CRISIS DEEPENS FOR SOVIET ENERGY INDUSTRY

The Soviet Union's energy industry remained mired in deep crisis during the first 2 months of 1991.

Oil and coal production were more than 8% below the levels of the same period last year, and the fuel distribution system is in shambles. Natural gas flow continued to increase modestly.

Total energy production during January and February was about 2.6% below the government's reduced official plan, the Moscow newspaper Izvestia reported. If crude and condensate flow continues to drop at the January-February rate, 1991 production likely will fall to less than 10.5 million b/d from 11.39 b/d in 1990 and the 12.48 million b/d peak in 1987.

THE BORDER OF COLLAPSE

Izvestia described the continuing fall in oil and coal production early this year as "a dangerous tendency bordering on collapse."

Total Soviet industrial production plummeted even more than energy during January-February-by 4.5%. The energy shortfall contributed greatly to the big decline of nearly 6% in petrochemical and chemical manufacture and more than 4% in metals production.

The effect of spreading coal strikes was devastating to the Soviet economy in March. Man-hours lost because of walkouts during first quarter 1991 ran far ahead of the same period last year.

The Soviet press said industry and transportation in all three trans-Caucasian Soviet republics-Armenia, Georgia, and Azerbaijan--were badly crippled during the winter. Electricity and heating fuel were in short supply, and the population complained of cold apartments that resulted in illnesses.

Environmental groups have delayed construction of a gas pipeline from the Russian Republic into the trans-Caucasus area. Azerbaijan, once the U.S.S.R.'s leading hydrocarbon producer, admits it can no longer satisfy its own gas requirements during winter months.

Increased gas imports from Iran could ease Azerbaijan's winter gas shortage. However, such imports would bring little near term relief to Armenia and Georgia unless ethnic unrest subsides.

PRICES JUMP

Moscow decreed sharply higher retail prices for many consumer goods beginning Apr. 2. But it promised no increase in official government prices for buyers of gasoline, kerosine, natural gas, coal, boiler fuel, wood, and, among other items, vodka.

Retail fuel prices can be maintained at present levels only by boosting government subsidies because wholesale prices are soaring. Wholesale oil, gas, and coal prices were sharply increased Jan. 1, and pressure for further hikes is mounting.

In Turkmenia, the U.S.S.R.'s second largest gas producing region, wholesale prices have jumped again. Repeated complaints to Moscow that Turkmen wholesale gas prices remained below production costs resulted in another doubling of central government payments for Turkmen gas, making February costs more than four times the December level.

Striking coal miners are demanding a 100-150% wage increase on top of higher pay recently granted. If authorized, wage costs for coal produced in the Ukraine's Donbas area alone would rise 5 billion rubles, pushing the republic's 1991 budget further into deficit.

CHAOTIC OIL MARKET

Soviet officials admit the nation's oil markets are in complete chaos.

At the same time gasoline is being exported from the Black Sea port of Tuapse, gasoline is being shipped into the same terminal to meet area needs.

Until last fall, Tuapse had only exported oil. Then the first Greek tanker arrived with gasoline required by Kuban area farmers unable to harvest their crops.

With rubles practically worthless, oil suppliers in the refining center of Grozny said they will be able to deliver added fuel to Kuban farmers only if they are paid 3 l. of milk for each extra liter of gasoline provided.

Izvestia said the cost of imported gasoline was 50-100% higher than the official domestic Kuban region price. The government was forced to subsidize the additional 15 million ruble cost of imported gasoline.

Meanwhile, motorists in the Kuban lined up last winter for hours to buy gasoline, blocking city streets. They expected fuel shortages to ease following the end of harvest time.

Izvestia said this year's fuel shortage in the Kuban will be still worse. Storage tanks for agricultural fuel needs are empty, and supplies allocated to motorists have been cut 15% "from 1990's meager level."

Authorities have begun rationing gasoline in Black Sea resort cities.

In mid-March, the Moscow newspaper Trud reported a "catastrophic" fuel situation had developed in the region around the refining center of Orsk, near the southern end of the Ural Mountains. While consumers were experiencing severe shortages, 150,000 metric tons of gasoline, diesel fuel, and lubricants had filled the Orsk refinery's fuel storage tanks to capacity.

"The refinery may be forced to shut down because there is no place to put its refined products," Trud declared.

"There is no deficit in crude deliveries to the refinery. But there aren't any railroad tank cars to move the refined products to consumers.

"The same situation prevails at many other Russian refineries. As the saying goes, 'We are laughing through our tears.'"

Copyright 1991 Oil & Gas Journal. All Rights Reserved.