China and Russia will stay on tenterhooks for decades to come, on the question of sufficiency of energy supplies, notwithstanding the oil grab they have indulged in over the past years. According to energy security pundits, both China and Russia have unique problems and are unable to shake off the shackles of the modern open energy market.
“Even though China seems to be rushing to buy oil resources and production supplies, it still has to buy its oil in open markets.
A rough calculation of its production and consumption units in bpd show it would not be using more than one-third of its total consumption from its own productions in the coming decades,” said John Roberts, energy security specialist with Platts. Roberts predicted, “even though China will end up with one-fourth of Kazakhstan production, the rest of Kazak production will head West.”
According to media reports China is amassing oil and gas reserves in Nigeria, Libya, Angola, Iran, Iraq, Venezuela and other available resources around the world leaving no stone unturned anywhere and there is a panic in the Western media about it.
A backlash of sorts is already evident from Libya's recent veto of a $462 million bid by China National Petroleum Corp.
The Chinese invasion news is compounded by Russian claims on untapped gas reserves in the Arctic and the U.S. is getting accused of oil grab in the Middle East, especially in Iraq for now.
In the West there is an open question about security of the western oil supplies vis-a-vis expansion programs of Russian state-owned groups such as Gazprom ready to threaten those supply lines. Russia is the world's second-largest producer of petroleum - about 8 million barrels of crude per day - which accounts for nearly 40 percent of the country's GDP.
Sky-rocketing global oil prices over the past five years have wafted state budgets into the black, fueled a modest economic boom, and enabled the Russian Central Bank to rack up reserves of $170 billion. But far beyond taxing windfall energy profits, the Kremlin moved to take over the industry.
Prime Minister Vladimir Putin, the former president and his over-inflated but shrewd ego is going all-out to get back the super-power glory resulting in the assembly of a vast state-run energy conglomerate. Russian authorities have - by hook or by crook - regained state control of the formerly private oil-and-gas sector with increasing state ambitions to spread its domain now to the Arctic areas. But this oil grab may have damaged Russia's energy prospects, according to sector observers.
A Russian energy expert speaking on conditions of anonymity told Oilprice.com today that exploration has come to a halt while a sustained growth of 9% in oil production a few years ago has dried to just 3% this year.
Platts energy pundit Roberts told Oilprice.com: “The Russian companies are keen to invest outside Russia because it is difficult to make that much money inside as Russian terms are not very good.”
On the question of the Arctic oil and gas grab, Roberts said: “That area promises further major resources because we know that Yamal Peninsula has vast volumes of gas to be developed.”
Citing the Russian estimates of “300 billion cubic meters a year,” Roberts pointed at the need for developing the production. “To develop giant field resources, Russia needs capital and also to maintain the present status quo of production, huge investments are needed between 2010 -2030 as gas production otherwise will be halved,” he said.
Russia, however, has two advantages, Roberts pointed out: First, having resources and second, most profligate user of energy.
“If it could learn to save or conserve energy and become energy efficient, it may hope to free up cash for the transformation of existing resources into actual production,” he said. “Russia needs anywhere between $2.4 and $2.8 trillion for energy development between now and 2030,” Roberts added. “It’s worth looking up at Russian GDP and that is a lot of money for Russia.”
“Russians are planning to tap into FDI (Foreign Direct Investment) but we have never seen anything like that,” he said, questioning where would Moscow find $15 bln per year in FDI.
With the fear of looming energy crisis and impending need for security for hungry industrial giants, there is no doubt that the developing countries like China and India are giving the advanced nations like the U.S. a run for their life in the energy fields.
The energy gurus, however, feel that there will stay an equation of sharing depending on basic principles of give-and-take.
Sarah O. Ladislaw, a Fellow with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington DC, said at a recent forum how “consumer feelings of insecurity increased when the price of oil went up,” as she addressed the issue of the intersection of security and sustainability.
Michael Mandel, former chief economist for BusinessWeek, “was optimistic, long-term” despite projections about the industry in the face of a global population crisis and global warming prospects that will exacerbate energy supply.
On the question of sustainability of supply, Roberta Bowman, senior vice president and chief sustainability officer, Duke Energy Technology, maintained that “sustainability, on an industry basis, will only come about through dedication to efficiency, collaboration and capacity-building.”
Curt L. Hebert, Jr., executive vice president, external affairs, Entergy Corp., approached sustainability from the perspective of “conduct,” as well as creating proper incentives and price signals while Pedro Azagra, chief development officer, Iberdola, tied sustainability policy to the proper servicing of clients and communities.
All these augur well for the United States as its crude oil production for 2009 is on target to have its biggest one-year jump since 1970, according to a Platts analysis of industry data.
With U.S. oil production averaging 5.268 million barrels per day (b/d) through October, the gain in U.S. output will be the most since the country produced 9.637-million b/d in 1970, which turned out to be the peak year of U.S. crude output, according to Platts’ analysis of data published by the U.S. Energy Information Administration (EIA).
By Tejinder Singh