From Russia, with love:
Russia Holds the Reins
MOSCOW, Nov 15 (energy24.com) - Mother Russia's reluctance to join wholeheartedly
with OPEC in production cuts reveals its long term ambitions to grab a bigger slice of the
world market - and to oust Saudi Arabia from the world number one producer spot.
Obviously, by its current position and its capacity to produce a lot more oil, Russia is hoping
to drive the price of oil down and open up the market.
With an encouraging year-on-year growth that has taken the industry from bust to boom in 10 years, the
post-Communist independent producers are on a fast-track to success.
Russia's daily production probably will rise 6 percent this year to 6.9 million barrels, making it the
second-largest producer after Saudi Arabia, according to United Financial Group in Moscow. And with Saudi
output possibly dropping to 7.05 million if OPEC delivers on cuts, the gap between the two will suddenly
closed to striking distance -Russian companies can smell blood.
Sibneft has boosted oil output by investing in once-dilapidated fields in places such as Siberia. The nation's
sixth-largest oil company increased production 19 percent in the first nine months of the year and plans to
expand output by a quarter next year.
And Yukos, Russia's second-largest oil producer, has targeted oil production growth of 14 percent this year
and another one-third by 2005.
Saudi Arabia's oil minister, Ali al-Naimi, is concerned.
"The biggest worry we have is Russia,'' he said. "They remain opposed to making sufficient cutbacks and they
have the capacity to produce a lot more.''
The companies are being aided and abetted by President Vladimir Putin's improving relations with a western
economy that is looking to reduce its dependence on Middle East oil.
Because of this, traders and analysts aren't expecting any sizable reductions from Russia - even if other
non-OPEC countries come to an agreement on cuts.
Putin left Washington for Texas today for a visit to President George W. Bush's ranch.
But not all Russians are thinking the same way.
While Russian oil companies offered al-Naimi what he called a "very negligible'' reduction of 30,000 barrels a
day when he visited Moscow on Monday, some have hinted they may be more accommodating.
Tatneft said it was ready to cut production, and the thinking at Lukoil, where Soviet-era managers have
retained control, thinks Russian companies should agree not to boost production next year..
But companies can ship their products by railways and tankers, bypassing state-controlled pipelines. That
would prevent Putin's government from enforcing supply reductions even if it wanted to, analysts said.
The near future of oil prices hangs in the balance - and for the first time in almost 20 years that decision is not
in the hands of OPEC: for now it's down to how much the Russians want it. |
