David Prosser: Russia is the big winner from the Opec debacle
Thursday 09 June 2011
Outlook For anyone wondering why BP has been prepared to put up with so much grief as it strives to increase its presence in Russia, yesterday's ill-tempered Opec meeting provides an answer. In a world where Opec is incapable of agreeing a common goal, let alone exerting the control it once did over global oil production, Russia becomes even more powerful than its status as the world's largest oil producer might already suggest.
With Opec failing to agree how to proceed yesterday, it looks as if we may now see a small increase in production from those members who backed this strategy – particularly Saudi Arabia.
But that is unlikely to reduce the upwards pressure on the oil price. For one thing, most of the countries, including Saudi Arabia, are already operating at close to full capacity. For another, they are increasingly heavy users of their own oil, limiting export supplies.
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.
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