Gas pipeline in northern Russia
Yesterday the New York Times had a story on the lack of pipelines preventing several oil fields in Siberia from capping the natural gas that comes out of their wells. Instead of pumping the gas to markets in Europe and Asia, Soviet era fields like the ones near Usinsk, 1,000 miles northeast of Moscow, are flaring gas. The amount of gas annually wasted by one company, Rosneft, would be enough to power a city the size of Denver (600,000 people) for a year. These gas flares can be seen at night by satellites orbiting in outer space.
On the positive side, Rosneft is trying to raise cash for new pipelines with an initial public offering open (at least theoretically) to some foreign investors.
Tales of waste and inefficiency in the oil and gas sector in Russia are nothing new. However, the article reveals a fact that most westerners outside the oil industry probably didn't know - why Russia dilutes its expensive low sulfur crude with cheaper, higher sulfur oil from the Caucuses to create the mediocre "Urals blend" it sells to Europe.
Source: U.S. Department of Energy
The NYT's Andrew E. Kramer writes:
Politics, analysts say, lie behind the practice. The heavier crude oils are principally drawn from fields underneath the politically restive Muslim enclaves in Tatarstan and Bashkortostan, neighboring states about 500 miles southeast of Moscow. Doing away with the practice of mixing different qualities of oil would effectively end a subsidy to these minority Muslims, a sensitive issue in the internal politics of Russia. This winter, President Vladimir V. Putin said he wanted to eliminate the Ural Blend by separating oils in the pipeline. But no solid plans folllowed...there is easly refined low-sulfur oil, called light sweet crude, outside Usinsk. But there is no incentive to develop those outlying fields in the tundra, because there is no premium on higher-quality oil in Russia.
The U.S. Department of Energy estimates that a deepwater tanker terminal in the ice-free Arctic port of Murmansk could would make it feasible to ship Siberian crude to the U.S. in just nine days. With enough pipeline and tanker capacity, Russia could daily export 1.6 million barrels of oil to the U.S. - about 8% of what the U.S. uses every day. Pipelines for natural gas could be constructed along the same corridor (see above), so that LNG tankers could also serve U.S. Atlantic ports.
Oil tanker cruising in the Barents Sea near Murmansk
For more information on the obstacles to developing Russia's rich natural resources, see this PowerPoint presentation hosted by Rice University's website.
This is an important story.
Russia's GDP growth is falling and a huge gap is developing between industrial and non-industrial GDP with industrial growth approaching recession despite the soaring price of oil.
Russia was recently forced to dramatically jack up the price of oil to Belarus, critical to Russia's imperial influence in that backwater country, because oil revenues are not enough to float Russia's boat.
Can you imagine what would happen if the price of oil started to drop? Can you imagine what will happen to Russia when oil, an exhaustible fossil fuel, runs out?
Kim, Russia isn't even close to running out of oil. The Soviets merely tapped the oil that was easiest to get at and, as the article mentioned, kept certain potentially restive regions subsidized.
I think too many people are confusing the end of cheap oil with the end of oil. Here in the Pacific Northwest, there's another Saudi Arabia of oil sands just a few hundred miles away in Alberta. Russia may very well have unconventional oil reserves as well as mostly untapped Siberian fields. The point we've made again and again is that Russia needs to be open to foreign investment to get at it and increase production substantially. This is what the Rice University powerpoint was all about, questioning whether Russia can expand production beyond 2008 on its own (of course, take into account that this is presented by consultants to Houston-based oil companies).
Thanks for reading.
Charlie, you really ought to define your terms and make some attempt to be fair and understand the point under discussion.
Russia's oil WILL run out some day. Whether it is in ten years or one hundred years is TOTALLY IRRELEVANT. The question is, WHEN IT DOES, will Russia be able to replace that income with something else.
It may very well be that Russia's oil will "run out" before it disappears, because huge consumers like the USA will turn to alternative sources like oil sands and alternative energy like solar and wind.
But the price raise to Belarus, which will dramatically hurt Russia's interest there, shows that Russian oil is far less potent than some imagine. Russia has huge problems delivering the oil it does have to market, and it is selling of a finite resource to pay the bills, just like using mortgage proceeds to pay for groceries. That is ruin.
Russia receives virtually no foreign investment because it doesn't want any. They Kremlin knows that foreign investment undermines its power, and it will never tolerate that. In short, as it always does, Russia is cutting off its nose to spite its face.
Re: last post at this article
Oil will hypothetically dry out everywhere. The Russian economy is more than just oil. See:
IS RUSSIA REALLY HOOKED ON OIL?
http://www.untimely-thoughts.com/index.html?art=500
The price raise to Belarus makes perfect sense.
LUKASHENKO MUST EITHER LOSE POWER OR MERGE WITH RUSSIA
http://en.rian.ru/analysis/20060410/45540259.html
GAS RUS' & BELARUS
http://english.intelligent.ru/editorscolumn/index.html
Russia is on the rise and will be great. This is great news for the rest of the world. It's not good for such a great land mass to be impoverished.
THE RE-EMERGING RUSSIAN SUPERPOWER http://www.cdi.org/russia/johnson/2006-18-9.cfm
Kim thinks that Johnson's Russia List is one of the "freakish pro-Russia fringe groups."
The other sources have some informative information that do reference raw facts.
Kim, what souces do you find as informative?
"Come to think of it, Mike, if Russia is SO wonderful, how come YOU don't LIVE there?
LOL"
*****
Strange sense of humor Kim.
Actually, I'm very much needed in America to better inform the masses of misinformed who often blindly believe what they read in the sources you mention. Those capable of grasping different views have acknowledged a good number of points I have raised over the course of time.
Russia right now is swarming with a number of English language journalists who bash Russia and Putin, while making a good living at it. Based on this, I wonder whether Russia is a somewhat occupied country.
I think that at least one actively high profile English language analyst/journalist should be tolerated in Russia.
Let them make me an offer that I can't refuse.
You can't make a living in America as a Russia friendly journalist.