Ivan Sixpack retains more than a passing interest in the Russian Federation’s income from oil and natural gas exports, which together constitute nearly half of all revenues in Russia's budget.
Russia, the largest country in the world, is blessed with massive energy resources. According to the Tomsk Polytechnic University Review, the Russian Federation possesses 12 percent of the world‘s oil, the world’s fifth largest reserves, the world’s largest reserves of natural gas (32 percent of the global total) and 11 percent of the world’s coal deposits. Since the late 1960, when Soviet leaders began the development of western Siberia massive oil and natural gas deposits, revenue from energy exports has assumed an ever increasing role in the country’s exports.
Moscow however remains somewhat coy about its income from energy exports and the government doesn’t disclose a detailed breakdown of the revenues accruing from its energy sector.
Accordingly, Russian Federation Energy Minister Sergei Shmatko’s interview broadcast on the state-owned Rossiya 24 news channel on 9 January is of more than passing interest.
Asked by interviewer Dmitrii Shchugorev to sum up the Russian Federation energy sector’s performance in 2011, Shmatko replied, “For the Russian fuel and energy industry, for the Russian energy industry, 2011 was a very successful year. The country's electricity consumption is rising stably. That's a good sign. That's a sign that, despite the fact that there are, as certain experts say, signs of recession, our country's industrial production is increasing, for one thing.”
Turning from the domestic energy market to exports Shmatko said, “We believe that we can say that we have set a record for a second time, in terms of oil production. And we can say with certainty that a minimum of 510 million tons, maybe more, will have been produced in the whole of 2011. I recall that last year was the first time that we topped the 505 million ton barrier. In terms of the amount of natural gas we've produced, we've also gone up by about 3 percent, and, once again, in approximate terms, by the end of the year we will reach a production level of 667 billion cubic meters of natural gas. Once again, that's going to be 3 to 4 percent more than last year. And we're growing steadily in terms of coal. So whereas last year we produced 323 million tons of coal, this year it will be around 335 million tons. And the conditions for this are good. The increase in prices for coal industry products abroad has allowed us to boost exports.”
Continuing his roseate theme, Shmatko was similarly upbeat about the Russian Federation's prospects in the global energy market, informing his audience that he saw no reason why Russian energy companies would not be able to succeed in Libya, as the new Libyan Prime Minister Abdurrahim al-Keib declared that his government recognizes all contracts previously signed with Russian energy firms, adding that a number of meetings have already taken place with the new Libyan authorities and representatives of the country’s national oil company with the aim of Russian companies’ gradual return to work.
On the protracted thorny issue of the Russian Federation’s admission to the World Trade Organization Shmatko stated his belief that the Russian Federation's admission to the WTO would have little effect, positive or negative, on the country's energy industry, at least in the short term. Ending on a high note, Shmatko said that he was confident that there would be no disruption to Russian gas supplies to Ukraine and onward to Europe over the New Year period, despite the disputes that have previously arisen between Moscow and Kiev over gas contracts.
All in all, Shmatko almost seemed to be channeling Stalin, who said, “life has become more joyous, tovarishchi.”
By. John C.K. Daly of Oilprice.com