Russia’s oil reserves are three times larger than the official estimate of 50 billion barrels and the country is poised to serve as reserve supplier to the U.S. market when prices climb too high, the head of the country’s second-biggest energy firm said yesterday.
Mikhail Khodorkovsky, chairman and chief executive of Moscow-based Yukos Oil Co. and one of Russia’s richest men, told a Washington audience that “serious reassessment” of Russia’s proven oil reserves was necessary, but added that recent talk in the West of Russia as the world’s next energy superpower was also off the mark.
“A year ago, we were not seen by the U.S. government as a significant player,” he said through a translator in an address yesterday at the Carnegie Endowment for International Peace.
“Now, I think, the new assessment is also too excessive. Russia is not going to replace Saudi Arabia,” he said.
Because of higher transportation costs, he said, Russian oil producers will only be a “marginal” supplier to the U.S. markets when prices are in a “moderate” range of $20 to $25 a barrel.
But should prices go above the $25 barrier, either through increased demand or supply cutbacks engineered by the Organization of the Petroleum Countries (OPEC) oil cartel, “Russia could then sell to the United States and smooth out the price peaks,” he said.
Mr. Khodorkovsky has played a leading role in the recent battle of wills between OPEC and Moscow, which is not a member of the producers’ cartel.
With the Yukos chairman’s active backing, the government of President Vladimir Putin offered only tepid support for OPEC’s efforts to cut global production by 1.5 million barrels a day starting Jan. 1, an effort to prop up prices as the global economy went into a slump. The price of oil this week was about $18 a barrel, several dollars below the OPEC target price.
Abdullah Bin Hamad Al-Attiyah, Qatar’s energy minister, took a swipe at Russia during a visit this week to fellow OPEC member Venezuela.
“We can’t protect the market alone in OPEC,” he complained.
But Russian Energy Minister Igor Yusufov said in a Moscow briefing yesterday that Russia hasn’t decided whether to extend the current production cuts into the second quarter of this year.
Mr. Khodorkovsky said yesterday he saw opportunities for, at best, limited cooperation between Russia’s major producers and OPEC.
“I think we need to consult with OPEC, just like we have to consult with our customers in the market,” he said. “We need to convince them that increased Russian production is not a threat to OPEC’s markets.”
Once considered the archetypal Russian business “oligarch,” the 38-year-old Mr. Khodorkovsky has embarked on a carefully planned image makeover in recent years.
A former deputy energy minister, he took control of Yukos in 1996 and is credited with streamlining the company’s unwieldy structure, installing Western management and production-control standards, while amassing a personal fortune estimated at over $2 billion. His battles with minority shareholders and his creative financing methods in his first days at Yukos also earned him a reputation as one of the most freewheeling of Russia’s new tycoon class.
He predicted yesterday that the Russian oil and gas industries will be fully integrated into the world economy within the next decade, with one or two domestic producers surviving as multinational energy giants rush to invest.
“My hope is that my company will be one of those survivors,” he said.