Russia Faces Challenges in Energy Leadership

A Russian state study paints a bleak energy picture, pointing to problems in future export rates of natural gas -- the domain of its largest and most important company Gazprom.

The annual ministry of natural resources study concluded that oil quality was deteriorating steadily as a result and Russia could only sustain current annual world-topping production rates of 500 million tonnes for another 13 to 15 years.

The latest government findings showed investment in new oil exploration declining by 40 percent and development work yielding the discovery of only small traces of oil.

"So far, the expectations are not being fulfilled," the Russian natural resource ministry said.

Russia has been the world's top natural gas exporter throughout the post-Soviet era, but the study warned that even this lead was not safe because the world was switching to liquefied natural gas consumption while the United States and Canada were also pushing ahead with the development of shale gas.

Gazprom has been forced to temporarily stall the development of its Shtokman field in the Barents Sea after discovering the United States was no longer willing to import its expected supplies.

The state-run giant also reported a drop in European sales last year and the Russian ministry warned that further complications for Gazprom were likely.

"European consumers are increasing their liquefied gas purchases, seeking to at least partially replace the Russian pipeline supplies," said the survey.

"This trend is irreversible," it starkly noted.

The ministry observed that the new European policy could endanger Russia's planned South Stream and North Stream pipelines -- two projects designed specifically for European markets.

Source: AFP