Panel One: Prospects for Russian and Caspian Oil
The first panel discussion, chaired by Eugene Rumer, focused on the future of Russianand Caspian energy projects.Thane Gustafson discussed the challenges facing the Russian oil industry going forward.The sources of oil production inherited from the Soviet Union are producing less, and primaryshareholders are now being asked to make their first large post-Soviet investment in extractingfrom new sources. The Russian oil industry faces a slew of challenges according to Gustafson,including its relationship to the government, unreformed tax codes, lack of diversity within theoil sector, and very little foreign participation.The Russian oil industry is veering in two directions today. The shale gas and oil boom plays an important role in the conversation about
Russia’s oil future. Russia’s initial reaction
was enthusiastic as the country is estimated to contain a large amount of oil shale. There are stillquestions as to whether the deposits have matured into hydrocarbons and whether or not they areextractable. The other direction for Russian oil is the Arctic. The Arctic is a project for the
future while shale is possible now. Gustafson said that Rosneft is at the center of Russia’s oil
future and currently it is trying to pursue both directions.Brenda Shaffer spoke on Caspian oil exports and lessons that can be learned from energydevelopments in the region. Shaffer argued that the Caspian energy market matters and that the political jockeying of the 1990s was important. Political involvement is important to the securityof supply, according to Shaffer. Energy affects politics and as such, it is logical that politicsshould have a say in energy, opposed to the
let the market decide
attitude of many energycompanies.Shaffer debunked the myth of peace pipelines, insisting that there is no precedent of their construction bringing peace to a region. She also criticized the idea that stability is needed tolaunch energy projects, stating that only a minimal degree of stability is required. Georgia willremain
central to the region’s energy market
, but its future stability and orientation remain to bedetermined. Shaffer concluded with her argument that the Caspian does matter because of its potential impact on oil price stability and possible liquefied natural gas (LNG) market if a globalLNG market fails to materialize.Pavel Baev returned the conversation to the topic of Russian interests in the Arctic. Baevstated that the recent energy battle between Brussels and Moscow has made the Arctic animportant theater for both sides. The Arctic is an area where Russia has a position of strength.
Russia’s border and claims in the Arctic are incredibly large and it is positioned militarily to be
able to better utilize the region than other states. Putin has expressed great passion about the
Arctic’s energy potential but initial hopes have been confronted with
harsh realities.Echoing Gustafson, Baev stated that the future of Russian energy policy is unclear andcontains few guidelines. The hopes of Arctic oil being a quick fix due to shallow waters andclose proximity to land were dashed as Russian oil firms discovered that Arctic oil was slow,expensive, and not the fix they needed. Russia has failed to expand its continental shelf claimsdue to the poor quality of its initial application and is falling behind other states on this matter.While Baev noted that Russia has shown it can be cooperative, he also argued that Russia issliding into self-isolation, which will complicate cooperation in the Arctic and beyond.