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Thursday, April 06, 2006

Russia's Gas Resources in Decline

As The Washington Post reports:

Three months ago the Russian energy giant Gazprom forced Ukraine to pay sharply higher prices for natural gas. At the time, the story was portrayed as a political struggle for control in Kiev. But last week Gazprom announced it was tripling gas prices in Belarus, a country that is politically close to the Kremlin. Moldova has been forced to accept a doubling of prices over the next three to four years, and the other former Soviet republics are already paying market prices for Russian gas.

The truth is that these price increases are not political. Rather, they reflect worrisome economic and geological facts about Russian gas fields. The Kremlin is not simply trying to use Gazprom to reassert authority in Belarus, Ukraine or anywhere else. There are in fact deep problems with Gazprom -- problems created by its inefficient management and a looming decline in gas production.

Russia controls over a quarter of the world's gas reserves -- more than any other country. Most of the known Russian reserves (about 80 percent) are in west Siberia and concentrated in a handful of giant and super-giant gas fields. Since the early 1970s the rate of discovery for these new fields has been declining. Moreover, output from the country's mainstay super-giant fields is also steadily falling.

This, of course, is no surprise. Sooner or later, fossil fuels exhaust. But it appears its sooner rather than later for Russia. If this is so, Dictator Putin will no longer be able to rely on energy wealth to secure his dictatorship, and will have to begin relying on the ham-handed, jack-booted thuggery of this Soviet predecessors. So it goes in the neo-Soviet Union.

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