The Next Saudi Arabia?

Following Saudi Arabia and the United States, Russia is the world's third-largest energy producer. According to the latest figures released by the global energy giant BP, Saudi Arabia produced 423 million tons of oil in 2001, the U.S. 352 million and Russia 348 million.

Production for the world

But Russia plays an even more important role as a supplier for the international energy market. In recent years, it has risen to become a leading player in energy exports. Already the world's largest supplier of natural gas, Russia is now vying against Saudi Arabia for the poll position in oil extraction and production.

The vast majority of Russian energy exports go to Central and Western Europe. But Russian energy companies have also been working to increase oil sales to the United States and Asia. All across northern Russia and Siberia, companies and the government are building pipelines and oil loading stations in ice-free ports in order to meet growing demand.

Important resources

Russia's potential is immense and increased reliance of Russian's energy reserves could significantly improve the security of the international energy supply -- making it less vulnerable to geopolitical crises.

Currently, Russia has oil reserves of approximately 48.6 billion barrels -- 4.6 percent of total worldwide reserves. By comparison, OPEC members in the Persian Gulf region -- Iran, Iraq, Qatar, Kuwait and Saudi Arabia -- together possess 64 percent of the verifiable world petroleum reserves. But in the area of natural gas, Russia has clear dominance -- close to a third of all world reserves are held there, totally 48 trillion cubic meters. But Russia is also cutting into its natural gas reserves at a faster pace than its Middle East competitors, which together have close to 56 trillion cubic meters in reserves.

But Russia faces considerable challenges as it seeks to grow its energy market -- most based on the country's dramatic geography and climate. Much of Russia's energy reserves are held in climatically difficult areas like Siberia or in places that are far away from the nearest consumer markets. That reality leads to higher prices for transporting the energy and also diminishes the profit potential. Growth will also require considerable capital investments in order to modernize existing plants.

Bottlenecks

Another bottleneck in the growth process is the fact that Russia's energy pipelines are operating almost at capacity right now. And despite its serious cash crunch, the Russian government has so far been unwilling to turn over control of future pipelines to private companies. Currently, Transneft, the government-run pipeline company is in a dispute with private Russian energy concerns over plans for new pipelines from Asia to the port city of Murmansk. On top of all that, one of the reasons that Russia is able to export so much energy is that it uses relatively little itself. The possibility of significant economic growth in the future in Russia could lead to an increase in energy demand and lead to a curb in exports.

Although Russia's natural resources are extremely important to the international supply of energy and they do influence the pricing policies of the OPEC oil cartel, it will never be able to replace the role in oil supply played by Saudi Arabia and the OPEC states in the Gulf region.