Russia became a world leader in oil production

Mari Tsiklauri

In 2003 Russia won the first place in the quantity of oil output. The data for 11 months of this year reveal the fact that oil production amounted to 384. 12 million tons, which is 11 percent higher than in the corresponding period of 2002.

Russia pumps 8,5 million barrels of oil per day having caught up with the largest producer in the world- Saudi Arabia (8,47 million barrels).
Russian oil export rose by 10%. This year Russian companies have exported 127 million tons of oil to foreign countries as well as 31 million tons to neigbouring ones, which is 15% higher than the corresponding period of previous year. If OPEC cuts oil production in the nearest future, difference between oil output of Russia and OPEC might become a bit greater.
Analysts think there is a logical explanation as to why Russia overtakes Saudi Arabia in oil production. The mentioned countries have different objectives.
Russia is interested in stability and growth of oil export with comparatively lower prices and with long perspective instead. Saudi Arabia first of all aims at solving problems of social liabilities connected with problems of princes’ multi-thousand families and decrease of life-standard.
Russia is not burdened with any political obligations of oil production restrictions and it has all necessary economic pre-conditions for the development of oil industry including world oil prices. Russia was able to achieve present results even earlier. Yet, problems of pipeline and market area with sharpening political risks in oil industry give us grounds to conclude that the unexpected growth of oil production in Russia is not expected in the nearest future.
As mentioned above, OPEC countries are likely to reduce output in the near future. The data of the US Statistics Department reveal that the country’s oil reserves rose by 3,6 million barrels by December having reached the highest maximum since September 2002. OPEC President and oil minister of Qatar Abdullah Bin Hamad Al-Attiyah said, oil-exporting countries have become particularly concerned about the rapidly expanding production of Russian oil companies in recent years since this has not only eaten into Saudi market share, but has threatened to drive oil prices below the $22-28 range preferred by Saudi Arabia. With the continued expansion of Russian production and the likely restoration of Iraqi production in the near future, downward pressure on oil prices appears likely to increase.
Yet, Abdullah Bin Hamad Al-Attiyah said, OPEC will do its best to provide adequate quantity of oil reserves for the winter.
OPEC met in Vienna on December 4 to consider reduction of oil production. “Ministers of OPEC countries said, they decided to maintain the levels of production as it was and they were going to meet again on February 10 in Algiers to decide the forecast for the second quarter. Iraqi delegation headed by oil minister of Iraq Ibrahim Bar Al-Aluma has also participated in the conference. According to prognoses, the main intrigue of OPEC conference was Iraqi delegation that attended the Cartel conference for the first time since the end of the war.
Iraq boosted production to 2.1 million barrels a day last month and exported record volumes of crude oil from its terminal in the Gulf, Oil Minister of Iraq said. He also said that Iraq hoped to maintain this momentum and increase its daily production to an average of 2.3 million barrels in December and 2.8 million barrels by next April.
By comparison, Iraq pumped about 2.5 million barrels a day on the eve of the U.S.-led invasion that toppled Saddam Hussein.
Despite this, the highest forum of OPEC did not take any decision on Iraq’s reintegration into the OPEC quota system. Thus, Iraq can produce and export oil freely.
Market makers think that role of Iraq in oil price formation will grow. Member of the country’s World Ruling Council Adel said Baghdad intended to demand that OPEC should increase its quota to 6 million barrels per day. He said, Iraq would grow oil production to 3-3,5 million barrels in the near future.
Oil prices will much depend on how fast oil production of Iraq grows. Besides, guerilla war and unstable situation stand in the way of large-scale investments in the country’s economy. Thus, Iraq will not be able to grow oil production considerably next year.
It is noteworthy that Iraq was not given the official voting right in the summit. A representative of Venezuela protested against it. Ministry of energy Raphael Ramirez explained the position of its country saying that Iraqi authorities have not yet been recognised by the World Community.
Joseph Stanislav, President of Cambridge Energy Research Associate said in the interview with Financial Times: “No one stands in queue to get to Iraq, instead, everyone wishes to stand in the queue to enter Russia”.
As we can see, OPEC is comparatively more worried by Russian factor that by the growth of Iraqi oil exports. The Financial Times said that during the Vienna meeting OPEC oil ministers have never forgotten the danger of Saint-Petersburg conference for the cartel.
OPEC’s wish to co-operate with Russia is quite clear.
Deals between TNK and BP as well as coming of foreign investors to Yukosneft will help Russian to increase oil production. The International Energy agency forecasts that by 2025 Russia will produce 10,4 million barrels per day.
Nowadays, Cartel countries produce each third barrel of oil in the world market. The share of the Cartel grows dayly, and oil consumers of developed countries do their best to reduce dependence on politically unstable Middle East
In its turn, Russia is more interested in investments of rich oil importers than in efforts of the Cartel. Russian oil firms?with Moscow’s approval?are aggressively seeking to increase their exports to the United States.
Due to different objectives and aims, mentioned above, parties prompt to compete rather than co-operate with Russia reducing OPEC share in the market.