Russia a force to be reckoned with in oil markets

Russia a force to be reckoned with in oil markets 

If you ask people which country is the world's biggest producer of crude oil, most will immediately reply that it's Saudi Arabia. But the Saudi’s have been surpassed by…. the Russians. Granted the
Saudi’s have reported capacity of 12 million barrels a day and are holding back production to support OPEC’s quotas. Russia is the world’s largest producer.

Russia’s production has seen a rather meteoric rise (for the oil industry, anyways) since the mid-1990’s, where production bottomed out at 6.1 mmbbls/d in 1996. The need for “hard currency” and the advent of modern drilling and production techniques has helped boost production.

Speaking to an International Service provider earlier this year, it appears that Russia has yet to adopt the most modern horizontal drilling/fracking technologies in the field (old habits die hard for those in the office, but the “boys in the field” are chomping at the bit to give it a whirl.)

How much higher could Russian production rise? Well, given the vast size of the country, and rather staggering reserves, production could keep rising. Russia is one country that has helped satiate the growing demand from new countries, such as China.

Clearly it's not a country for every company in the oil patch, but Exxon’s recent agreement shows that not everyone has backed away from Russia’s sometimes draconian governing style (BP would surely have some great tales over a beer.) Like it or not, Russia is a powerhouse in the oil industry, and expect it to remain so for years to come.

If ever there could be a fly in OPEC’s ointment, it will be Russia, and this could prove to be extremely frustrating for the Saudi’s, who have typically driven production cuts in order to support prices, only to now potentially see the void filled by growing Russian production.

It is unlikely the Saudi’s will want to “subsidize the Russians”, so…Expect the Saudi’s (OPEC) to try and work with the Russians in the future to control global production levels. If you thought the OPEC members were good at the old “nod and wink”, wait until they try and deal with the Russians. -The Globe and Mail