271. RUSSIA: LOTS OF OIL & GAS, NO PIPELINES
The March 28, 2006 New York Times has an article (behind the free registration wall) on the oil situation in Russia, particularly the Timan-Pechora region.
In the USGS World Petroleum Assessment 2000, Timan-Pechora is Province 1008, and this is the map (green dots are oil fields and red dots are gas fields):
WPA 2000 ranks Timan-Pechora as the 26th province in the world in terms of undiscovered oil, with the following stats as of 1995 (MMBO, except for maturity):
Cumulative oil: 3,346
Remaining oil: 9,774
Known oil: 13,120
Mean undiscovered oil: 5,732
Future oil: 15,506
Oil endowment: 18,852
Discovery maturity: 70%
This basin is far from peaking, and produces the sort of light crude which is in high demand. So why isn't production in this province booming?
The answer is one we have previously addressed in 253. MONOPOLISTS SITTING ON OIL. From the NYT article:
Despite its remote location in the far north, Usinsk has some inherent advantages. An export terminal a few hundred miles away on the Arctic Ocean could supply tankers able to reach the United States in nine days. Building a pipeline to Europe would feed the high-quality oil directly to another ravenous market.Hard to believe, isn't it? Russian bureaucrats are blending caviar with slop, and selling it as dogfood. Which, as a side-effect, just happens to eliminate any incentive to produce the caviar.
But for now, the Russian government controls exports. So instead, oil from here is pumped into a maze of state-run pipelines stretching far to the south, where it is blended with inferior oil and sold at a discount.
Another interesting fact from the article: Siberia is covered with natural gas flares. There aren't enough pipelines and the gas can't be moved, so they just burn it. Rosneft alone flares enough gas in one year to supply an entire city the size of Denver.
So we've got Western Europe struggling due to lack of gas, while the Russians are burning it off like it was garbage in Siberia. This doesn't sound like a problem caused by resource constraints. It sounds like a problem caused by government meddling and mismanagement.
-- by JD