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Caspian, Russian energy needs major investment - EBRD
By Barbara Lewis
LONDON, Nov 20 (Reuters) - The Russian and Caspian oil and gas sectors may need investment of more than $300 billion in the next decade to enhance productivity, increase pipeline capacity and develop new fields, the EBRD said on Tuesday.
In a report on Energy in Transition, the European Bank for Reconstruction and Development (EBRD) also called for an array of reforms to help ensure a "stable and predictable investment environment."
Total requirements are difficult to estimate, but they are likely to exceed $300 billion, with perhaps three-quarters of that amount to be spent in Russia.
"The cash flow in Russia's hydrocarbon sector should be sufficient to finance modest production growth over the next few years, but as the need to develop new fields increases, Russian energy producers will increasingly have to raise external capital," the report said.
It added that investment needs were relatively higher in the Caspian region. In 1989, the Soviet Union was the world's largest oil producer, with an annual output of around 600 million tonnes, writes the EBRD.
As output in general fell dramatically with the collapse of the Soviet Union, production of Soviet successor states fell to some 350 million tonnes at its lowest point in 1996.
In line with progressive economic recovery, output in 2000 was 395 million tonnes, helped by foreign investment spurred by the past two years of high oil prices.
Samuel Fankhauser, senior economist at the EBRD and one of the report's authors, said he did not believe the current fall would hit investment in the Russian region more harshly than elsewhere. Oil was trading at below $17 a barrel on Monday, its lowest level for around two and a half years.
Fankhauser underlined the report's calls for improved corporate governance, greater transparency, competition and for the state to change its role from owner and director to regulator.
Key conditions, it said, are open and non-discriminatory access to pipelines, which at the moment are largely controlled by pipeline monopoly Transneft and Russian gas giant Gazprom (GAZPq.L).
By some estimates, cited by the EBRD, crude oil production in the Caspian region could reach up to 200 million tonnes per year by 2015, up from 65 million tonnes in 2000 -- provided reforms are implemented.
Russia's crude production is expected to rise more gradually to around 375 million tonnes a year, up from 325 million.
Saudi Arabia, has the world's biggest oil reserves of 262 billion barrels or around 36 billion tonnes.
According to figures from the West's energy watchdog, the International Energy Agency (IEA), Saudi Arabian daily oil production in October was an estimated 7.35 million bpd, while Russian production was 6.92. Saudi Arabia says maximum capacity is an estimated 10.5 million bpd.
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