Oil prices might have hold…
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The constant battle that takes place between Russia and Saudi Arabia to be the world’s largest oil producer and exporter seems to be leading towards yet another change at the top. The new Russian oilfields are just not able to offset the fast decline in production from their mature deposits, according to the International Energy Agency (IEA).
Russia took the top spot from Saudi Arabia during the economic crisis back in 2009 when the Organisation of Petroleum Exporting Countries cut crude oil output. They developed new oil fields to help push their production up to 10.5 million barrels per day (bpd), nearing their peak record of 11.4 million bpd produced in 1988 under Soviet rule.
Russia’s new problem is that the mature fields are rapidly declining and the new ones just can’t support the loss. The IEA predicts that by 2015 Saudi Arabia will already equal Russia’s output, and that by 2035 they will be yielding 14 million bpd. Although Russia will remain the world’s largest exporter of natural gas at 330 billion cubic metres, they will only be able to produce around 9.7 million bpd of oil.
However, the race is not yet lost for Russia. It is also predicted that Saudi Arabian oil may become scarcer in the market due to the vast amount consumed domestically. More than 10% of the crude oil produced in the Gulf is now burnt in the countries own power plants.
Ali Aissaooui, head of economic research at Arab Petroleum Investments Corporation, told arabianbusiness.com that "Domestic consumption has been growing very fast as a result of rapid demographics, steady economic growth and heavy subsidies, with the latter leading to excess demand."
The country is hoping that a huge nuclear programme, which could see 16 reactors being built by 2030 will help reduce its own reliance on its largest export earner. But the widely held view is that it is too little too late, and that as the Saudi demand for its own oil increases there will be a supply shortage by the end of the decade.
In fact Jadwa told arabianbusiness.com that he expects exports to fall far more dramatically, with less than 5 million bpd escaping onto the global market by 2020, thanks to a 60-percent surge in domestic demand.
So the fate of Russia’s survival as the number one exporter of crude oil will depend on the success of Saudi Arabia’s Nuclear power plants and other alternative forms of energy.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…