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Mix-Ansicht- Russian Oil And OPEC Price Policies - Cosa, 23.03.2004, 16:35
Russian Oil And OPEC Price Policies
-->Hi,
gestern erschien bei MEES ein interessanter Artikel zur russischen Ã-lproduktion; nur eine Frage der Zeit, wann die OPEC es geschafft hat genügend Investitionsmittel für Russlands Ã-lindustrie - Dank der eigenen Preispolitik - zur Expansion zur Verfügung zu stellen. Danach wird Saudi-Arabien als grösster Produzent abgelöst.
Russian Oil And OPEC Price Policies
By Fadhil Chalabi
The following is a presentation by Dr Fadhil Chalabi, Executive Director, Centre for Global Energy Studies, made at the CGES?Russian Oil And OPEC?s Policies? seminar held in London on 15 March 2004.
The Soviet Union began to enter the world market as a net exporter of oil by the end of the 1950s, a development that, at that time, had an important impact on the spot market price of oil, given that new Russian oil exports began to affect the dominant position of the major international oil companies. At the time, Russian oil exports contributed significantly to widening the spot market, which was an important development in the structural change of the world oil industry. For that reason, the Soviet Union, during the 1960s, applied for OPEC membership as a net exporter of oil, although its request was turned down at the time, on the grounds of non-applicability: the case of the Soviet Union's oil not meeting the requirements of the OPEC Statute.
During the Soviet era, FSU net oil exports were more or less constant at around 2mn b/d and so did not significantly affect OPEC policies, even after the organization first Started to implement supply control through the quota system as a means of defending the oil price. Nevertheless, Russian oil exports did have a limited impact in determining the ceiling of OPEC production. The quota system meant that total OPEC production should be restrained to represent the world's call on OPEC oil, which is the difference between world demand for oil and world oil supplies outside the organization, with OPEC being a last-resort supplier. The usual OPEC procedure was to assess world demand for oil during the year and deduct from it world oil supplies outside OPEC, plus OPEC natural gas liquids (NGL) production, plus net exports from the Former Soviet Union to the 'free world'. The importance of Russian oil exports in this equation meant that, at a certain level of world demand, the higher Russian oil exports, the lower the OPEC quota; but because Russia?s oil exports kept constant for many years they only marginally affected OPEC's quota decisions.
The stagnation of Russia's oil exports to the 'free world' persisted despite its higher growth rates in oil production, which increased from 3mn b/d in 1960 to 12.5mn b/d in 1988. The reason for this disparity in production growth and exports was the great wastage, in terms of Russia's oil consumption, through holding prices down at an artificially low level, combined with a high degree of inefficiency in fuel utilization and the subsidizing of exports to the satellite socialist countries. All this was, of course, inherent in the FSU's inefficient central planning system, to which Russian production and exports were subjected.
The collapse of the Soviet Union and fall of the Berlin Wall brought many sweeping changes that Would ultimately have a significant impact on OPEC. The sudden shift from its centrally planned economy to a market-oriented free economy, overturned and threw into disarray the old structure of Russia's oil industry, which led to a dramatic collapse in the country's oil production, declining from 11.5mn b/d to 6mn b/d, reflecting the fall in domestic oil consumption from about 9mn b/d in 1988 to less than 3mn b/d in 1996. Such a drastic decline should have led to an increased availability of oil exports but, at this stage, until 1999, the increase was relatively very small, most being directed to East Europe. Between 1992 and 1999, Russia?s crude oil exports rose slowly from 1.3mn b/d to around 2mn b/d, and the effect on OPEC's quota calculations was minimal.
For a long period after the fall of the Soviet Union development of Russian oil production was an extremely drawn out affair because of legal and administrative constraints, together with a lack of experience and clear policy for facilitating investments. The ensuing long period of stagnation in Russia's oil industry was, in fact, a direct result of the chaotic legal and administrative system that prevailed, following the very long reign of a centrally planned system, together with an inherent resistance to change in economic structure, which had the effect of hindering new investment by Russian or international oil companies.
However this period of stagnation soon ended with the year 2000 being marked by a rapid growth in investments in Russian oil production - increasing from less than $2bn in 1999 to $6bn in 2001. Investments continued to grow (albeit at a lower rate) and by 2003 reached $6.6bn. This massive growth in investments between 1999 and 2003 produced a steep rise in Russian oil production from 6.1mn b/d in 1999 to 7.7mn b/d in 2002 and to 8.4mn b/d in 2003, and is expected to reach 9.1mn b/d this year (2004). This means that the cumulative growth of Russian oil production since 1999 has already reached 50% in four years! It is estimated by the CGES that, given present market conditions, Russia?s oil production could be expected to reach 10.3mn b/d by 2006.
The spectacular increase in Russian oil production has been reflected in a correspondingly high growth rate of Russian exports to the world market. Russia's exports (of crude and products) to the OECD stuck at around 2mn b/d until the break-up of the Soviet Union; while exports (of crude and products) to the world market in 2003 amounted to more than 5.4mn b/d and are expected to reach 6mn b/d in 2004. Russia's crude oil exports to the world market rose from 1.6mn b/d in 1992 to 3.6mn b/d in 2003 and 4mn b/d in 2004.
According to CGES estimates, Russia's total oil production could reach 12mn b/d by 2010, i.e. an increment of 3mn b/d from 2004. This radical growth in Russia's oil production has occurred since Putin's presidency, during which many structural adjustments and reforms to Russia's legal system have been undertaken to facilitate investments.
However, the main driving force behind the spectacular increase since 2000 in Russian oil production and exports has been OPEC?s high price policies. The following Chart (1) shows that when OPEC pricing averaged $17/B in 1991-1997 the growth of Russia's oil production was very slow, but once OPEC policy sought to price oil at a higher level, $25-28/B, Russian oil production began to rise rapidly.
[img][/img]
Using density of Russian Crude: 7.3.
: Argus and CGES
Chart 2 indicates more clearly the correlation between higher prices and the spectacular rise in exports of Russian crude oil to the world market.
<IMG SRC="http://www.mees.com/postedarticles/oped/a47n12d01_files/image004.gif">
The incentive to invest in Russian oil is provided by OPEC's high price policies, which afford a very high profit margin for investing companies to reinvest in the industry for expansion purposes. One can imagine the huge profit for oil investors if we consider that the fully-built-up cost of Russian oil (including transport) amounts to an average of $11/B. Even if one adds government taxes on investors' profits, their investment could continue to be profitable at an OPEC price of $18-20/B.
OPEC's recent approach towards prices in excess of its previously agreed $22-28/B band, serves only to further oil companies' profits in investing in Russian oil and, correspondingly, in higher capacity. The effect is a continuous rise in total Russian oil exports (both crude and products) which, by 2006, may attain Saudi Arabia's levels and exceed 7mn b/d. Assuming that Russia?s oil capacity by 2010 could increase to over 10mn b/d, which is theoretically possible while OPEC's high prices persist, Russia would become the world's largest oil exporter, exceeding even Saudi Arabia's export volume. Furthermore, if we base this rate of increase on CGES estimates, Russian production could reach 13.3mn b/d by 2015.
Russia's surge in oil production and exports will have a direct impact on OPEC, given that the organization, as was explained earlier, will be forced into reducing still further its total production quota in the face of additional supplies from outside the organization. This means that the greater the increase in Russian oil exports, the lower OPEC's production - in order to keep the price at present levels. OPEC has continually reduced its production and market share in order to bolster prices. OPEC's present production is 28mn b/d, 3mn b/d less than its 1980 output, during which period world demand grew by more than 14mn b/d.
The extent to which OPEC can absorb these increased supplies from Russia by adjusting its production to stabilize the market depends entirely on the future rate of global demand and supply growth.
According to OPEC and IEA forecasts, based on an average annual growth rate of 1.6%, between 2003 and 2010 incremental global demand will be around 10mn b/d, but these predicted rates of future world demand growth are contested. Shell and CGES predict an annual average growth of 1.1% in global demand between now and 2010, which implies incremental demand of only 5.5mn b/d during the period.
The difference between the two sets of forecasts (amounting to more than 4mn b/d) is significant in examining the impact of Russian oil on OPEC. The demand analysis by CGES shows that important developments in technology, combined with economic growth patterns and environmental pressure, indicate a lower growth rate of global oil demand for the future than that predicted by the IEA/OPEC forecasts.
However, the impact on OPEC of investment in Russian oil exports cannot be assessed by the volume of future incremental global demand alone. What is more significant is what the future holds for global supplies.
Huge investments are being made in West Africa (the Gulf of Guinea) and especially in Nigeria and Angola, so that it is expected that by 2010 some additional 3mn b/d will come from that region. According to certain sources (Le Monde of 5 March 2004) supplies from West Africa to the US could meet 15-25% of American oil consumption for the coming 10 years. A further 3mn b/d of supplies may also be obtained from the Caspian Sea, almost all of which will be exported.
In addition to these incremental supplies, oil is being produced from tar sands in Alberta, Canada, as well as extra heavy oil from Venezuela. It is estimated that some 2mn b/d additional oil will be exported to the US by 2010.
However, given either scenario, the increase in Russian oil exports by itself ought not to affect OPEC, since a world incremental demand of 5.5-10mn b/d would be more than enough to absorb these exports. The problem is that Russia's exports add to the substantial increases from other areas, and given OPEC's own ambitious expansion programs - as in the case of Algeria, Iran and other member states (expansion programs involving foreign oil companies) - it is unrealistic to assume that incremental supplies from these countries will not be used in order to abide by the OPEC quota. Since they tend to produce at full capacity, the burden of defending the price will continue to fall on Saudi Arabia as OPEC's swing producer, a situation which the Saudis would find unacceptable, and in which case the present oil price cannot hold.
The above picture may change given certain geopolitical factors that could hinder Russian expansion programs for oil production. There are fears that Putin's increased power may lead to state intervention in Russia's investment program, so that the spectacular increase of the past four years could cease or, at best, taper off, thus reducing the growth in Russian oil exports. Another factor that could hinder growth of Russian oil exports is investment of the infrastructure necessary for the expansion of export capability outlets.
Further geopolitical influences reducing the impact of Russian exports would arise in the event of President Chavez continuing his policy of restricting oil investments, and so further reducing Venezuela's exports; and in the event of political and tribal problems in Nigeria arresting that country's expansion plans for oil production capacity.
However, the most unpredictable geopolitical factor in determining the future impact of Russian oil on OPEC is the Iraqi enigma, and the uncertainty of what will happen in the coming 10 years to Iraq's oil, the potential of which is enormous. Iraq's present destabilized situation may worsen to the extent that its oil may cease flowing, as happened when Iraq was under UN sanctions. The UN has already warned of the spectre of civil war. If civil war stops Iraq's oil exports, the pressure on OPEC from increased Russian oil will be reduced. In fact, Saddam's policies, leading to a partial oil stoppage of Iraqi oil during his wars and the continued absence of Iraqi oil when the UN economic sanctions were in force, were of great help to OPEC because they took out from the world market about 95bn barrels and thus enabled Saudi Arabia and Venezuela to boost production without harming the price.
Quelle
Gruss
Cosa
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