Russian oil production falls raising concerns

There are some concerns being expressed with regard to the news of a year-on-year 1% fall in Russian crude output, the first such decline since 1998.  Observers seem undecided as to whether the news suggests a move towards resource sustainability or whether it casts doubt on the country’s ability to be a key supplier to the market.  In the first instance most agree that the country does not lack hydrocarbons, but is perhaps guilty of depriving these of appropriate development resources.  Higher taxes, reduced opportunities for foreign investment and the uncertainty of foreign ownership have all played a part.  However, if the second scenario proves more accurate, then there will be significant impacts not only for Russia.  The situation hints once again at inadequate investment in infrastructure and if indeed it is found Russia cannot cope with increasing Asian demand (for example), some alarm bells will be loudly ringing.

This article is extracted from International Oil Letter, Vol 24 issue 19, published 12 May 2008.

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