RusEnergy

Analysts are tending to share the CCI Chairman’s forecast. Thus, data, provided by the Development Center, an analytical group, indicates that the average price for a barrel of the Urals blend will sink to $31 this year against $36 last year. Senior expert at the Development Center Valery Mironov puts this down to a possible decline in growth rates of the global economy. If, in 2004, growth was 4.5 percent, this year many specialists predict no more than 3.5 percent.

In the words of Evgeny Primakov, the drop in oil prices will “not be drastic”, yet “rather painful for the Russian economy”. According to his estimates, Russia’s exports, chiefly exports of raw materials, account for 50 percent of GDP growth. “The oil price factor” accounts for one third of total GDP growth.

But Russia’s economy will suffer the negative impact of yet another factor too. According to Primakov, oil production could decrease soon. According to Primakov’s data, in 2004 exploratory drilling sank at least 18 percent compared to 2003, and a number of wells, which became operational, fell 4.3 percent. This can be put down to the oil industry currently using only the most productive oil fields - which will be running empty in the near future. Once this happens there will be nothing to replace them with, since nowadays the state does not encourage the oil industry to develop new fields, the daily says.

In the opinion of experts polled by Novye Izvestiya, it is too early to speak about any decline in oil production. However, its growth is slowing. If in 2003, oil production exceeded the previous year’s levels by 10 to 12 percent - in 2004, preliminary estimates put the rate at 8 to 9 percent. This year, Mironov estimates, growth will be less than 5 percent.

Head of the Financial Research Institute’s corporate finance department Oleg Ordin gives two separate reasons for the decline. Firstly, the increase in the extraction tax rate and higher export duties have negatively affected investments in the oil industry. In 2004, the total volume of investments went down by 20 percent from 2003. Secondly, the transportation system does not allow a further boosting of production, since, in Ordin’s words, it is loaded to capacity. Construction of the new exports infrastructure is being delayed. For the moment, massive volumes of oil and oil products are being transported by rail. Experts point out that, given the current transportation conditions, and taking into account the higher extraction tax, an increase in oil production is unprofitable for some oil companies.