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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Russian oil output peaked in 2007; World’s second biggest producer has been counterweight to OPEC cartel
By Finfacts Team
Apr 15, 2008 - 5:13:45 AM

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Russian President Vladimir Putin presents Lukoil Chairman Valery Grayfer with the Order for Services to Russia (Third Grade) on Oct 09, 2007.

 

Russian oil production peaked in 2007, the Vice-President of Lukoil, the country's second largest oil group, said in an interview published Tuesday. Russia is the world’s second biggest oil producer after Saudi Arabia.

Speaking to the Financial Times, Leonid Fedun said Russia's oil production of 10 million barrels a day was the most he would see "in his lifetime".

The 52-year-old added that in terms of production in Russia's oil-rich western Siberia region, "the period of intense oil production (growth) is over" and compared the region to the North Sea and Mexico, where oil production has fallen.

Lukoil said last week, its 2007 net earnings jumped 27.1% to more than $9.5 billion (€5.91 billion) from 2006.

The FT says that Viktor Khristenko, Russia’s energy minister who is pushing for tax cuts that could stimulate investment, said last week: “The output level we have today is a plateau, stagnation.”

Russia has been viewed as an important counterweight to Middle East oil dominance, at a time when the supply situation is tight.

Oil futures in New York on Monday rose to $111.79 a barrel, close to last week’s record of $112.21 a barrel.

The Christian Science Monitor reports today that another private oil company, the Russian-British joint venture TNK-BP, is reeling under successive attacks by police and government agencies, in a pattern reminiscent of previous state-sponsored takeovers.

The continuing troubles for Russia's fourth-largest petroleum firm are fueling a debate over whether the imminent change of Kremlin leaders from Vladimir Putin to the reputedly more liberal Dmitri Medvedev holds out hope for genuine reform.

The BP joint venture TNK-BP, faces a state environmental review at its biggest oil field, which is likely politically motivated.

The alternative tool of intimidation deployed by the Kremlin, is a tax audit.

The CSM says that over the past five years, about a third of Russia's oil production has been effectively renationalized, often in legally murky ways, and accompanied by baldly partisan actions by state agencies.

Medvedev, who has been chairman of the state-run natural gas monopoly Gazprom since 2001, has raised hopes that this era might be coming to a close.

Russia ended 2007 with its ninth straight year of growth, averaging 7% annually since the financial crisis of 1998.

The US Energy Information Administration says that Russia’s economy is heavily dependent on oil and natural gas exports, making it vulnerable to fluctuations in world oil prices. According to an International Monetary Fund (IMF) study , a $1 per barrel increase in Urals blend oil prices for a year is estimated to raise federal budget revenues by 0.35% of GDP, or $3.4 billion. In order to manage windfall oil receipts, the government established a stabilization fund in 2004 worth. By the end of 2007, the fund was worth about $157 billion. Raw materials, such as oil, natural gas, and metals, dominate merchandise exports and account for over two-thirds of all Russian export revenues.

Although estimates vary widely, the IMF and World Bank suggest that in 2005 the oil and gas sector represented around 20% of the country’s GDP, generated more than 60% of its export revenues (64% in 2007), and accounted for 30% of all foreign direct investment (FDI) in the country.

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