Oil: Russia: Market Share: Shipments to Europe.
Shifting loyalties brewing?
dailystarnews.com
Russia overtakes Saudi Arabia as biggest oil producer: IEA
Potential long-term challenge for OPEC
AFP, Moscow
Russia has overtaken Saudi Arabia as the world's number one oil producer for the first time since the 1980s, highlighting the potential long-term challenge the country represents to the mainly Arab oil cartel OPEC.
Russia pumped 7.28 million barrels of oil a day in February, compared to Saudi Arabia's 7.19 million barrels per day, according to statistics just released by the Paris-based International Energy Agency (IEA).
The two countries were neck and neck the month before.
Russia may not hold onto its position at the top of the table for long, with the Saudi oil kingpin able to boost its production by up to 50 per cent and Russian oil firms currently pumping near full capacity.
But the 11-member Organisation of Oil Exporting Countries, which has been locked in a battle of wills with Russia since late last year to get it to support global oil prices by cutting exports, has reason to be nervous.
"If Russia starts competing with OPEC and escalates its harsh rhetoric, we'll end up losing and getting in a price war that will be really harmful for everyone," said a source at the organisation's Vienna headquarters.
"Cooperation is the key, not confrontation," the OPEC official added, speaking on condition of anonymity.
The lavish attention paid by OPEC to Moscow in recent months, with a succession of top officials from the powerful cartel descending on the Russian capital to persuade Russia of the benefits of continued cooperation, shows the country's new-found muscle.
For the moment, the pact forged with OPEC committing Russia to skim 150,000 barrels a day from its exports, which Moscow this week extended until the end of June, has tied the Russians' hands.
But the export restriction has produced a glut of oil on the domestic market this year, driving prices down to a mere 4.25 dollars per barrel and starving Russian oil giants of cash to expand their production capacity.
"Saudi Arabia can step up output if it wants to, while Russia can step it up only if continues investing," Stephen O'Sullivan from UFG brokerage in Moscow commented.
"Investment requires profits and cashflow, elements which are under threat," he added.
While Saudi Arabia exports almost all the oil it produces, more than half of Russia's crude is sold on the domestic market, mainly because the state pipeline monopoly Transneft, has not expanded as fast as production has.
Russian exports amount to just three million barrels a day, compared to six million barrels for Saudi Arabia.
Moreover, the current Saudi oil output is particularly low because OPEC members slashed production to support world prices after the September 11 attacks and the resulting global economic downturn.
In 2000 the kingdom's production was eight million barrels per day, down from a high of 10 million barrels in the past.
But Russia's success in overtaking Saudi Arabia in output is likely to be followed by continued expansion of the Russian share of the global oil market.
Such a development would have been "almost unimaginable" two years ago when the sector was still in the doldrums following the Soviet Union's collapse and Russian oil giants were milking cash to finance acquisitions elsewhere and spirit money abroad, said O'Sullivan.
Providing investment continues to flow into the industry, in the next few decades Russian oil production could easily reach nine million barrels a day, according to Stephen Dashevsky from ATON finance house.
"Production capacity should grow and Transneft is actively building new transport infrastructure as well," he said.
Exports are likely to increase sharply to the European Union, Russia's major market, which has agreed to help Moscow develop its oil and gas reserves in return for a long-term energy supply commitment.
Russian oil exports to Asia meanwhile are set to rise in the next decade with the development of oilfields in Eastern Siberia and Sakhalin Island in the Russian Far East.
And the United States, the world's largest oil consumer, may begin to seriously import Russian oil to reduce dependency on the volatile Middle East, although transport costs currently make this uneconomic. |
