According to BP analysts, Russia may become one of the world's chief countries in shale oil production. Tax incentives are already in place, the only stumbling block is the technology.

Russia's oil majors confirm BP forecast. Source: ITAR-TASS

According to a BP forecast, in 20 years' time, Russia will become the world's second largest tight oil producer. The company's experts estimate that by 2035 it will be producing 800,000 barrels of shale oil a day.

Russia's oil majors confirm BP experts' predictions by declaring that they view unconventional oil production as a priority. A source at Rosneft said that the company's estimated reserves of shale oil stood at about 1.4 billion tons.

In the near future Rosneft expects to increase its unconventional oil production and, through the use of new technologies, arrive at an annual production of 10 million to 15 million tons.

Russia has begun to reform is tax system in order to create favorable conditions for applying technologies that are required for unconventional oil production. As a result, the country could be looking at becoming a world leader in shale oil production.Lukoil is continuing with its tests at Bazhenov formation deposits in the Khanty-Mansi Autonomous Area and expects to identify the necessary technologies and move on to commercial production, the company's representative said. Gazprom Neft was unavailable for comment.

As of late last year and extending for a period of 10 years to 15 years, a zero-rate mineral extraction tax will apply to four tight oil deposits: Bazhenov, Abalak, Khadum, and Domanik.

As one oil company employee pointed out, shale oil production is a necessity that the whole industry is facing. As traditional oil reserves are depleting, oil companies have to search for new sources of hydrocarbon resources.The Russian Energy Ministry estimates that by 2032 the proposed incentives may result in additional oil production of some 326 million tons, generating an additional $66 billion (some 2,000 billion rubles) in taxes, Minister Alexander Novak said in an interview with РБК daily at the end of last year.

For the state companies that have access to Russia's continental shelf, a long-term way out may be offshore oil production in the Arctic, but that will take many decades. For the medium-term, the only thing that could bolster falling production is the development of unconventional reserves, the paper's source concluded.

This article first appeared in Russia Beyond the Headlines.