The following report from Bloomberg details declining Russian oil production.  Even more troubling for the world’s increasing shortage of oil is what this implies for the future.  

Turning around Russia’s production problem requires mobilizing capital, labor, and expertise in massive amounts.  This can not happen quickly, even if the Russians really want it to happen, which is arguable.   Recent attacks on TNK-BP are redolent of previous attacks on foreign oil majors in the Sakhalen projects.  They are aimed at increasing Russian financial interests and decreasing those of the foreign entity.

Such policies may have the impact of limiting the interest of foreign companies in bending to the task of increasing Russian oil production.  This impact may or may not be desired by Mr. Putin and his government.  That question is truly  unknowable but equally troubling.

The other  implication of the above facts is what it says about the “Export Land Model” that points out that when an exporter is rapidly increasing its internal  consumption of oil, as Russia is, any decline in production is magnified in its impact on exports.   The exports decline much more rapidly.  That will clearly be the case here.

The Bloomberg report adds more details worth noting:
  

Russia’s Oil Output Falls in June, Extending Decline (Update1)

By Greg Walters

July 2 (Bloomberg) — Russian oil production declined in June, bringing the world’s second-largest crude exporter closer to its first annual drop since 1998.

Production fell to 9.77 million barrels a day (40 million metric tons a month), 1 percent less than in June last year, according to data released by CDU TEK, the dispatch center for the Energy Ministry. Output rose 0.2 percent compared with May.

Russia’s production may have peaked as producers struggle with aging fields, rising costs and increasingly remote new deposits, senior executives at Moscow-based OAO Lukoil and TNK-BP, the country’s two-biggest independent oil companies, have said. The finance and energy ministries are developing tax-cut proposals in a bid to revive growth.

Crude oil exports via OAO Transneft, Russia’s oil pipeline monopoly, fell 1.3 percent compared with the same month last year.

Russia’s government has supported raising the level of when its oil-extraction tax takes effect to $15 a barrel from $9 a barrel as oil companies’ costs soar. OAO Rosneft, the country’s biggest producer of crude, raised capital spending 69 percent in the first quarter this year to $1.75 billion.

The oil market will be “tighter” than previously expected because many major projects throughout the world are experiencing “slippage” of 12 to 15 months in their completion time, Nobuo Tanaka, executive director of the International Energy Agency, said yesterday.

Oil prices touched a record $143.67 a barrel in New York this week on concerns of a disruption to Iranian output, capping a 47 percent increase in the first half of the year.