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Oil rig disaster may have upside for Russian energy
Published: 04 June, 2010, 11:30
Edited: 08 June, 2010, 14:33
A grab taken from a BP live video feed shows a remotely operated vehicle in a new attempt to stop fluid escaping from a fractured pipe, which has been spouting oil for 42 days on the seabed off the coast of Louisiana coast (AFP Photo / BP)
(8.2Mb) embed videoWashington is expected to tighten drilling restrictions in the wake of the BP oil rig catastrophe in the Gulf of Mexico, pushing energy firms to look for opportunities elsewhere.
Things will never be the same either for BP or for the US oil industry. American authorities are expected to impose stricter environmental and technical requirements on the industry after the Gulf of Mexico oil spill. It's already ranked as the worst environmental disaster in the history of the US.
Tighter regulation would lead to higher extraction costs and hit oil companies' profits. In such conditions, oil companies are likely to look for growth opportunities elsewhere and Russia could be an attractive destination, says Konstantin Simonov, Head of National Energy Security Fund.
“We see the reaction of American society to this explosion of this platform, that is why it will be difficult to work in the states and that is why it’s a very good combination, because western companies will think about new places to invest money and Russia is more tolerant with foreign companies.”
Although Russian regulation hampers foreign investment in the country's strategic hydrocarbon fields off shore, analysts say this situation could change as the government is developing a new tax regime for oil industry, thought to be more favorable to the companies, says Dmitry Lyutyagin, an oil and gas analyst at Veles Capital
“Russia could be interested in attracting some of the companies that operate in the Gulf of Mexico. Of course, more liberal legislation will be required. A recent report to vice-premier Sechin regarding the development of strategic shelf fields included a proposal to ease restrictions on foreign companies.”
Energy consultants say that oil majors such as BP, Shell and Exxon are the main operators in the Gulf of Mexico waters and they highlight that Chevron could be especially hurt by any ban on further exploration in the region. Nevertheless, the honeymoon between the US administration and oil companies seems to be over, as the state no longer considers tolerance to be the oil of relationships.
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Indeed, oil rig disaster may have an upside for Russian energy. But NOT for the reasons quoted in this article. The last thing Russia needs is to be relaxing regulations. "...Although Russian regulation hampers foreign investment in the country's strategic hydrocarbon fields off shore, analysts say this situation could change as the government is developing a new tax regime for oil industry, thought to be more favorable to the companies, says Dmitry Lyutyagin, an oil and gas analyst at Veles Capital...". The upside will come from the fear from deep underwater drilling, and the increased environmental safety requirments. Countries that do not take this seriously are going to face the wrath of a new generation of environmental movement that will follow this disaster. Many opportunitistic players will take advantage of this new fear for the environment, and they will be hawking their technology and know how. At the same time, many governments may slap tariffs on oil imports from the countries that do not protect the environment with more expensive tehnology. In other words, this will become a new battleground on world stage. Russia needs to TAKE A LEAD in tehnological and management solutions to be ahead of the curve. Most other producers will be forced to do it as well. Oil prices will come up, this time for real, not due to the market manipulation. At present, oil fluctuates in step with Dow Jones Average, which is as real as a three dollar bill. This dynamic in the attitude towards producer countries will finally get oil to be valued higher due to the legitimate concerns the producing countries will have to assuage.