Foreign Affairs

Russia’s Oil Production Booms Even As Energy Prospects Dim

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Russia’s oil industry is under siege from slacking oil exploration and cratering crude prices, yet that has not stopped the country’s oil producers from increasing production, The Wall Street Journal reported Sunday.

The decline in exploration is due in part to President Vladimir Putin’s decision to put a planned cut in the country’s oil-export duties on hiatus, essentially diverting money to other areas of Russia and causing exploration to atrophy.

Income from natural gas and oil exports, which make up half of Russia’s entire revenue, are crucial components to Putin’s ability to place military retinues in Syria, The Wall Street Journal reports.

Russia’s dominant place as an energy exporter is in danger of being replaced by natural gas companies in the West, as the U.S., thanks to its burgeoning liquefied natural gas industry and Congress’s lifting on oil export bans, plans on jumping into Europe’s energy markets this spring.

“We will have to limit our spending and that will lead to a fall in production,” OAO Lukoil Chief Executive Vagit Alekperov said. Russia’s second largest oil company — OAO Lukoil — said it will need to work together with the Organization of Petroleum Exporting Countries to increase slagging oil prices.

“In my opinion, if such a political decision is taken, Russia should jointly work with OPEC to cut supply to the market … It’s better to sell one barrel of oil at $50 than two barrels at $30,” Leonid Fedun, vice president of Lukoil, told TASS news agency Monday in an interview.

Western powers placed sanctions on Russia in 2014 following Putin’s decision to annex Crimea, yet the sanctions appear to have little impact on the country’s oil output, as China lent triage to Putin by giving Russia the equipment it would need to grow its oil exports.

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