Putin’s house of cards coming down? – and ours as well?

The article below discusses the possibility of Russian miscalculation over the gas confrontation. Whilst the argument might be correct, the implications are dire as the two paragraphs quoted below show.

These reinforce the fact that even if there was a regime change in Moscow, the outlook for more secure and continuous supplies is bleak, even over a relatively short time frame.

We must not wait until we are in the current position of the EU States without gas, or believe that a rescue ship in the form of that euphemism ‘alternative sources’ will arrive in the time our ‘supplies’ will hold out. We must start working now to ‘minimize the resource intensity of our societies’ .


Putin’s house of cards coming down

……………………Its longer term prospects look no brighter. With current production in decline and most of the new fields to be developed in the forbidding and extremely expensive Arctic region, Gazprom needs a minimum investment of $20 billion per year over the next 10 years to stave off production collapse. With its credit-worthiness in tatters and foreign capital now avoiding Russia like the plague, it is unlikely to have an easy time finding it.
Nor is the oil sector in better shape. Over the past eight years, Russian state coffers were filled by exorbitant export and extraction taxes levied on oil producers that together amounted to more than $50 per barrel. At current market prices below $50, the oil companies lose money on exports and are shutting down wells. With most major oil fields well past their peak and many nearly depleted, the oil industry needs new investment as badly as Gazprom, but is even less likely to get it. Western oil companies and banks that were once eager to pay any price to get into Russian oil are now wondering how to cut their losses. In just one example, Conoco/Phillips’s 20% stake in oil major Lukoil worth $1.3 billion only four months ago is now worth less than half that and falling further…………….

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s