World's Energy

June 19, 2008 - Agence France-Presse by Amelie Herenstein MOSCOW, (AFP) - Russia is a key oil power but its problems with raising production and wariness of openly associating with OPEC mean it will be keeping a low profile at an oil summit in Jeddah on Sunday, analysts said. While Russia has been invited to the conference between producer and consumer countries in Saudi Arabia to discuss soaring oil prices, officials say no decision has yet been taken on whether Moscow will send a delegation. In contrast, Britain will be represented by Prime Minister Gordon Brown and the United States by Energy Secretary Samuel Bodman at the emergency meeting -- called as world prices neared 140 dollars per barrel. Russia has been vying for the top oil producer position with Saudi Arabia for years but recent statistics show that production may be stagnating and could even fall during 2008 -- a source of much embarrassment among officials. "At the moment, Russia has nothing to offer" at Jeddah, where other producer countries could announce output increases to lower global prices, said Chris Weafer, chief analyst at the Uralsib investment bank in Moscow. "This is a bad time for Russia to put itself in such a central stage ... It would much rather keep its head down for a couple of years to fix this problem and then come back," Weafer said. Senior officials including Prime Minister Vladimir Putin have sought to downplay disappointing production figures in recent weeks and have announced tax cuts in a bid to promote investment. But these measures to increase production appear insufficient and in any case will not have any effect before 2009, senior oil executives said at a business conference in Moscow this week. Experts expect Russia's oil production will at best level off in 2008 at the 10 million barrels per day it churned out last year -- some 12.6 percent of total global production, figures compiled by British oil major BP showed. The trouble with Russia's oil sector, a Western energy expert told AFP, is that it is dominated by "short-term thinking" because it has gone through severe legal uncertainty in recent years. The controversial privatisation of almost the entire energy sector, the Kremlin-backed legal campaign against the Yukos oil major and now the implosion of British-Russian oil venture TNK-BP have all contributed to unease. Oil executives in Russia are now more interested in dividends than in long-term investments that could help boost production. Any production increases will be "very difficult," said the Western energy expert who asked not to be named. Russia's other problem with Jeddah is that it has always been careful not to identify too closely with other producers, particularly with the Organization of the Petroleum Exporting Countries (OPEC), analysts said. "The meeting would identify them much more as part of the producers bloc and that would be something they want to avoid with the G8 meeting coming up soon," Weafer said, referring to the July 7-9 Group of Eight summit in Japan.