The Russian Federal Energy Agency squeals over the end of cheap oil
- Some excerpts translated into English. The El Pais below link, might
For those interested in the full article in Spanish language, please
Interview by Fernando Gualdoni to Serguei Oganesian. Director of the
Russian Federal Energy Agency by El País. Spain.
"Government is not interested in Yukos being broken"
Q. What levels should have oil for the investments to account for in
this Russian sector?
A. It is difficult to calculate the production costs of one ton of
Russian oil. There are big differences in the climatic and economic
conditions, efficiency and deposits potential, as well as in the
state of the art of the companies. The crude itself its
differentiated by its physical properties. Tha fact that the big
oilfields are far from the main trunk pipelines, influences the
costs. In reality, the oil business in Russia is several orders of
magnitude more expensive than in the Arabian Peninsula. But there are
still some wishing to invest in our sector, in the hydrocarbons
sector in particular. There are 11 vertically integrated companies
operating and a hundred small and medium producers, many of the in
joint ventures. I would like to give some figures to better answer
your question on investments. In 2003 the Russian oil companies
invoiced 50 billion US$. After paying 25 billion in taxes, their net
profit was a 35.7% last year. The companies reinvested some 5
billion and some 20 billion remained for credit paybacks,
Q. Russia is already producing more than 9 million barrels a day.
What is the upper limit of your country?
A. In the first four months of 2004, the crude production rose in
14.2 million tons, with respect to the same period last year. In
2004, the Russian oil sector will grow between a 7 and 8%. The crude
production in Russia will change as a function of the socio-
economical scenarios in the country. In the optimist scenario, in
2010 the oil production in Russia will be of 490 million tons and in
2020 will reach 520 million tons.
Q. How much oil is exported?
A. In 2003 the crude exports were growing faster than production and
were 228.5 million tons. Crude sales gave to the Russian companies
benefits for 38.8 billion US dollars. As per our forecast, in 2004,
Russia will export 251 million tons of crude and in 2005, from 249 to
262 million tons.
Q. How do you think will evolve the prices of crude oil in the short
and medium term?
A. There are various factors explaining the high levels of crude in
this moment. Apart from the increase in the demand, speculation and
the violence in the Middle East, I would like to mention a couple
more. First: in the world, the situation of the proven reserves is
started to be questioned. The most recent estimates point that they
will deplete between 35 or 40 years from now. Although data can be
objected, because there are more than a dozen of methodologies to
calculate reserves, the figures are far from being nonsensical. The
proven reserves of crude oil are being exhausted. Second: We are
aware that it is very unlikely that Russia will have new discoveries
of big oilfields. And the development of the ones already operative
is more and more difficult and costly, as they are in the polar seas.
Besides, they are very far from the trunk pipelines. The production
and transport of oil is every day more difficult and expensive. Due
to this, I believe Humanity must accustom to live with an expensive
oil, to treat hydrocarbons as a non renewable resource and to look
for alternative energy sources. It seems that oil is not going to be
The Russian director confesses partially. He still talks "business as
usual" and expects his country to grow 7-8% annually (optimistic
scenario), in which case, the exports may decline, even the local
production is still set to increase nobody knows for how long-, but
then expects that people will treat oil as a non renewable resource.
He explains and admits that there is oil for 35-40 years, but does
not explain that this is "at current production levels" and
that "current production levels" can not be sustained if the Hubbert
curve is right. He admits his oil is several times more expensive
than the one in the Gulf. And answering about the concern for the
foreign investors, he goes in an ellipsis and says they won 35.7%,
after taxes, in one year, which is substantially more than what my
bank pays to me or my salary increase or my pension. Clever guy. They
start confessing, but still keep their "business as usual" face. We
will see for how long.
Pedro from Madrid