Russian Oil To Surpass Saudi Supplies
Jul 03, 2003
Russia continues to raise its oil production and -- barring a change of policy in Riyadh -- will surpass Saudi Arabia as the world's premier oil exporter by 2005. This increase in production is not a temporary surge, but a fully sustainable, long-term national project. Russia's oil infrastructure is being improved at a pace not previously seen, and production has steadily increased since 1998 -- making plans to expand the country's oil industry both ambitious and realistic.
Russian energy sources said July 2 that state-run oil pipeline monopoly Transneft increased June exports by 140,000 barrels per day to an all-time high of 3.53 million bpd. Russian oil output in June reached a post-Soviet record of 8.38 million bpd, an 11 percent increase from one year ago. Total exports now stand at roughly 6 million bpd.
Given that exports have risen in recent years by approximately 700,000 bpd to 800,000 bpd per year, Russia will export well over 7 million bpd by the first half of 2005. The country's oil exports will then exceed those of Saudi Arabia, which has not added fresh production to its capacity for the past 20 years. Moscow will continue to pick up the slack by meeting virtually all growth in worldwide demand -- as it has since 1998.
There is every reason to expect Russian exports to pass the Saudi mark. Russian companies are investing heavily in upgrading their oil infrastructure; old refineries that had fallen into disuse have been reactivated; new pumping stations have been built to raise the fluid pressures in major export pipes by up to 300,000 bpd. Pumping and shipping facilities at the terminal of Primorsk on the Baltic Sea also are being upgraded.
The Russian oil complex, described during the 1990s as ailing and dilapidated, has largely been turned around. Moscow and the country's oil firms, however, see their recent progress as inadequate. A national project is under way to boost exports considerably over the long term. Transneft plans to expand the capacity of its Primorsk export pipe to as much as 1.24 million bpd by 2005. By that time, major pipelines to Asian markets will be under construction.
The appeal of a stable oil source will bring these nations into ever-greater dependency on Russian oil and ever-diminishing reliance on Mideast sources. An Asian shift away from OPEC and toward Russia, coupled with significant infrastructure upgrades, will ensure the long-term sustainability of the rise in Russian production.