What Would A Saudi-Russian Partnership Mean For World Energy?
What happens when two nations, that together account for more than fourth quarter of global oil production, begin collaborating on future energy projects?
Russian President Vladimir Putin met Saudi Prince Mohammad in St. Petersburg on June 18 at a meeting in which Saudi Arabia and Russia, the world’s leading two oil giants, decided to form a working group for joint energy projects.
“At the end of the year, in October, we will summon a meeting of the intergovernmental commission, which hasn’t operated for five years,” Russia’s Energy Minister Aleksandr Novak said recently at the St Petersburg economic forum. He further clarified that his country was not looking to replace its existing oil and gas partners but wanted to create newer ones. “There are no specific projects in the energy field yet, we only have an agreement to create a working group between our ministry and the Saudi Arabian oil ministry, which, together our companies will work on specific projects,” the Energy Minister told reporters.
Image Source: Forbes
What are these ‘specific’ projects that Russia is talking about? Why are the two biggest producers of oil in the world now cooperating? Is this a natural response to the U.S. and EU sanctions that have targeted Russia’s oil and gas industry, specifically its arctic exploration and unconventional drilling sector?
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Russia – Hedging its risk and shifting its focus towards Asia
In May, Russia’s oil output reached a record 10.78 million barrels a day, which was very close to the Soviet era production of 1987. “Russian output has proven to be pretty resilient to the fall in prices, and they will not have a problem keeping production up for the next year or two,” said James Henderson of Oxford Institute of Energy Studies. Russia’s economy is heavily dependent on oil and gas revenues as they account for more than 50% of the federal budget.
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