Tuesday, October 02, 2007

Some Additional Points from the Energy Dialogue ...

--When the U.S.-Russia Energy Dialogue was announced in May 2002, oil was at $25/barrel, most Russian oil was being produced by private companies, and the Russian budget was extremely dependent on oil revenues. There was also a prevailing belief that after any Iraq war the United States and its allies would be able to quickly restore Iraq's oil production and that the world price would probably fall to $15/barrel. The feeling was that Russia needed the United States and the West--to provide new investment and capital. That situation is very different today.

--International companies are not likely to be able to acquire major assets in Russia today but can still invest and have smaller pieces. What remains unclear is whether international companies can trade expertise--particularly in making old wells more productive, helping to deal with losses caused by flaring, and to help bring new sites online--for a piece of the project.

--Russian production is leveling off in both oil and gas. And Russia may hit a crunch where rising demand at home, the need to fulfill contracts to Europe and loss of supplies from Central Asia may create a crisis.

--The long-term problem for Europe is not whether Europe is dependent on Russian gas, but whether Russia can keep up with the demand Europe is going to have for energy.

--We still don't think about energy in a global sense--supply and demand across the world in a single integrated system.

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