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Putin Tells Russian Energy Producers To Get More Competitive

Energy produced from shale deposits requires Russian energy producers to shape up, warns Putin.
By Amiel Ungar
First Publish: 4/11/2012, 6:03 PM

PM Putin in Duma
PM Putin in Duma
Reuters

On May 7, Vladimir Putin will go back to being president of Russia - some would argue that in reality he never really left the presidency - but for less than a month, he is still Prime Minister and he gave a fairly upbeat report on the economy, one of the Russian Prime Minister's purviews.

He emphasized that while the European Union countries were coping with a debt crisis, Russia had a modest surplus. Russia would soon be one of the world's top 5 economies. With the Warsaw Pact gone, NATO was an anachronism, although in some places it was a force for good, as in Afghanistan.

There was however one economic cloud on the horizon - namely, the revolution in extracting gas and oil from shale. Putin warned "we have to be ready for any external shocks…The world is entering an era of turbulence, and there is also a new wave of technological changes. The configuration of the global markets is altering." One of the examples he gave was shale and here the Russian energy companies "have to be ready right now to meet this challenge."

Vladimir Putin was optimistic that the development of new fields, plus the spread of pipelines directly to strategic markets such as Western Europe, in addition to Russian control over these pipelines, would keep Russia competitive in the energy market.

Russia is already casting a wary eye on the United States, that has become self-sufficient in gas production, and soon will be competing with Russia in the export market of liquefied natural gas. As America does not need to import gas, it has freed up these gas supplies for other countries, lessening their dependence on Russian gas.

The United States is not the only player in this energy-from-shale game. Poland, seeking to create jobs as well as lessen its dependence on Russian energy, is hopeful that its shale deposits will prove a game changer.

China, a major customer of Russia, is pouring in massive resources ($16 billion) to develop deposits near exhausted coalfields. This will allow China to transition to less polluting energy. Gas output is already 8,000,000,000 m³ and the Chinese seek to boost it to 30,000,000,000 m³ by 2020.

Russia's economy is still predicated on the sale of energy products; a decline in the terms of trade would seriously impact the Russian economy.