Russia's minister for fuel and energy believes the 4 year slump in the republic's oil production will end in 1993.
Viktor Chernomyrdin, who also is a vice premier of the Russian Federation, says the situation is "almost satisfactory" with respect to natural gas flow and electrical power generation. But he expressed no such optimism regarding falling coal production.
In an interview with the Moscow newspaper Argumenty i Fakty (Arguments and Facts), Chernomyrdin warned that if Russia's reactionary opposition to reform is able to oust President Boris Yeltsin and Premier Yegor Gaidar, the republic's fuel and energy problems will continue to grow worse.
"If efforts to push the nation off the road toward a market economy are successful, there will be a catastrophe," he said. "Nothing else but a market economy will save us."
OIL PROBLEM
Chernomyrdin said if strong measures are not taken, Russia's oil production could almost cease. He noted that the nation's crude oil flow during the first 8 months of this year plunged 13.7%.
Many of the Russian oil industry's present difficulties, he said, date back to the mid-1980s, when drastic cuts in capital spending began. The result was like putting a delayed action mine under the petroleum sector of industry.
"Under our former centrally planned economy, it was permissible to fix domestic oil prices at (a ridiculously low) 72 rubles/ton at the end of the 1980s, when the world price was $130-150/ton ($17.81-20.55/bbl). That is no longer acceptable," he said.
"Oil is more than automobile gasoline. Only several percent is used for that purpose in our country. If we had continued on the former path, we would soon be unable to provide heat for people living in our northern regions.
"Most of our oil is used to keep the nation's economy running. Oil is our lifeblood, and that is why I am putting a national pricing policy into effect."
Chernomyrdin conceded that conditions in the Russian oil industry are still chaotic.
"We are unable to provide state subsidies for the petroleum sector. As a result, even the managers of new, well equipped oil fields must seek bank credits at 80%/year interest to pay the wages of their workers.
"But that doesn't mean price increases are the only way to rescue the industry. To stop our declining oil production we must quickly start the privatization process and create stock companies to attract private domestic investors as well as foreign ones.
"It wouldn't be frightening if Russia's small oil fields were turned over to private interests."
Chernomyrdin believes price hikes for energy won't cause huge inflation throughout the Russian economy. He said higher fuel costs will increase the overall price level in the national economy no more than 30%.
FIELD EQUIPMENT
The vice premier complained that the precipitous decline in the ruble's value has caused great hardship for Russia's oil producing associations. He noted that domestic manufacturers of pipe, pumps, and other equipment needed in the oil fields to increase production are now demanding world prices for their products.
"For example, in Azerbaijan (which still manufactures close to half of the former U.S.S.R.'s oil field equipment) such products made for the Russian market and valued at a billion rubles have been stockpiled. The oil producing associations don't have the money to buy this equipment.
"Our fuel and energy complex should be fabulously rich if one is to judge by conditions in other oil producing countries. Instead, it is 360 billion rubles in debt while, in turn, it is owed 530 billion rubles.
"Hardly any oil buyers want to pay on time. But from now on, all oil deliveries to domestic and foreign customers will be made only after their money has been received."
FOREIGN INVESTMENT
Asked about reports that foreign oil companies want to invest billions of dollars in the Russian oil industry, Chernomyrdin said in many cases there is much talk and little action.
"One gets the impression of enormous foreign interest from the fact that all the hotels in our oil regions are literally thronged with foreign businessmen. But these are mostly ordinary middlemen.
"Many of these hacks also make the rounds of Moscow offices. However, it is true that there are now signs of serious intentions."
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
