Eat dust, Saudi Arabia!

[ChrisD(RJ)]

http://www.telegraph.co.uk/money/main.jhtml?xml=%2Fmoney%2F2003%2F01%2F10%2F
cnoil10.xml
Russia becomes the biggest oil producer
By Malcolm Moore (Filed: 10/01/2003) 
Russia overtook Saudi Arabia as the world's largest oil producer in the last
three months, as the country beat all expectations for its output growth.
In the last quarter, Russia pumped an average of 7.97m barrels of oil a day,
against 7.86m barrels from Saudi Arabia.
It is a telling statistic as the Organisation of Petroleum Exporting
Countries, the oil cartel, meets on Sunday to discuss how much more oil to
release onto the market
</money/main.jhtml?xml=/money/2003/01/08/cnoil08.xml> to combat the high
prices caused by the five-week strike in Venezuela
</money/main.jhtml?xml=/money/2003/01/04/cnoil04.xml>.
Analysts now believe that Russia could increase its production by two or
three million more barrels a day before the state forecast date of 2010.
Russia has been helped this year by Opec cutting back its output
</money/main.jhtml?xml=/money/2001/12/29/cnoil29.xml>, leaving more room on
the global market for Russian oil.
In addition, as the US tries to become less dependent on oil from the Middle
East, Russian companies, such as TNK and Yukos, have begun shipments to
American refiners.
All of Russia's major oil companies have pledged to boost production further
this year, and German Khan, executive director of TNK, Russia's
fourth-largest player, recently said that the country would shortly produce
9m barrels a day. 
He added that unless there was major foreign investment, the country would
then remain at that level, or even stagnate.
Western oil companies have been reluctant to invest in Russia because of
delays in introducing product-sharing legislation. The benefits of such
legislation are that tax levels remain the same as when the deal is struck,
so companies do not have to worry about the vagaries of the Russian
government.
Nelli Sharushkina, an analyst at the Energy Intelligence Group in Moscow,
said: "One problem is it costs more to produce oil in Russia than in Saudi
Arabia. 
Saudi oil costs between 75c and $2 a barrel, but in Russia, it is expensive
to get to and expensive to transport, with costs up to an additional $6 a
barrel."
The need for Russia to begin exporting more oil than its current 50pc level
is underlined by the co-operation between four of the country's oil
companies to build a one million-barrel-a-day oil terminal at the former
naval base in Murmansk, with the intention of raising exports to the US
dramatically.
Russian oil companies can only achieve around $4 a barrel for crude on the
domestic market, compared to the $30 prices being paid abroad. 
Japan has also made overtures to the Kremlin, saying that its economy will
be able to can absorb a million barrels of Russian oil a day, and asking for
a 2,400-mile trans-Siberian pipeline to be built.