July 16, 2002	Tuesday	Jamadi-ul-Awwal 5, 1423

RIYADH, July 15: The United States is actively pursuing a new energy security policy, so as to considerably lower its dependence on the oil rich states of the Gulf and diversify significantly its energy sources.

In order to overcome the psychological issue of energy security the US is hoping to double its oil imports from Nigeria — from the current 900,000 barrels a day to around 1.8 million barrels per day in the next five years, says Dr. Paul Michael Wihbey, a fellow of the American Institute of Advanced Strategic and Political Studies. Dr. Wihbey, a member of the African Oil Policy Initiative Group (AOPIG), said this while presenting his paper last week in Lagos, Nigeria, emphasizing the US needs to diversify its oil and energy sources.

The policy shift, contained in a white paper submitted to the US government by the group, was based on the growing fear of insecurity that the continued supply of crude from the Gulf posed to the US market. The white paper strongly suggested developing Nigeria as a major source of crude to the US market in the coming years.

Nigeria is currently the fifth largest exporter of crude to the US with Saudi Arabia, Canada, Mexico and Venezuela at the top of the list. Saudi exports are currently believed to be in the range of 1.4 to 1.8 million barrels a day.

“Nigeria is the energy super power of Africa. The private sector, small and major operators, administration and officials have come to realize that Nigeria and the Gulf of Guinea are of strategic importance to the United States. Statistics from the US Department of Energy showed African oil exports to the US will rise to 50 per cent of total oil supply by 2015,” Dr. Wihbey added.

President Obsanjo of Nigeria is scheduled to visit the US later in October this year while the US President George W. Bush would be in Nigeria in the first quarter next year. The state of oil industry in Nigeria and the possibility of increased crude supplies to the US, would be high on agenda during the two visits, analysts here in Dhahran, the virtual global energy capital strongly believe.

Dr. Rilwanu Lukman, adviser to the Nigerian president on petroleum and energy affairs, said last week that Nigeria looked out to benefit from the US capital and technology in the quest to raise the country’s oil reserves.

While emphasis on developing African reserves is growing in the United States, to meet its long-term energy security objectives, the US is also working closely with Russia to meet its short-term objectives in the energy sector.

Outside the Opec, Russia is now the world’s second largest exporter, producing roughly close to 7.2 million barrels a day. Saudi production, in the aftermath of the Opec production restraints, agreed in order to support a fair return to crude producers, is reported to be around 7.4 million barrels a day. However, the fact stays that Saudi Arabia has more than 3 million barrels a day spare crude capacity in mothballs.

Analyst here point out to the fact that the Russian crude reserves are only about 5 per cent of the world’s oil and one-tenth of the reserves of the Middle East. As compared to the Saudi Arabian reserves of 262 billion barrels, the Russian reserves are only in the vicinity of 50 billion barrels. Thus in the long-term, the US cannot depend upon Russia as the major energy supplier to the US, and the energy analysts in the US administration realize this fact very well.

Julian Lee of the London based Centre of Global Energy Studies says that the increase in Russian production from close to 6 million barrels in the late 1990s to the current levels is not sustainable. He says it was achieved by jacking up output at existing wells rather than by investing in the exploitation of new fields. To maintain these output gains, he says, the industry needs billions of dollars of investment.

High oil prices have helped the Russian oil and energy industry in the short-term. Because of hefty transport costs, Russian oil is relatively expensive to bring to the market. At the current crude price levels, the Russian industry is attractive enough for the foreigners.

However, the more they produce, the greater would be the downward pressure on oil prices, making the industry less attractive to foreigners.

Analysts are clearly noting a tendency within the US oil and energy circles to promote Russia in the short run as a counterweight and balance to the Opec. This seems to be working to some extent, at least for now, energy analysts here believe. However, Russia with its current reserves levels cannot compete with the Opec producers for long.

For long-term, there is, therefore, urgency within the US administration to look towards Africa, the Caspian belt and other possible alternatives, to ensure diversified, regular and secured crude supplies in meeting the growing energy demands of the country. It should, therefore, come as no surprise that Nigeria is emerging as the next stopover for Mr. Bush and his entourage — mainly drawn from the oil and energy corporate world of the United States.