Russia forms working group to address long-term problems in oil industry

Feb 27, 2002 01:00 AM

The Russian government Feb. 20 formed a working group, which includes the leaders of the country's top oil companies, to address long-term problems in Russia's oil industry. The participation by the oil majors signals Moscow's desire to maximize production throughout 2002 and beyond, to the point of surpassing Saudi Arabia as the world's largest oil producer.
Several Russian oil firms already plan double-digit production expansion for 2002 based on a relatively conservative price estimate for Brent crude of $ 16 a barrel; the current price is $ 20. Although success is by no means assured, Russia has the right measures in place to dominate the oil market and strike a major blow against OPEC.

Russian Prime Minister Mikhail Kasyanov met with the leaders of Russia's oil majors Feb. 20 to discuss energy policy. Contrary to expectations, there was no mention after the meeting of extending Russia's promised 150,000 bpd export cut past the first quarter, in order to cooperate with OPEC's desire to reduce global supply to boost oil prices.
The non-announcement sent Brent crude down 2.8 % and renewed speculation that Russia does not fear a price war with OPEC, since Moscow is not as dependent on oil revenues as OPEC governments. Kasyanov estimates that the oil industry is only about one-third as important to the Russian economy as it was three years ago.

Source: Strategic Forecasting LLC
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