CIA FOu.. - THE IMPENDING SOVIET OIL CRISIS (ER 77-10147)

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THJI:IMPENDING SOVIET OIL CRISIS (ER 77­10147)

[THE IMPENDING SOVIET OIL CRISIS (ER 77-10147)

Irltelligel1ce J\1emord.l~dum

The I1npending Saviet. Oil Crim

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CIA FOr! - THE IMPENDING SOVIET OIL CRISIS (ER 77-10147)

NATIONAL SECURITY INFORMATION

UnquthQri;tcd Disdo$l,1re Subject '0 Criminal Sanctions

Page 2 of 12

I·"S~·crct--'

~~ 77·10].1.7March 1977

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lllC' Impending Sov/CI

Oil Crisis

--..-----..-------

, The Sovkt oil jnd~lstry Is in trouble. Sm·jetj oil producthln wiIJ ~()()11 peak,, po!:.'iibly liS e<lrly lIS [ICXt ,'year Elnd 'c~ftain[y not !(j(cr th;\n the {~ar1y I 980s. The

maxiLnum level of output tcn..:::hed Is likcly to be lJ1twccn I [ and 12 million b:HT(;[S

' per <1<11(bld)-up from the J 976 Icvd of 10.4 niUlion hid. Maximum Icvl'1s tiro

" not: Hkely to he maIntllIncd for [Orl!!. !however, ahd the declin~. wh.en it ram cs.will f~ !iharp. 'I i

. !The Sov1c[s Imvc two bask probkms: Qne ofrcscrves :md onc of pmductiotl.

~ B:J'rlioB an extremely unlikely disco\'crY of a mnssi~'e r.cw field <:lose to ;In existing

fidd. ncw dCPQ~iI5 wilt not' he fou:ld ";ipidly ~r.Q\!~11 to ma::1t;tin ;;ccept:Jblc

~scrv~Ho'production ra'jo~. PIHl InoslI fjdd~ th3t f.(:count ror 111(;bulk of $ovic [

producHQn are experiencing sevc,~ water cl1crollchmcf\t. As I: resuit, ir;(':xDStH~:Y111!,gcquantttlcs of waler mU5t be lifted for cfld~ bllrrd or oil pwdu(;cd, IIl1d

rugh-capadty submersible plImp~~{)b!!lil1ilble pnlr from th~ United States-will he

r!:qui~d if Prouuclion dccHm:s ~rc to. be st::\\'cd' off c~':m tcmpo[;Jril}'.

Dudn!:! the Ih::<t dl.!cudo. tr.c USSR muy well find lt5clf no. mdI' Imub1c tll

sU;1ply oiJ to. Ecs(crn Europe Ilrld the West o;~ the "resent sC;JI~. bu: :1[,0 hiJvif1f,

10 wmpetc for OPEC {Jil far its owrL use. -nItS would be <l m::1fked Ch3:1!;C from

the current situatian, in which cxpori~ of oil to [he West nl1rUl:Jlly pravide- 4U

pe-tCC:l( of totll' Sovict hJrd curn:r.cy er-rn1nB>. The USSR It:!s brg~' resem:s 0,' _

cou] and !1ll!l.lrnl ~as, but, tJ1051: sch~dulcd for exploitation ov!:; thc IlC); t dec;ldr.

;If': cast 0.1' the Um]s, rm" pom cOf1~tlrning ccntcrs in the W,'s(eln USSR. Dist<!t1cr..

cl in~;)[e, cmI tc mitt wiil rtwkc exploitation and tn1fiSport dif,icu(t and CXp~rtsh.t"

Exports of gas ••••·ill incrcils(:. bllt will no! e(!mpc~I~;;[(,'for the lus.s or c;!rI1iaJ,'!: from

th(' eXiJort of oil. A1thQugh somc :WbstitlltiQIl of C(1a] und !::IS (or oil in aOJTI(',t[c

U~~ will bIJ pO:>sibk It! !I'(\!DJ1g HIn. Iho ('ffcct or sLlch 5r;bstJI1I(/or: will he rnklimld

Null,!: CO!T1f!l'" 11t· '''''3 qucrlcs n,'l~Llrdlt)g tltl" l11emD:andlill: ilrc Wl'kn Il1C, Th(')' IU;'''h., directed IQ

lite Offic:: of Ecmwmk: Re.<;t~":ch

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.~

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tn the shon run. Neither hydrocll!ctric power tr[]t1smlncd from the cust nor

c(mstrllction of nudear cledtic plants (mahlly in thi:' westcrn USSR) can be

expected to nfford fnt.1ch relief in the: Sovlct energy situation for r~()fi~ than :1d{'cade.

,

----

The Problem

L Unlike the United StQIL's. whkh has long restricted production for rea~On5

of conservation and profit. the USSR ~avQrsu forced draft appro:Jch. Short-termnt'rr......r.ilro':",n ""....,t~ no •• n •...AH.~r .•~•••••_ •.• n W'Y"O _ ••••••••.••••••• Jr! •... ..J __ • ..i. _

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1··'Vu"' •••••.• " 015"'''''' •.•, •• ""U"~I ••••.••I,;U IIVU,". JlU~ \;!;Hlngs, lino rcwaras are given [Or

cKccedll1!: them with (HUe regard to productivity over the longer to:ran. Und"1' these

conditions, Sovi~t productlon has expanded much morc rapidly In the last 20 yearsthlln that of the United States.

Soviet and US Crude 011 Production1I11l101 BrD

I~

fIGURE 1

D

1Bse 80 815 70 " 76 no 811l-- proJltCtl'd--"

2. The Soviet stnkhllnovire :.Jpproach has led to (a) :!I'I emphasis on

development drming ovcr CXplOflllion. with thc rcsult thut new discoveries arc failingto keep pl\CC with output growth: (b) O\'crprodLlctJon of existing wells und fields

through rapid water injection nnd other methods. with the res\J(t that less of the

j)il In place is ultimately recovered; IInd (c) new capadt)\: requirements that soon

will run f!if beyond the Soviet 011 indu$try's cnpubility, Efforts to further im:reilsc

productIon-such 1111Ilrc dcri'umdl!d by the gOllts of the reccntly annoLlnced S;ycor

plan-clIn only worsen the :dluatlon und mnk\! Iho Cycntulll downward slide morcrnpld.

L

~J

USSR: PtlJdm:lion of Crud~ Oil.'by Rt'gloll

MnUan Dnrnb 1'1<'1 DDl

CiA F.stlm~tc:.s

or Puk Oul~19&0_1;70

1975 .COli ITOI;\I

.1.069.8212.80Wcskrn region and Unll$

! 5.806.005.71. Urnls- Vol!:1I,

: 4.17

~~~ )

NATllrtnr .' .2,0 I

DlIsnklt0.8(0.812.8S

Kllybysltev0.700.69n___,

. I:.f!gb Law..:.

tU11.0

5.64.9

4.13.:5

L.S1.9O.r-

0.5

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n:rm

Orcn bu rx

wWl:r VolgnUdmurt&nllov

!kJorus.11"

Cnuc:ns.us

lv.~fb31'd7.h31\Ukflllne

Otbcr

Kornl :lOd Arklumgel'skEutem r~glon

West S!bcr.13

Cenlrlll Ad::!

MiJl'ip-s..'IIlIk

ErnbaTurkmcCl

OllwrSnkhlllln

Other

j,. IrwllloJillJ ~I eon~n~E~.j

U.:.J;Z

0.1 5, 0.14

0.010.030.080.690.410.1:7

O.Oj0.151.260.630.58O.2t

O.OS

0.29O,QJ

: 0.05

. Nest

U.450.140.140.070.030.160.470.350.230.07

0.223.822.Q6

0.82

0.40 }0.080.31

1

O.OJ J

0.04

N~gI

0.62, 0.6

0.6

1.74 i 0.2 )

OJ j

0.4;).2

Ne!!!(!.SO; 0.41.09: 6.16.16; 5.2Ni\. 0.9

0.54

0.28 .i.

O.II}' 0.1

05

0.4

1.0

0.4("IS.l0.8

0.1

I

3.: As the ruUtl of resoryt! 10 output hus f{lUen, the bulk of SO'o'kt OI,l(I'I(lt

has come Increaslng!y from Odd!! npprotlching ckhtlusUon. Tbo rc~;ult IIIIS been o.n

Dc~cleri1tion or drillirtg rCClllircment~. whkh wil! !evel oN' or decline onl)' when-and

If-v..:'ry ·!tlr~!,) new nflditiOfl~ urd mude to the producing reserve bl1sc, llH~ SOIt'i~t.s

51>.:o:lkof this prOblem In terms br fhe depl~tion of(.<;ct-thc umollot of new CII/lllcity

rcqilit~d 10 oft'sct dr:j'lll'1ion of old ('u]lm:itr In c.nch S-ycor plnn p~rlod.! :

4. During the 1961·65 pl:m period. ol1ly Ij l11il!Jojt bId (67 mi1lion hms

per !/\'ar) of c~rJlH;111' had to be rcplac.:d, In 1971-15,5.1 million bl<! (254 miliim1

tQn~ per y~ur) of f'CIII,lcclfll:nt cnpndty. Wjl,.'I required b\!C1lll~r: of mph! dcplctJon.

Viewed in. Linother WLlY, about 72 ~rccm of 1970 cllpuciry h"d to b<: rcpla~edby the end of 1975. 11111 target for the 1976·80 plun is 10.6-/0.8 million bId

{S30-S40 miUion tOrts per ycarLof new, capacity; 7.8 million b/<J-cq:!ul t.o IIboutBD. percent of the c:!podty on !in., In .t975.-i!tlo 1?rf~el dcpTi:t!on. If dcph:tion

Is more rapId thu!! the SOViets expect-nnd. based olflhclr-past record, it maywdl bu-oonsidcrably more of thc 1975 capacit):wHl have to be replaced.

5. There is unccrt;\inty :!bou[ thc Si7-C I,f thc USSR's r~crvcs. becausc ofdefinition:!1 problems as welt as Soviet sccrr::y. Our best estim:Hc is that Sovietproved rescrves are )D-)S, billion balTcls, rOl,lghly comparable with those of the

United States. There is tlO doubr that Russinn proved reserves have bccn ramng

in recC'nt yca~. and tbere is very little chance that cnouWllicW oil will be discovcredduring the next few y<.',m to apprcci:Jbl>' improve tile rcscrves-ta-production ratio.Inde-cd. despite rncJor efforts it wHl probably dctcriotrltc further.

6. AlthDUgh Ihe USSR has nbund.mt potcnti<ll tcscrves in Arcti~. Easl

Sibcri.:m. and offshore arcaS. development of such rescrvcs is at least a decade away.

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Thu~.· during the ncxt 8·10 yellPl. almost all Soviet OUll1tH will Imllc 10 come from

existing fields cnd from new fields in C~ ~srin8 producing rcs:iol'\$.

The Outlook f(lt OL.ltput from Exhtirlg Production Rl.'gluns

7. ,r:,.om World Wllr U through 1970, the wowth In'Soviet oil output came­

either from the Caspian fields Of. ofto'r the mid·19SOs, from Inr~~ fields in the

Urals·Volgn rt!l):ion. Since ,1970. "e!lft~ :111output growth hns comc (rom West

Slbcrill, primarily from the idant SnmoUcir field. Current Soviet pl::ms ~1!1tfor hOlding

aggregate output !lenrty comtLlnt west ~f the Urnls. while doubling production It,, 'West Slb"nll. Becuuse or a variety of problems. We bcHcve thut output w('st of

the, Urals wilt docllne. whilo that of W1..'st Slbcrlll :wll1 fnll fat ~hort of doublln~.I I~ ~.

8. Production from I1cld5 in t1'l6 wc5tcrn p~rt of the COll11try i~<:omln~

inc~lIilngly from (tI'CO!C!f dapth!l and from In-Oil drilling which allows mOfl: Intcn:;l\'c

exploitation of already tapped rcscf\'oln. All growth in output through 1~80 wUl. ~ . t .

i .II;i iI ', I

__i_~ I

USSR: Additions to 011Producing Capacity FIGURE 2

10.8

.:

r •..

.

MtLUON BARRELS OF' OIL PER DAY

3.2

~o

- :'IIu

J • D

f II' I

,j

.;

--,i

iI

i, !I

,i

II

; !1.8

;, Tl'r;" '. :i

II

I'1.1, ijI•

j!;i•I,;

I,

,Ii5.1 i

,7.!1

GROY/TH

DEPWI~~OHm

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,.~ !II'i

,'.'

'! i .::1.8

.: ~

s~"

I;

comc from Wl,:st Silx·rh,. wlwrc Ih •.•il1hIlSI~itllbl(;' dimJltc. dlfl1cult tCfr:rin, imo vust

distanccs greAtly compllent ••• opcrntions. In 1976. Ilpproxim:Jtl.!!y 60 pcrcclil or West

Sib~rian Ol,tput .md toughly onc-fifth of natiol1rsl proulH:tiC'[1 !..'om•. fraln the gb!1t

SurnoUor field on the middle Ob',Sovict $O\.1rccs indicate tlmt this field will rCi1ch

peak production In the next ycar or so and wHl hold pcn" Ic\'~I!' for no rnore

than 4 YCUI'$, It .is already cx~tlst1cJng ropld wuCcr Incllrslon. The .water t!lIt rcached

47, percent in 1975. :md; incre;:Jsing ,q~l:Jntitics '"Of lJu,id (WZltcr plus ""'oii)' must be.

"lifted to recover any givcn:qmmtity of oil. Although new'f'jl.'ltts arc bci'ng discoveredIn Wes.t Siberia. no gioot: nclds compornble to Samotlor have been found.

The Drilling Problem

9. The USSR does not have U1C dr1lHng capability to pursue adeqW'rtc

dcvclopment IInd cxploration prQgrumsslmultLlncously. The Soviet!' hove soma I,GOQ

active dgs., about .he same: liS the Untkd States. In terms or mctcrs drillt!d, howcvl:r,

thc Sovicl effort amol.lnt$ to only about onc-fifth U13t or Ihe United St:ltes.lnIQ71-75. the Sovjet Ministry of the Oil Industry drilled a lotal of about 52 lI1i!lion

m Ncrs. In 1975 1)10l1c, U:.e United SllIlcs drilled 53 million metcrs with nb-out

),700 rigs. Wc estimlltc thl.\t. even with a m:udmum effort, the Soviets will n<)t

be: able to come close to drilling by 1980 the 7S miIHon meten: called for bytheir current S·year plan.

10. The poor Sovjet drilling record is in PM! the rc!1.ult of th~ foet (hul 80

percent of their drHHng is done with turbodrilling rigs that :lrc highly inefficient

for dcep drilling Or for use in soft form:Jtions.. Grctllcr access to advanced Westcrn

tt'Chnology nnd rotary drilling equlpmont could help nltcvllHu the Soviet driIU,,~ 'problem.

The Fluid Uftlng Probl~m

11. In the 19S0s, wh1:n well!! In the Umls.vo!ga region began 10 stop flowing

naturally, tha Soviets were forced t£1 begin pumping. .,At that lime, however,

pumping equipment W;1:i in short supply, To foreStall a s'iawdowl1 In th •• growth

, of 011 Qutput, tho SovlOh adopted the; practico of mnsslvc Wllter Injection within

aM along the edge~ of ~Bch field. If; cnollgh water fs forced loto n formation.I ' ,It raiscs I'C9crvoir pressures so Ihllt wells once Ilgtlin now without pumplf'lR,' The

Soviet 5Iys.tclTI diffcrs from the standord WC'!i'.tcrn ~ccQndD.ry recovery technique of

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~GRfr-- :r J

i :watcrflooding ill that the object Is to inclcll~c r~lhcr t;um just to maIntain prC'ssure.

MUCQ mON wllter t'l h\i~l;tcd thlln oil rrod"ced.

I

12. ' Althoul::h ml1<is[vc wat~r Injection ciln; boo~t ~rodllctlon for c time,cycntuuU)' tho wote: will find 11chllnncl of ICIl~t rcs[stllnc~ :md bred: throllsh'to

the oU-producing well. a prOCLlS that leaves bc~ind m:H:h 011 In the less rc:t:Jl1cal'.h;

portions of the form;:J.t!~n. When the welts begin to show -water in large qUlmtWcs.I I --.'.the nlltufC) now wlU \lslIlll1y stop and the wells rnustbc ·pumped. In this case,

nowc\'cr, conventional pumping equipment cQ~not be uscd: special hlgh.cnpncU)o'

submersible pumps arc needed because much lireat~r volumes of fluid (water plusoil) must be lifted. ,

, . I13. Such pump~ began to be uscd extensively In the USSR In the Iiltc 1960s.

In ] 973, t!lc5c pUmp~ provided 2~S million bId of th~ So~ct tot:ll of B.6 miUionj

j

USSR: Fluid LlttJng RequJrements~lUn~ IIETillC TD~£

3

J.IOO

11180plan

FIGURE 3

.

B~I.!18

: 111781978

I~

-I

I

, ,, iI

IDU

.1

. j

Ij

WATER'

aDf!

r.~.1 1'101_U'.iI;., ••. n "'ru.~" "".tII ••. k ~ •• I! 1111.1•• t. CC: ,.'nll' ill nu.

'.'11.' .~I" ••.•••.'~!I.~I•• , .,un' r. hlu;~1'ioI, Itn ~ !!'it. '!tI11f •.'t.,. • JUt.

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(lit 1-

bid. The StJ••.j~t;;. h>ld $01111; 12,000 of thes\: pumps in 1915, .md their nced for:Ioudt cQUi)1T11cnl is IncrelJ1i1ng tJj'lidly a.s water cncroachmcnt becomes a pmhlcm111more and mon: fields .. Allhougl1 some Wt;::;.tEurofl~un lIation~ und the USSI,

it,;clr manufuc!mc 11 lower: capacity version of th~sc pumps, the Soviets rccogni7.c

HiLI! the only pumps ndequate to dcal with their UrHng problcm lire made in the

Un.i!cd States. The 1,000. pumps alrcady purchased from the Unitcd States have11 higher toted lifting cnpoclty. -[hart the II,aOO-pumps of domestic "'Ofh:;ln. Even

In tllC United States, such pumps are nuinufacturcd ·1iy-only-two compllnles and·

are· in short supply, As IIn· alternative to high-cBpa9lty submcl'$ible pumps. at lenst

in some fields, the Soviets are considering wider. use of gas·lift equipment. Thekind of projects they have In mind :would retlulre IIITgc-scalc Imports of US

technology nnd lang lead times.' i

The Longer Tenn Ou lIook

14. Th~ Jnit1pl rulloff, wh~n,!t C(lmes, will nlmost certQlnly 00 sharp; thcuJnftcr

output maY continue to fnll sharply. level off, or perhaps even Increasc a.•• new

fields tire brousmt Iuto production in frontier areas. There Is !IO qucstion that newfields-some quite IUfgl..'-wiU eventually be discovered, Given tllc rapid ratc or

depletion of exbtlng fields nnd the techn.ical difficulties IIssocllUo::d with c~p!Qrntlonand ex·ploite.tlon In frontier llrens, howcvcr, wc doubt that the new discovcrics

will eome on stream rapidly enough to do mqre thur. temp<)ranJy arrest lhe rapidslide 'of So\'lct output •.

15. A'!IwO stated earlier, only small nmounts of So•••i!!t production dt.1ting

the next decade will come from outside ex.isting prorltldr\g nrc~s. In the early 1980s

neW offshore Cuspl.lln reserves mJ1~' make some small contribution to QUlput, Us

WIll new dlscovcdC!! on th~ Mnngyshhtk Peninsula on the CaSf shore f'l1- the Cospinn

and in the PCc!1C>rn region west of the Urals. The Soviets also hope to find oilin dCi:p stru.ctures in the northern part of West Slberia.'s Tyumcn' Oblos(. Limited

exploration In this region. how('Vcr. hQ'; ;so fBr yielded 'mainly nalurnl gas cndcom.lcmiatc. !

Ij

16. Geo!oglcal conditions favClrahlc to Ijtf~ future disco\'crics exist over muchof the Arctic offshore l'iglOn!i (cspcc1a!1y in the Burents and Kara Seas), In the

East Slborlan lOWland!!, In deep structu~s lu the Caspil1n nma, ur:d rll:rhupJi. off

KI,\I11~llIItkil nnd Sakhlln in the Sen or Okhotsk. Protlllctlon from most of thcsc

arCII:>. howevcr, Is ut lcRst 11 decade away. In. the off~hore Arctic. environment;;!l

7

~;,

I

conditions arc mucI1 more SL'Vl;ro than III thl! North S~i.1:tc-dmolo~y fot I.'X[1I(]ralion

nnd producllcn In this f~gI{ln ·does /lU[ Yl't .C!!,tsl, ~VCI1 (n tiN Wcs.1. AHhuuJ,:h

conditions tire more famrable "ellr S<lkJuJlin and in tile EH:;t Sib-Jori.m lowl.U1t1s,

production and tr.:1r1sportation! difficl.:fi,:S makc it doubtrul ChaC signi1ir;;mt•.•• _ •••• -'~ __ II.J •.•..•••

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prulJul,;uon coma t",KO pLace Un!iI 10 YC:lts after LI m~lor dis;.covcry-which nul:.y~t

to be m;ujc. The lead time would b~_*ortcr for production irom d~p w~l~ _in

the Cusplan region.: the USSR; howcvcr. lacKs the' cqUipt!1cnt an'it cxp~rience'

nccc~ary to undertOikc fJ deep :drill1ng program withlJut c"fcnsivc-Wcstcm help.

Economic ImpUcnt!om

,

17. When oil praductiorl st()PS growing. and perhaps even bt;f()fC.profoundrepercussions will be fclt on the domestic. economy of the USSR and on Its

intctnrlUOlUt' economic relations. The c)(tcnt of 1iuch rc(lcrcu!;sion~ c:Jn he onlygue1iScd at wHhoUl rurther t1.Jscl1rch. At u minimum. flm USSR will find it extremely

-"difficult to continuc to simullaneout:1y meet its ('wn requiremcnts and (hose oi

En:'ltern Europe white cxpotCing:to non·Communis.t countries on the prC'~cnt !tcllle.

More pcs.~imlsticl3lJy. the USSR wjJI it5dr become 1111 oil importer.

18. I The~ arc Import:Jnt consldcration'! ror tbe S(n;ct Unioll. ] t now supplies

three-fourths of the oil required bi' the Cummunist countries of Eastern Europe;nnd It undoubtcdly wi:thc~ to nltull1 the politlcalll!1d economic levcrage Ihut gOC!

with being' thclr prJncipll1 ~upplicr. For many years. the cxport or oil to

non-Communist countri~~. mllinly in Wcstcm Europe. litis Ir--cH the USSR's IJfj;cstsingle J;ourcc of IuIrd currency •.

19. ! In the 10n8 run, considernble su,bstltutlon for oil will be p~ ••iblcdomcstlca1lvnnri .,..,.hll M ;'1 ••••nnrt •••••••••••a ;,.••••• 11 "'M.;' 11C'.:-.•..•...J. __ • _. _ u , ••••

, ~I!. i

I

transmJS$!on tm~st be ~olycd before such resources can be fully cKploited.Th,:,

Soviets -co1'L1ldernucienr power to be the best !iource of new electric PO'.\Il'r inEuropqlln areas. A program ror constructing nuclclu' powerplants Is under WD!I,but

It will 00 qultG some time bdol'G thc!!c plants ca~;hav~. an tmportant effect 01"1

the; power base. In 1975 nuclear power repr~sented 2 pe~nt of tOla! pOWer: "

pnxtuctIon. and .it will reach. Qply about 6 percent In' t 980-. I '--1: . -I· . ;. _

I I[ ..- ~I·II'j iI;! 'i !"

i .

.../browse _d~cs_ full.asp?doc _no=0000498607 &title=THE+IMPENDING+SOVIET +OIL +CRISIS 06/05/31