The Wall Street Journal reports this morning that Russia--long viewed as a likely candidate to pick up the slack in oil production as fields in the North Sea and Gulf of Mexico go into decline--has seen oil production fall for the first time in a decade. The vice president of the Russian petroleum giant Lukoil yesterday told reporters that not in his lifetime would Russian oil production exceed last year's figure. There seem to be two factors at play: on the one hand, existing Russian oil fields, primarily in Siberia, are genuinely drying up. On the other hand, the development of new fields has slowed, in large part because Russia insists on playing hardball with Western oil companies who would otherwise be more eager to invest there, as the WSJ notes:
Business investors have grown wary because the Kremlin
has increasingly intervened in the energy sector. Russia nationalized
former oil giant OAO Yukos and forced foreign investors like Royal Dutch Shell
PLC to sell half its stake in a big project off Russia's east coast to
the state-run OAO Gazprom. TNK-BP has also come under pressure: Last
month, intelligence services arrested one of its employees on suspicion
of industrial espionage. TNK-BP said it is cooperating with authorities.
So the production decline may have as much to do with political developments as it does with geological ones. But you'd think the U.S. would want to try to wean itself off of energy sources whose stability rests on the whims of the Kremlin, no?
Image: Wall Street Journal
--Josh Patashnik