Monday, April 14, 2008

Peak Oil - Bullish News from the Russian Bear

In an article in today's Financial Times, Carola Hoyos and Javier Blas quote a senior executive at Lukoil as stating that Russian oil production has peaked. Some of those refuting the peak oil thesis have been pointing to the vast reserves of Russia as a source of higher future production. It will be important to keep an eye on export data from the large producers over the next few years as their domestic demand continues to increase while supply stagnates.

From the article:

"Leonid Fedun, the 52-year-old vice-president of Lukoil, Russia’s largest independent oil company, told the Financial Times he believed last year’s Russian oil production of about 10m barrels a day was the highest he would see 'in his lifetime'. Russia is the world’s second biggest oil producer.

Mr Fedun compared Russia with the North Sea and Mexico, where oil production is declining dramatically, saying that in the oil-rich region of western Siberia, the mainstay of Russian output, 'the period of intense oil production [growth] is over'.

The Russian government has so far admitted that production growth has stagnated, but has shied away from admitting that post-Soviet output has peaked.

Viktor Khristenko, Russia’s energy minister who is pushing for tax cuts that could stimulate investment, said last week: 'The output level we have today is a plateau, stagnation.'

Russia was until recently considered as the most promising oil region outside the Middle East. Its rapid output growth in the early 2000s helped to meet booming Chinese demand and limited the rise in oil prices."

The trend, however, has turned, with supply dropping below year-ago levels for the first time this decade, according to the International Energy Agency, the energy watchdog."