OPEC’s meeting in Vienna yesterday came to a rather sorry conclusion. Saudi oil minister Ali al-Naimi described the stormy get-together as ‘the worst meeting we have ever had’, with a failure to reach consensus on increasing output. The context of the Arab Spring has, it would seem, not only put a strain on oil supplies (with Libya out for the count until the grip of civil war eases) but has also increased political tensions within the group. As Venezuela, Iran and Algeria decried output increases against West-leaning OPEC kingpin Saudi Arabia, several commentators have seen the collapse of talks as a sign of OPEC’s fading star on the energy landscape, which leaves a Russia-shaped gap. This was rather presciently felt by Jeff Rubin in an article in the Globe and Mail, an extract of which is below:
Russia, the one country actually capable of producing 10 million barrels a day, isn’t even at the table at the OPEC meeting. And it’s been Russia that has been adding the most to world exports over the better part of the last decade as OPEC exports have faltered.
Oil production in Russia, the world’s largest producer,rose to a near post-Soviet high of 10.26 million barrels a day in May.Unlike Saudi Arabia, which has been hard pressed to maintain even a ninemillion barrel a day production level, Russian production has beennorth of ten million barrels a day since September 2009.
PrimeMinister Vladimir Putin has made it a national priority to maintainRussian oil production at over ten million barrels a day for the nextdecade. Let’s hope Russian oil giants like OAO Rosneft are up to thetask.
Because if Russia can’t produce any more oil, don’t expect OPEC to do it.
David Prosser of the Independent also views OPEC as an increasingly obsolete entity, seeing the disarray of Vienna as the death knell for the cartel. He argues:
Where might future increases in oil production come from? Well, BP’s latest Global Energy Review, coincidentally published yesterday morning while Opec was busy arguing, reveals that Russia (along with the US and China) was responsible for the biggest production increases last year. Amongst Opec members, only Qatar and Nigeria really ramped up production, but they have much smaller proven reserves than Russia (which, by the way, was also responsible for a third of the world’s increased production of natural gas). In Saudi Arabia, production was barely up at all.
The BP report also puts into context the contribution currently being made by renewable energy, with all the different renewables combined meeting just 1.8 per cent of the world’s energy needs last year. That’s three times more than a decade previously and renewable energy production is now growing faster than oil and gas – but still.
Oil remains all-important, in other words. In which case, the oil producers with the ability to service the growth in demand for oil will be all-important too. RIP Opec, all-hail Russia.