October 6, 2002	Sunday	Rajab 28, 1423

MOSCOW: Russian companies are attempting with government backing to take over from Saudi Arabia as the main oil provider to the United States. The companies are also seeking American capital for investment in Russian oil.

US Commerce Secretary Donald Evans spoke of Russia’s “important strategic role in diversity of the supply of world oil” at the energy summit between Russia and the US in Houston earlier this week. Russian Energy Minister Igor Yusufov signalled Russian readiness to supply oil, but said that the Russian oil industry needs an investment of about a billion dollars a year. US investment and technology could help deliver Russian oil to America’s West Coast, he said.

Companies have moved in line with political agreements. Russia’s state-owned Rosneft oil company and the US firm Marathon Oil Corporation announced a decision October 1 to participate jointly in Urals North American Marketing (UNAM), a project to supply oil from the Urals region in Russia to North America.

UNAM will use the existing transport and marketing infrastructure, the two companies announced. Oil supply under this project is due to begin in the third quarter of next year.

Russian executives are reported to have told the Houston summit that Russia could export as much as a million barrels a day to the US within five years. But Russia lacks pipelines and suitable port facilities, they said.

The US received its first direct shipment of Russian oil in July. Yukos, the second largest oil company in Russia began shipment on an experimental basis in the face of fears that high transportation costs could mean a loss up to 50 cents a barrel.

Yukos spokesman Alexander Shadrin announced in Moscow on Wednesday that Yukos has sent three oil tankers to the US so far, and that these supplies have been profitable. Yukos plans to ship five million tons of crude to the US next year, Shadrin said.

LUKoil, Russia’s biggest oil producer already owns the Getty gas station chain on the East Coast of the US. The company plans to build a new sea terminal in Murmansk for shipping oil across the Arctic Sea to the US from its Timan-Pechora oilfield in northern Russia. Direct oil shipment to the US remains a challenging task given the distance and the lack of the necessary infrastructure in Russia.

The US market is “very attractive and prestigious” despite the high cost of transportation, says Mikhail Odintsov, head of the natural monopolies committee of the Federation Council, the upper house of Russian parliament. Russia should also target East Asian markets like China and Japan because it is much cheaper to supply oil to them, he says.

But there are some dissenting voices in Moscow. Yevgeny Ischenko, deputy of the state Duma, the lower house of the Russian parliament, has urged caution in selling oil to the US The two countries have different oil interests, he says. The US wants to divide oil producers, particularly members of OPEC (Organization of Petroleum Exporting Countries) and push prices down, while Russia should band together with other producers to create a “hydrocarbon international”, he says.

OPEC has pressed Russia to keep exports to present levels. OPEC announced in November last year that it would withdraw 1.5 million barrels per day (bpd) from the market this January to hold prices, and asked the other major exporting countries Russia, Norway, Mexico and Oman to come up with another 500,000 bpd cut. Russia announced a 150,000 bpd cut, but only after OPEC threatened Russian producers with a price war. Russian oil has a position in the market now only because OPEC cut supplies, oil analysts say.

Russia exports 100 million tons of oil a year, and oil earns Russia half its hard currency. But it has been reluctant to join OPEC because it wants to build independent relations with major buyers. OPEC faces the prospect of a major producer acting on the side of consumers.

Officials at the Kremlin say growing energy exports from Russia are changing the status quo in the world energy market. The target is the supplies from Saudi Arabia.—Dawn/The InterPress News Service.