Fears emerge over Russia’s oil output

Fears emerge over Russia’s oil output
By Carola Hoyos and Javier Blas in London

Published: April 14 2008 22:10 | Last updated: April 15 2008 15:43

Russian oil production has peaked and may never return to current levels, one of the country’s top energy executives has warned, fuelling concerns that the world’s biggest oil producers cannot keep up with rampant Asian demand.

The warning helped on Tuesday to push crude oil prices to a fresh all-time high above $112 a barrel, threatening to stoke inflation in many countries.

US crude oil West Texas Intermediate surged in London trading to $113.06 a barrel, above last week’s record of $112.21 a barrel. It later traded 125 cents higher at $113.01 a barrel.

Leonid Fedun, the 52-year-old vice-president of Lukoil, Russia’s largest independent oil company, told the Financial Times he believed last year’s Russian oil production of about 10m barrels a day was the highest he would see “in his lifetime”. Russia is the world’s second biggest oil producer.

Mr Fedun compared Russia with the North Sea and Mexico, where oil production is declining dramatically, saying that in the oil-rich region of western Siberia, the mainstay of Russian output, “the period of intense oil production [growth] is over”.

The Russian government has so far admitted that production growth has stagnated, but has shied away from admitting that post-Soviet output has peaked.

Viktor Khristenko, Russia’s energy minister who is pushing for tax cuts that could stimulate investment, said last week: “The output level we have today is a plateau, stagnation.”

Russia was until recently considered as the most promising oil region outside the Middle East. Its rapid output growth in the early 2000s helped to meet booming Chinese demand and limited the rise in oil prices.

The trend, however, has turned, with supply dropping below year-ago levels for the first time this decade, according to the International Energy Agency, the energy watchdog.

Oil futures on Monday rose to $111.79 a barrel, just below last week’s record of $112.21 a barrel.