Russian Oil Gets Indian Investment

The Russian oil economy, like most oil-rich nations, has been taking a beating lately, as the world’s oversupply of oil drove prices to as low as $26 barrel. The Russian government relies on about half of its income from oil and natural gas sales, and set its budget based on an oil price of $50 barrel.

Well, fortunately for mother Russia, oil-hungry India, who import 80% of their oil requirements, decided it was time to increase their upstream holdings.  In deals reported last week, Indian state-run oil companies increased their shares in Rosneft’s Siberian fields linked to the East Siberian Pacific Ocean pipeline, which China also has a direct feed from. Three of India’s state-run oil companies are taking a 29.9% stake (combined) in Taas-Yuriakh Neftegazodobycha estimated at $1.7bn, with the deal expected to close September 16.

Certainly, this is welcome news, and income, for the Russian oil economy and makes good sense for India too, as both parties are keen to diversify their trading partners.  But, as oil prices begin to lift into forty dollar-dum, all eyes will be on the massive stockpiles of crude, global production levels, and demand, as until there is a re-balancing low prices will likely prevail.

The pinch point, according to analysts, is due to come in 2017 / 2018, when the world has eaten into the 523 million barrel global stockpile, this combined with the lack of investment in upstream developments will hit prices hard. According to Neil Atkinson, head of the IEA’s Oil Industry and Markets Division, $300bn is required to maintain current production levels.  With US shale companies needing nearer $65 a barrel than $40, the flip in the fundamentals could see us rocketing back up again into $100 territory, while rigs race to come back online.

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