Where does Russia’s hydrocarbon industry stand: gas and oil?
For most Europeans, when it comes to energy matters, Russia means natural gas. It has a quarter of the world’s reserves of conventional gas and Gazprom, its national company, supplies EU consumers with 40% of their imports. If Ukraine is taken into account, this increases significantly.
A crisis between Russia and Ukraine six years ago (in January 2006) interrupted gas imports to European countries – thankfully for only a few days. Under pressure from the EU, the countries then took measures to ensure that future crises would not interrupt supplies. The crisis of January 2009 had no significant impact.
The price of conventional Russian gas is indexed on the price of oil, which increases continuously. As a result, Gazprom has seen its financial resources increase vastly and the management of the company has become ineffective, even unhealthy. President Putin has spoken of corruption!
Concurrently with this development, and in sharp contrast, the United States has been moving into shale gas production. It has brushed aside severe criticism from certain Europeans about the impact of the production method used for this new gas which they believe to be environmentally disastrous.
The quantities that will be brought to the world gas market are such that it will be completely altered. The impact will be even more significant given that prices will be much lower and that the United States stands to gain an economic advantage, particularly in the chemical industry.
To counteract Gazprom’s shortcomings, Russia decided to call on Western companies to operate new gas deposits including shale gas deposits!
In the United States, the development of this new type of gas has led to the development of shale oil which will have an impact on all aspects of oil geopolitics.
The evolution of the Russian petroleum industry is no less significant in light of these changes.
The Russian oil giant Rosneft enables the State to control about 50% of national petroleum resources. Following its purchase of the joint TNK-BP venture, which has considerable technology and management know-how, Rosneft is now the largest crude oil producing company in the world outside of OPEC. It is even larger than Exxon Mobil.
Although the subject of Russian hydrocarbons raises the issue of gas first, it should be remembered that oil revenues for the Russian State – the Russian Federation – are eight times greater than those from gas!