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Russia’s Big Energy Secret

Putin wields gas as a weapon. But the reality is that Russia can barely meet its own growing demand.

By Owen Matthews | NEWSWEEK
Updated: 11:26  a.m. ET Dec 22, 2007
Dec. 31, 2007 - Jan. 7, 2008 issue

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  • Posted By: zviad @ 01/25/2009 3:48:37 AM

    An excellent article. Russia's lack of own energy production explains the Russian invasion of Georgia in August 2008. Russia's long term goal is to control the pipes that bypass Russia and deliver the Central Asian oil and gas to Europe through Azerbaijan and Georgia.
    That is why Russia is so worried about Georgia joining NATO. Russia will not be able to invade or intimidate Georgia, when it becomes part of NATO.
    The accuracy of Owen Matthews' analysis is also evident from Russia's gas war with Ukraine and Europe in January 2009.
    Putin system abuses not only neighbors, but also own citizen. North Caucasus is devastated and the local population is disenfranchised. The political oppression is increasingly harsh approaching Soviet times. Politacal assasinations of dissenters and journalists is systematic. The elections are nondemocratic and unfree. The free media is suppressed. Corruption is pervasive.
    The West must support Russian democratic groups and free media. The West must ensure security of Russia's neighbors. Putin's Russia may not be trusted.

  • Posted By: Braes @ 12/24/2007 1:37:10 PM

    Yes, an excellent article, but the even greater issue is the developed nations move away from distillates (Gasoline, Diesel, etc...) toward renewable energy sources. If the United States begins an apollo-like program to remake our energy markets, we can rebound from our current economic troubles in a few years. Russia remains undeveloped, and unconnected. There are few open lines of communication, let alone an interstate highway system, or multiple tracekd rails as in Europe's West. Putin has done a lot of things right, but he is still stuck with a mostly pre-industrial society, and gross underdevelopment. Spending money to make a 5th generation fighter, and returning to open military activity in response to Bush's provocations will hurt Russia by costing them development money on Arms. I wish my Russian friends a Merry Christmas.

    • Posted By: streetwise @ 01/18/2008 4:43:50 PM

      Braes, Russians build weapons not only to rearm themselves, but also to sell them abroad (and not only to rogue states: even to India -40 %-, Malaysia amd even Greece) . Weapons are the second voice of ruxxian export, after energetic rough materials . That is: more cash . And plenty of it...
      I have read the article of prof Homyakov . His forecasts are based partly (if not mostly) on the assumption that Russian will never ask foreign companies to help them in their search for new source of oil and gas . Well, I have a news for you: they did (and do, and will do) . They have asked french TOTAL and Norwegian Statoli for a participation (not necessarily on share production basis) in the field of Stockman, they are talking with Chevron for the siberian area, and they are already cooperating with italian ENI right for Yamal (regarding Jamal: prof Homyakov says the problem there is the melting permafrost, other tecnicians say the problem uis there is stil too much permafrost...) . And all the company have or will say "yes please" . Why ? because they have no time to wait the outcome of a new russian revolution (nationalistic or what you will) in 2 years time . They need oil (and gas), they need it plentifull, and they need it now (and tomorrow, and tomorrow, and tomorrow...)... .

    • Posted By: Dr.Max @ 12/24/2007 7:27:52 PM

      Putin's regime spend enormous amount of money not on making the 5th generation fighter and not on modernization of oil and natural gas industry, but on building and strenthening its truly oppressive police state and on generous donations to the Caucasus region. If instead all this money would be invested timely and smartly into renovation of the industry, perhaps Gazprom wouldn't feel so sick today. But it's already a lost opportunity...

      • Posted By: Vladislav @ 12/25/2007 11:49:40 AM

        By the way, here is another example of "where the money flows to" : Zubkov (Russia's PM) promised another transh of 111 billion Rubles to Chechnya (~$4.5 billion). http://www.government.ru/government/ (From RF press release Dec.24, 2007) It would be interesting to know that for so-called National Projects in RF the government will allocate only 300 billion rubles from the federal budget.

  • Posted By: Bergerac @ 01/03/2008 5:50:11 AM

    In fact, the article is nothing but an evident manipulation with a lot of factical mistakes. First of all, Gazprom really produces about 550 bcm, but overall Russia's NG production is 90 bcm more. Next - current Russia's NG imports from Central Asia are only 40 cbm, i.e. 6%, a year. What about developing new NG fields authors preferred to forget or even not to know, that two weeks ago Gazprom set in operation Yuzhno-Russkoye gaz field (+25 bcm), in Yamal. Etc. etc.

  • Posted By: Bergerac @ 01/03/2008 5:46:36 AM

    In fact, the article is nothing but an evident manipulation with a lot of factical mistakes. First of all, Gazprom really produces about 550 bcm, but overall Russia's NG production is 90 bcm more. Next - current Russia's NG imports from Central Asia is only 40 bcm, i.e. 6%, a year. Concerning developing new NG fields authors preferred to forget or even not to know, that two weeks ago Gazprom set in operation Yuzhno-Russkoye gaz field (+25 bcm) , located in Yamal. Etc. etc.

  • Posted By: Bergerac @ 01/03/2008 5:44:05 AM

    In fact, the article is nothing but an evident manipulation with a lot of factical mistakes. First of all, Gazprom really produces about 550 bcm, but overall Russia's NG production is 90 bcm more. Next - current Russia's NG imports from Central Asia is only 40 bcm, i.e. 6%, a year. Concerning developing new NG fields authors preferred to forget or even not to know, that two weeks ago Gazprom set in operation Yuzhno-Russkoye gaz field (+25 bcm) , located in Yamal. Etc. etc.

  • Posted By: Dr.Max @ 12/27/2007 8:52:28 AM

    Important moment here - if Gazprom couldn't take the gas because of lack of time, technology and money, then OTHERS (who have all these) should be allowed to explore and develop the gas fields. There's a gas. And there's an impotence of key player (Gazprom), which can't do things properly and doesn't allow other players to make serious move in this game (because of its monopoly in this industry). If other serious players would be allowed to quickly fix the problem, then both Russians and the West should feel happy. Because it will mean lowering of gas price in Russian domestic market and fulfilling all commitments which Russia made to the West as gas supplier.

  • Posted By: Leo_J @ 12/26/2007 2:05:06 PM

    Russia's stabilization fund? A complete development of the Yamal natural gas fields would require $20 billion more than all the money currently kept in the fund. Which saved in the western banks by the way. Russia doesn't have money neither to buy gas from neighboring countries to resell it to the West nor to develop its own fields. But it has money to sponsor dictator Lukashenko ($1.5 billion of easy term credit just confirmed to Belorussian opressive regime) and to "stabilize" explosive situation in Caucasus region, as it was mentioned here earlier. At the same time Russians already reported extreme raise of domestic gas price in the Far East of the country. The gas price on that domestic market is already higher than in the West! Well, if Puting wants to keep his promise to the West leaders as a reliable source of energy supply, he should forget his antiwestern rhetorics and beg for western credits now.

  • Posted By: orodionov @ 12/25/2007 11:07:43 PM

    ???..It's even incapable of managing huge natural resources which it owns, because of nature of the regime..??? Didn???t you read about multi-billion stabilization fund where Russia pours its ???excess??? oil revenue? Reliable suppler to the west? West has an interest of extracting oil and gas from Russia reliably at the cheapest possible price. Russia has its NATIONAL interest to use its resources to its maximum advantages, both economically and politically. Putin plays his country???s energy card masterfully. In fact he had a winning hand in every game he played! I hope he continues to do so. Putin is the best leader Russia had seen in generations. He might not be very palatable to western tastes, but that is not his job.

  • Posted By: lilinha @ 12/25/2007 7:49:03 PM

    I think:, always the Russia was a big economic center! So, her history said us who's she, this country, with many richs in her earth. It's so much money running!

  • Posted By: lilinha @ 12/25/2007 7:48:30 PM

    well, always the Russia was a big economic center! So, her history said us who's she, this country, with many richs in her earth. It's so much money running!

  • Posted By: lilinha @ 12/25/2007 7:45:19 PM

    well, always the Russia was a big economic center! So, her history said us who's she, this country, with many richs in her earth. It's so much money running!

  • Posted By: Dr.Max @ 12/24/2007 9:54:32 AM

    Thank you for the article. Actually, a situation rather worse. As it was described in another article "Russia to the West ??? is it a Threat or Hope?" by Peter Khomyakov, Gazprom now has no time, no technological know-how, and ironically no money to solve the problem. Another essay of professor Khomyakov "The Global Warming and the Future of the Planet" http://www.vdesyatku.com/GlobalWarmingEnglish.html explains why Yamal fields became problematic for operation. The icy land is simply being melted down, so even existing gas extraction and transportation infrastructure require technological adjustments, not to mention that investments into development of new Yamal fields in such sluggish conditions should be much more massive than it was planned earlier by Gazprom. It's not just a struggle. It's a deadlock.


    http://www.vdesyatku.com/RussiaToTheWest.html

    • Posted By: Vladislav @ 12/25/2007 10:51:11 AM

      I would like to support the author's position and to cite prof. Homyakov : Gasprom is trying to convince its internal and external
      counterparts that there will be no production decline. On the contrary, it's entertaining that the production would
      rise after a putting into operations the new gas fields ??? mainly in Yamal peninsula ??? is expected (Yamal is in the
      far North of the Western Siberia ??? Translator's Note).
      Meanwhile the boosted launch of the new gas fields is far from being implemented. Due to the global warming and
      melting of the icy ground, the engineering-geological conditions of the production and ??? to the greater extent ???
      gas transportation in Yamal are rapidly aggravating, which makes the putting these gas fields into operations very
      problematic.
      The author knows for certain that the engineering solutions for these problems have not been found yet.
      Consequently, there are no design decisions. That means that making these gas fields operations is out of the
      question.
      But that means that there will be no production rise by 2010, while the production decline will happen. And the
      decline will be not less then 10% from the level of 2006. This decline will not be compensated even by the
      cessation of the gas exports to the neighboring CIS and Baltic countries.

    • Posted By: Vladislav @ 12/25/2007 10:49:00 AM

      To confirm the author's position i would cite Prof. Homyakov : The author can't leave this theme along without dropping few words about so well advertised Gasprom's plan to
      increase the gas exports to Europe by 30% by 2010. Gasprom is trying to convince its internal and external
      counterparts that there will be no production decline. On the contrary, it's entertaining that the production would
      rise after a putting into operations the new gas fields ??? mainly in Yamal peninsula ??? is expected (Yamal is in the
      far North of the Western Siberia ??? Translator's Note).
      Meanwhile the boosted launch of the new gas fields is far from being implemented. Due to the global warming and
      melting of the icy ground, the engineering-geological conditions of the production and ??? to the greater extent ???
      gas transportation in Yamal are rapidly aggravating, which makes the putting these gas fields into operations very
      problematic.
      The author knows for certain that the engineering solutions for these problems have not been found yet.
      Consequently, there are no design decisions. That means that making these gas fields operations is out of the
      question.
      But that means that there will be no production rise by 2010, while the production decline will happen. And the
      decline will be not less then 10% from the level of 2006. This decline will not be compensated even by the
      cessation of the gas exports to the neighboring CIS and Baltic countries.

  • Posted By: orodionov @ 12/24/2007 7:44:27 PM

    Yes, Russia will eventually run out of gas, but so is the rest of the world! Oil and gas are in short supply everywhere. Gazprom flushed with petro-dollars and government behind its back will pour money into development of new fields and maintain or expand its position in the world. At the same time US economy can collapse. We shop ourselves into prosperity (consumer driven economy) only because China is so far willing and interested in financing our immense debt. China is US main competitor, not Russia.
    This article is nothing more then hysteria with unmasked anti-russian flavor ??? common in today???s media

    • Posted By: Dr.Max @ 12/24/2007 10:01:47 PM

      This article is nothing more than a sober look at eiphoria of Putin's commitments made to G8, to guarantee the energy carrier supply stability. Right word was said. And development of events will prove its just. "Russia will eventually run out of gas, but so is the rest of the world!". True. But this article was not about that. Russia currently has enormous reservoirs of natural gas and oil, but it's not capable to carry on of being reliable source of energy to the West, as it was promised by Putin's regime. It's even incapable of managing huge natural resources which it owns, because of nature of the regime. Exactly like "Dog in the Manger" as the "Russia to the West" article described it. That's what this article was about!

  • Posted By: positron1930 @ 12/24/2007 7:55:20 PM

    China growing, is a threat to world resources. Russia must know how to invest and discover gas pockets. India, China must ahve harsher population controls!!

  • Posted By: orodionov @ 12/24/2007 7:42:33 PM

    Yes, Russia will eventually run out of gas, but so is the rest of the world! Oil and gas are in short supply everywhere. Gazprom flushed with petro-dollars and government behind its back will pour money into development of new fields and maintain or expand its position in the world. At the same time US economy can collapse. We shop ourselves into prosperity (consumer driven economy) only because China is so far willing and interested in financing our immense debt. China is US main competitor, not Russia.
    This article is nothing more then hysteria with unmasked anti-russian flavor ??? common in today???s media

  • Posted By: orodionov @ 12/24/2007 7:36:13 PM

    Yes, Russia will eventually run out of gas, but so is the rest of the world! Oil and gas are in short supply everywhere. At the same time US economy can collapse. We shop ourselves into prosperity ( consumer driven economy ) only because China is willing and interested in financing our immense debt.
    This article is nothing more then hysteria with unmasked anti-russian flavor ??? common in today???s media

  • Posted By: Dr.Max @ 12/24/2007 10:06:06 AM

    Thank you for the article. Well, the situation is rather worse. As it was outlined in another article ???Russia to the West ??? is it a Threat or Hope???? by Peter Khomyakov (http://www.vdesyatku.com/RussiaToTheWest.html), Gazprom now has no time, no technological know-how and ironically no money to develop new natural gas fields in Yamal. In his essay ???The Global Warming and the Future of the Planet??? (http://www.vdesyatku.com/GlobalWarmingEnglish.html)
    professor Khomyakov explains why development of new and operation of existing fields in Russian polar region became a big problem for Gazprom. The solid icy ground is melting into swamps and lemans, and obviously require much more investment to manage such sluggish conditions than it was planned earlier. So it???s not just Gazprom???s or Putin???s Russia struggle. It???s a complete deadlock. The failure will be obvious in the nearest couple of years.

    • Posted By: Dr.Max @ 12/24/2007 7:14:34 PM

      Sorry for plenty of question marks. Apparently when I cut-n-paste, some symbols were replaced with the question mark.
      Bottom line - Gazprom (controlled by government of Russia) doesn't have no time, no money, no new technology to face adequately the challenge of the growing consumer demand. Please read prof.Khomnyakov's articles to understand why it happens and see the situation development forecast.

  • Posted By: zipperhead16 @ 12/24/2007 6:19:00 PM

    If the United States begins an apollo-like program to remake our energy markets, we can rebound from our current economic troubles in a few years.
    That's our best bet to regain our footing in the world. The mobilization of the American industry during WW2 and the Space Race mentioned by Braes leave no doubt it can be done except for the small matter that we are currently ruled by an Oil hungry government. Yes Oil hungry because at $3 a gallon, that's where the money is. And yes Ruled! Give me one accurate and truthfull reason to invade Iraq in the first place.
    Our manufacturing base has gone East because of cheap labor and there is no way to get it back except to have a national mandate to uitilize all forms of renewable energy. Cut our dependance on MiddleEastern oil and make the wind turbins and fuel cells HERE IN AMERICA!! Go around, over or through the unions if need be. As a union member it pains me to say that but the truth is the unions are in it for themselves and the largest thorn in the side of progress.
    Not only will we be weening ourself off the oil tit, but we can cut unemployment and put peoloe back to work whos jobs went away to outsorceing. Allow no importing to this industry and the hell with the Chinese. We're worried about the wrong people in the first place. The middle eastern countrys will never be the threat to the US like China is. What Russa is trying to maintain is what China IS doing and they have the money to do it. Like Russa the Chinese are stuck in a pre- industral society too, but Bejing is much more on the ball than Moscow.Plus China still has all the slave labor it wants thanks to communisum. Thats why they own Wal-Mart.Even as a dictator, Putin can't match that. Russa will find themselves short of funds soon with the military spendingthey are doing and thats a problem. What will Putin do when faced with a lack of funds and a surplus of weapons?

    • Posted By: Dr.Max @ 12/24/2007 6:43:25 PM

      "What will Putin do when faced with a lack of funds and a surplus of weapons?" Putin and Co will behave even worse than they do now, when they are supporting Hugo Chavez and Iran and opressing Russian people. A dictator doesn't like to stop a dictatorship just because he doesn't like it anymore. But leave this regime without surplus gained on high world gas prices, and this regime will feel the crisis and collapse pretty soon. I sincerely wish Russians to get free of tyranny!

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