and then a fundamental growth starts. In the specialist’s opinion, in the lapse of time "black gold" will be deeper processed into various synthetic substances, and alternative sources will be used as a fuel.

As Financial Bridge Company analyst Dmitry Aleksandrov supposes, the MEDT calculations have little grounds to rely on them. "Oil price is an unstable value influenced by the range of factors. An error in forecasts can attain around 25%", as the expert marks. On the other hand, he is impressed by the MEDT realistic look that puts a negative price dynamics in the nearest three years in the conception.

Dmitry Aleksandrov considers that in the future the majority of oil companies will follow Novatek example that now develops project on bio-etalon production in the USA. "But everything will depend on demand for the alternative fuel sources: the more scale orders will be, the faster this industry develops. At the moment, alternative sources are just a future prospect".

"The conception was based on a supposition about keeping the current world situation demand and economic interrelations, therefore it is impossible to say whether such long-term forecasts will be realized without factors’ sensibility analysis", as Alora Company analyst Boris Peleshko comments. "However, nothing interferes with them now, and energy and primary development option at least is quite probable".

According to the MEDT calculations, by 2020 oil and gas extraction in Russia grows by 9% and 35,2% respectively, as compared to the 2007 indices. "Extraction growth determined by the conception can be fully realized with two factors", as Dmitry Lyutyagin marks. "First, it is tax remissions for oil companies. Second, infrastructure development in the regions where resources are extracted".
Dmitry Aleksandrov marks that, according to the figures, the forecast is somewhat lower, as compared to benchmarks it has been going about last winter. "Obviously, the MEDT has taken account of extraction drop in 1H 2008. Indices growth will be mainly related to new deposits launch in Eastern Siberia, on shelves of the Caspian Sea and Sakhalin foremost", as the expert marks. The analyst finds the MEDT forecasts are moderate and optimistic.