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Russia's Growing Energy Supply

The American campaign against terrorism may be grabbing the headlines, but another battle is being waged with perhaps equally significant long-term implications: the contest for energy dominance between the world's two largest oil exporters, Saudi Arabia and Russia.

For each of the past two years, Russia has increased its annual oil output by nearly half a million barrels a day (MBD) -- globally, the largest increased output of any country. Even as oil production capacity in the Middle East has stagnated for 20 years, Russia's potential for production has grown. For example:

ExxonMobil and other large companies are developing a giant oil field at Kashagan, estimated to contain 50 billion barrels.

Lukoil, Russia's largest oil producer, has new proven reserves of 5 billion barrels in Russia's Caspian shelf, and the field may actually be three times as large.

Conservative forecasts show the Caspian shelf holds 75 billion barrels of oil -- 115 percent of what was credited to the entire former Soviet Union in 2000.

Thanks to these discoveries, the Russian oil sector is expected to increase exports by at least 2 MBD by 2006, which means total oil exports from the former Soviet Union could equal Saudi exports. The losers will almost certainly be Saudi Arabia, Kuwait and other oil producers with state monopolies that disallow foreign investment.

Eventually, Russia may displace the Organization of Petroleum Exporting Countries (OPEC) as the key energy supplier to the West. This could allow Russia to more fully integrate itself economically into the industrialized West. In political terms, energy resources could buttress Moscow's goal of becoming a key partner of the United States -- a situation frightening for Saudi Arabia and other OPEC countries.

Source: Edward L. Morse and James Richard, "The Battle for Energy Dominance," Foreign Affairs, March/April 2002.

For Text
http://www.foreignaffairs.org/20020301faessay7969/edward-l-morse-james-richard/the-battle-for-energy-dominance.html

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