Russia bolsters Gulf energy strategy
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Russia bolsters Gulf energy strategy

Russia bolsters Gulf energy strategy

President Putin's high-profile tour to the Gulf follows on from the visit of King Abdullah, then Crown Prince, to Moscow in 2003, the highest ranking Saudi official visit to Russia since 1926. Significantly an agreement was reached to co-ordinate energy policies. A momentum now seems to be building up following this.

    Putin has again stressed that Russia shares common interests in energy matters with the Gulf states during his recent visit to Saudi Arabia and Qatar an indication that the Middle East is becoming increasingly important to Russia's long-term energy strategy.

    Russia's president was accompanied by several corporate chiefs including Vagit Alekperov head of Lukoil, Russia's largest oil company. During the visit Alekperov signed a co-operation agreement with Qatar Petroleum's chairman Abdullah Bin Hamad Al-Attiyah covering possible participation in oil and gas projects including GTL, LNG and petrochemicals ventures.

    Observers speculate that there could also be future logistical co-operation involving LNG supply swaps for each country's global gas customers.

    Saudi-Russia ties

    Bilateral Saudi and Russian business ties are developing. Lukoil Saudi Arabia Energy (LUKSAR) was established in March 2004. The joint venture with Saudi Aramco is searching for non-associated gas and field condensate in a block covering 30,000 square kilometres in the northern part of the Rub Al-Khali (Empty Quarter) south of the giant Al-Ghawar oil field.

    The company has an unusually high 80 per cent stake in the venture which allows for five years of exploration involving five wells and 20 seismic studies over 8,750 kilometres.

    A first exploration well was spudded 15 months ago in the central area of the block. Lukoil is expected to invest $2 billion to exploit the deposit that was subsequently discovered in the area. The block should start supplying gas and gas condensate commercially in seven years time the company says.

    Saudi Aramco will have the right to buy all the gas produced at $22.7 per 1,000 cubic metres if annual production reaches an agreed level. The next stage of development involves building pipelines and other infrastructure development

    Saudi Oger talks

    Other Russian companies such as Gazprom's engineering subsidiary Stroytransgaz are looking to obtain contracts for this. The latter has already held talks with Saudi Oger on possible collaboration as well as for other energy and water pipeline work in the Kingdom.

    According to Alekperov, "Lukoil views the Middle East as a region of high priority. The Saudi project perfectly fits in the company's development strategy and matches all economic and competitive criteria the company applies to projects."

    As part of this evolving strategy the company is also monitoring events in Baghdad closely. In 2004, Lukoil agreed to help restore the material and technological base of the Iraqi oil ministry. However, the main aim is to restore oil extraction rights agreed before Saddam's downfall in 1997.

    Before the US occupation there were hopes of involvement in development of Iraq's giant West Qurna-2 oilfield estimated to hold 15 billion barrels of crude. The agreement envisaged Lukoil investing up to $4 billion in the field through to 2020.
    AMEinfo Staff

    AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.

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