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article imageRussia’s oil advantage increases over Middle East unrest

By Lynn Herrmann     Mar 7, 2011 in Politics
Moscow - Upheavals in the Middle East have led to escalating oil prices across the world and fears of additional unrest has left many investors looking for solid ground, with that solid ground now appearing to be in Russia.
Social unrest in the Middle East has unexpectedly put Russia in a windfall position, thanks to the rising price of oil connected to those protests, with the Russian ruble rising faster against the US dollar than any other currency this year.
“The upheavals taking place in a number of the oil and gas producing countries now send a signal to investors to come to Russia,” Total Energy’s Christophe de Margerie said, according to the New York Times. In announcing a new deal between Total and Novatek, Margerie added: “Russia offers a much safer environment for investment.”
Total, the French energy behemoth, announced last week it was buying approximately 12 percent of natural gas supplied by Novatek, an independent producer of natural gas in Russia. In a company news release, Total announced that it expects that amount to increase to 15 percent within a year and jump to 19.4 percent within 36 months. According to the Times, Total is committing $4 billion to the deal.
In addition, Total has announced the deal allows it to become the main international partner with a 20 percent share in Novatek’s Yamal Liquefied Natural Gas (LNG) project in the South Tambey field in the Yamal peninsula, located in Russia’s Arctic. Novatek controls the field with a 51 percent share.
Total reported the South Tambey field holds approximately 44 trillion cubic feet of natural gas that will allow the annual production of more than 15 million tons of LNG.
In its news release, Margerie, Total’s Chairman and CEO, said:
“Total is delighted with this strategic alliance with Novatek, which will accelerate the Group’s development in Russia. This agreement adds to the close cooperation built with Gazprom since 2007 on the Shotkman project. In becoming the first international investor to participate in the development of the giant gas resources of the Yamal Peninsula, Total pursues its strategy aimed at establishing partnerships in producing countries with national players and confirms its leading position in the liquefied natural gas business."
National Geographic reports the Yamal peninsula is home to 300 trillion cubic feet of natural gas reserves, among the world’s largest.
Russia is not a member of OPEC, the international oil cartel, thus it is free from any constraints the group imposes on its 12 members. Russia currently is producing oil at top capacity and is not in position to offset drops in global production should social protests in the Middle East impact that region’s oil production.
Ural crude is Russia’s primary export blend, and it closed last week at $114 per barrel, a 24 percent increase since the beginning of the year.
More about russian oil, russian ruble, total energy, novatek, middle east protests
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