Russia Seen Benefiting As Oil Price Rises
MOSCOW, May. 06, 1999 -- (Reuters) Firmer crude oil prices are giving a welcome boost to Russia's crisis-laden economy but will not lead to an extra short-term rise in crude exports above their already high levels, analysts and officials said on Wednesday.
"Plans which were drawn up for oil exports in the second quarter have not been changed. So far no increase is being considered. The price spike may be short-lived," Oleg Rumyantsev, spokesman to Energy Minister Sergei Generalov, said.
But ministry data on Wednesday showed crude exports outside the Commonwealth of Independent States in the first four months of 1999 are already 12.7 percent higher than in the same period in 1998 at 2.49 million barrels per day from 2.21 million.
Benchmark front month Brent crude futures on London's International Petroleum Exchange closed at $16.93 per barrel on Tuesday, the highest since December 1997.
Although Brent, against which Russia's main export blend, Urals, is traded, fell on Wednesday to $16.59 per barrel at around 1400 GMT, the price is still over $7.00 per barrel higher than the recent low of $9.55 set late last year.
Russia, the world's third largest oil producer, typically depends on oil and gas exports for up to half its hard currency export earnings, although the percentage varies as prices move.
Analyst Eugene Khartukov of Moscow consultancy GAPMER agreed that Russia would not boost exports in the short term because it lacks the infrastructure to do so, but said in the medium term increasing exports was the key plank in Russia's oil strategy.
"As usual, exports will be regulated by the diameter of the export pipelines," he said, pointing out that Russia already exports as much as it can.
He said the price rise, though welcome, made no difference to Russian policy, which was to export as much as possible.
"Russia has to sit and wait and accept the price as it is. It is not a price maker, it's a price taker. It will export whatever is available."
But while Russia has little room for maneuver now, it is forging ahead with plans to boost export infrastructure in the medium term.
On Wednesday the Federal Energy Commission said it had introduced a supplementary export tariff on crude oil of $1.43 per tonne, to provide crude pipeline monopoly Transneft with $100 million this year to build a new Baltic Pipeline System.
This will link a number of new oil fields in northern Russia to a new terminal to be built in the Gulf of Finland, allowing Russia both to increase exports and to bypass ports in independent Baltic states.
Next week work will begin on a new oil port at Russia's main oil export terminal, Novorossiisk, in the Black Sea.
Although it is being built to handle exports from the Tengiz field in Kazakhstan, it will eventually add 1.3 million barrels per day (bpd) to exports through Russia.
Generalov was reported by Interfax news agency recently as speaking of other plans to boost exports, including de-bottlenecking a line carrying crude to the Ukrainian port of Odessa, increasing throughput by 4 million tonnes in the last nine months of this year.
He also said adding storage capacity to Novorossiisk would lift throughput by 5 million tonnes per year (100,000 bpd).
Russia exported 117.9 million tonnes (2.37 million barrels per day) of crude oil last year to destinations outside the Commonwealth of Independent States.
GAPMER'S Khartukov said if Russia managed to remove all bottlenecks and export constraints and introduce top-class management at every level, its notional non-CIS export capacity would be 140 million tonnes.
"I guess that this year we will manage to export up to 125 million tonnes but no more," he added, saying "exports will follow the pace of expansion of oil infrastructure."
Russia agreed last year to cut oil exports by 100,000 barrels per day as part of a move by members and non-members of the Organization of the Petroleum Exporting Countries to cut supplies to boost prices, and repeated its pledge this year.
The cut by the large international group is the reason for the surge in oil prices this year. But while Russia is clearly a beneficiary of the price rise, there is scant evidence that it is honoring its pledge to cut exports.
The International Energy Agency in its end-March report forecast total exports from the Former Soviet Union at 3.1 million barrels per day in 1999, up from 3.0 million in 1998, itself the highest level since the break-up of the Soviet Union.
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