As the following report by Platt’s describes in more detail, Russia is moving to control oil assets in Venezuela and Cuba. This move coincides with Russian military alliances with Venezuela and with Russia’s new sense of wealth and entitlement that seems to be pushing Russian diplomacy toward aggressive confrontations with the west.  Russia’s swift military reaction to Georgian aggression in the vicinity of an important oil pipeline that feeds Europe is part of the same picture.  Russia, already the world’s largest oil exporter, seems clearly determined to aggregate increasing control over whatever sources of oil outside of Russia that it can. 

The new Venezuelan project will put Russia in control of developing Venezuela’s vast heavy oil assets in the Orinoco region.   It seems clear that currently “low” oil prices will probably end up delaying the actual implementation of this project.  But Russia seems to be jockeying for power in oil supply just like China has been snapping up long term contracts to buy oil in order to sate its huge and growing demand.  China and Russia both have moved to integrate foreign policy with energy policy. 

I wonder where all this will leave the U.S., once global growth rates begin to grow again and supplies become more scarce, given America’s “free market” approach to securing the oil it needs .   It is more clear than ever that oil is a national security issue for the United States and that time is becoming short for our country to find a long term solution to our energy requirements.   Unless, of course, we would like to be dependent upon the kindness of … Russia. 

Five Russian oil majors form Venezuelan consortium: reports

Moscow (Platts)--10Nov2008

Russia's largest oil and gas producers--Rosneft, Gazprom, Lukoil, TNK-BP
and Surgutneftegaz--have joined forces in Venezuela, taking 20% stakes each in
a consortium that will develop oil projects in the South American country,
Rosneft President Sergei Bogdanchikov said over the weekend.

     The consortium was registered on October 8 and is to have a rotating
operatorship, Russia's Vesti TV news service quoted Bogdanchikov as saying.

     A Rosneft spokesman confirmed the information.

     Venezuela's PDVSA will at a later stage join the Russian companies to
form a Venezuelan-Russian consortium. Russia's deputy prime minister, Igor
Sechin, has said that the creation of a consortium, an idea suggested by the
oil companies, would help minimize risks and reduce costs that are especially
high for operations in Venezuela's Orinoco extra heavy oil belt.

     CLOSER RUSSIAN-VENEZUELAN TIES

     Rosneft's Bogdanchikov was part of a high-level Russian delegation led by
Sechin that visited Venezuela and Cuba at the end of last week to negotiate a
number of deals, including in energy.

     As political and economic ties between Russia and Venezuela have become
closer over the last year, Russian oil and gas companies are becoming more
actively involved in Venezuela's hydrocarbon projects.

     During Venezuelan president Hugo Chavez's visit to Moscow in July,
TNK-BP, Lukoil and Gazprom signed a number of agreements with PDVSA to
appraise and develop projects in Venezuela.    

     Bogdanchikov said that during his recent visit to the South American
country, his company asked the Venezuelan government for a license to develop
the Delta Centro block in Orinoco, Russia's Prime-Tass news agency quoted the
Rosneft chief as saying.

     "We have sent them a letter with a proposal to give us the development of
the Orinoco delta," Bogdanchikov said, adding that crude at the block was
"lighter than on other blocks, and we would not need the construction of
upgraders, unlike on other fields." 

     Bogdanchikov estimated the resources at the block at up to 300 million
mt.

     Gazprom, meanwhile, has started drilling the first deep-water exploration
well on Urumaco 1 project in western Venezuela, Russian media reported.

     Commercial gas production at the field is expected to start in four to
five years, Vesti quoted Sechin as saying.

     The Russian delegation also visited Cuba over the weekend, where Sechin
met with Cuban leader Raul Castro.

     A number of agreements were signed, including in the oil and gas sector,
Vesti reported.

     Russian oil pipeline monopoly Transneft is considering pipeline projects
in Cuba, Transneft chief Nikolai Tokarev said, Prime-Tass reported.

     "They have a lot of old pipelines, which need to be reconstructed. There
is also need to build new ones," the agency quoted Tokarev as saying.

     "We are now looking at concrete projects," he said.

     Cuba produces about 5 million mt/year (100,000 b/d) of crude, Tokarev
said.
--Anna Shiryaevskaya, anna_shiryaevskaya [Email address: anna_shiryaevskaya #AT# platts.com - replace #AT# with @ ]

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Tags: peak oil investments

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