SOVIET ENERGY WOES WORSEN, DRAG DOWN ECONOMY

The U.S.S.R.'s energy industry has spearheaded the nation's severe economic slump in first half 1991. Whereas overall Soviet production fell 6.2% in the first half compared with the same 1990 period, oil production was down 10%, gas flow showed almost no change, coal extraction dipped 12%, and electrical power generation was virtually flat. Fuel and feedstock shortages are disrupting operations in many key areas of the Soviet economy.

Aug. 5, 1991

5 min read

The U.S.S.R.'s energy industry has spearheaded the nation's severe economic slump in first half 1991.

Whereas overall Soviet production fell 6.2% in the first half compared with the same 1990 period, oil production was down 10%, gas flow showed almost no change, coal extraction dipped 12%, and electrical power generation was virtually flat.

Fuel and feedstock shortages are disrupting operations in many key areas of the Soviet economy.

Soviet oil exports declined by about 30%, or about 900,000 b/d, in the first 5 months of 1991 but began to recover in May and early June, International Energy Agency data show. The recovery in May and early June means exports for 1991 as a whole probably will show a 500,000 b/d decline from 1990 levels.

OIL FLOW SLIDES

First half 1991 Soviet crude and condensate production averaged about 10.6 million b/d vs. 11.73 million in the same 1990 period. June production apparently was close to 10.4 million b/d.

The U.S.S.R.'s annual oil production hasn't averaged less than 10.6 million b/d since 1976. Flow averaged 11.39 million b/d for all of 1990, 12.14 million b/d in 1989, 12.45 million b/d in 1988, and a record 12.48 million b/d in 1987.

Soviet Premier V. Pavlov said the first signs of stabilization in total Soviet production appeared in May and June. But, he conceded, the energy situation continued to worsen.

Crude exports nosedived even more steeply than did oil production in the first half, and Soviet authorities expressed new fears the U.S.S.R. might become a net oil importer within a year or two.

The Moscow newspaper Ekonomika i Zhizn (Economics and Life) said this year's crude exports likely will drop to 1.4 million b/d vs. 2.172 million b/d in 1990, 2.547 million b/d in 1989, and 2.884 million b/d in 1988.

OTHER SECTORS

The U.S.S.R.'s energy crunch is causing widespread problems across the breadth of Soviet industry and agriculture.

Petrochemical production has skidded sharply as the supply of raw materials dropped. Comparing 1990 and 1991 first halves, plastics manufacture was down sharply, production of chemical fibers fell 16%, and mineral fertilizer production dropped 9%.

The Moscow press reported motorists in urban areas of the U.S.S.R. frequently are lined up for blocks to buy gasoline.

Pavlov disclosed that 1,0001,200 factories were shut down for extended periods during the first 6 months of this year, causing losses estimated at 3 billion rubles. Overall, one in five industrial plants in the U.S.S.R. did not meet its target, but the ratio was about one in three in the fuel/energy sector and one in two among petrochemical and metallurgical enterprises.

Pravda said fuel shortages persist in agricultural regions, with the situation worsening as harvest season approaches.

Eastern Bloc Energy (EBE), a publication of Eastern Bloc Research Ltd., Newton Kyme, U.K., reported the harvest in the Central Asian republic of Tadzhik has gotten off to a bad start because the Fergana refinery failed to supply enough gasoline.

The publication quoted Deputy Chairman of the Ministry of Resources Y. Kostyunin as saying. the Soviet economy was undersupplied -with 2 million tons of gasoline in the first half and prospects for the third quarter are no brighter. Kostyunin says more imports of gasoline may be needed, EBE reported.

The Party Central Committee's commission on agriculture blasted Minister of Chemicals and Oil Refining S.N. Khadzhiev for the deteriorating supply of fuels and lubricants to Soviet farms, EBE reported. Farms in the North Caucasus, Central Region, Central Asia, and Ukraine have seen fuel stocks fall to less than the minimum needed to keep vehicles running during peak harvest periods and jet fuel for aerial crop spraying is almost nonexistent, EBE reported.

"Members of the commission 'expressed indignation over the conduct of Minister Khodzhiev for whom personal ambition exceeds understanding of the need to take urgent measures for the overcoming of chronic failures in the work of the oil refining sector,' and they can't make it clearer than that," EBE said.

OIL EXPORTS PLUMMET

IEA also reported the U.S.S.R. in recent weeks had entered the European gasoline market as a buyer to alleviate shortages reported in several Soviet republics and meet the late summer increase in demand associated with the harvest.

In the absence of up to date monthly data for pipeline deliveries to eastern and Central Europe, the agency said tanker sailings from the Soviet Black Sea and Baltic ports offer the best indicator of overall Soviet export levels.

On this basis, exports the first 5 months of this year were down about 25% from last year's levels. They also indicate export volumes staged a significant recovery in May as more crude and straight run fuel oil (E4) was made available, especially from Black Sea ports.

This type of recovery is usual in the spring but occurred a month later than last year, apparently because of cold weather in the first quarter and a coal miners' strike in April, which is believed to have raised domestic fuel oil use.

EBE estimates total Soviet crude and products exports at 452.6 million bbl in the first half, with a full year total of 949 million bbl likely, a drop of 18% from 1990 reported levels. Minister of the Economy and Forecasting Y. Shcherbakov predicts a further decline of combined oil exports in 1992 of 25% -"and perhaps several times greater"-if measures to boost oil production aren't implemented, EBE reported.