Russia: UBS Says Oil Boom Will Last at Least a Decade (others skeptical)

[Dover]

Thursday, Feb. 19, 2004. Page 7

UBS Says Oil Boom Will Last at Least a Decade

Reuters - Brunswick UBS, one of the leading Western investment banks in Russia, said Wednesday that it expected the world's second-largest oil exporter to maintain very strong production and exports growth for a least a decade.

The bank said it had raised the forecast it published last year, already considered bullish, and expected output to rise to 12 million barrels per day from 9 million bpd now, strengthening its position as the world's top crude producer.

The country's oil and refined product exports could rise close to 10 million bpd by 2010, outpacing its main rival Saudi Arabia.

"In contrast to some expectations that growth rates will decline precipitously this year, we continue to believe output and exports will see extraordinary growth before settling at a 'normalized' basis of 4 percent annual growth at the end of this decade," it said.

Low oil prices still represented the main risk, but even if the price falls below $20 per barrel, cash-rich Russian producers would have enough resources to maintain the growth.

A possible stand-off with OPEC, increasingly unhappy about losing its market share to Russia, could also be a problem.

"We believe growing demand far in excess of Russian production offers the most realistic and probable outcome that would alleviate OPEC of the need to confront Russia dramatically, although the risk is present."

Many analysts have said Russia's impressive output growth, which propelled production to 9 million bpd from 6 million in 1999, may slow down amid the lack of export capacities, reserves depletion and a judicial attack on oil major Yukos...cont'd

http://www.themoscowtimes.com/stories/2004/02/19/047.html

[donsu]

1. and then what?

10 yrs. is not very long

[Dover]

3. I think they are saying that the next decade is the big growth spurt

and I assume established production will then level out for however long these resources last.

[Dover]

2. Russia: Study Triples Oil's Share of GDP

Thursday, Feb. 19, 2004. Page 1

Study Triples Oil's Share of GDP

By Alex Fak
Staff Writer The economy is nearly three times more dependent on oil and gas than official statistics indicate, making the country much more vulnerable to oil price swings than previously thought, the World Bank said Wednesday.

The State Statistics Committee doesn't properly account for the tax avoidance schemes used by oil and gas companies, the bank concluded in its annual report on the Russian economy. But if it did, the numbers would show that oil and gas accounts not for 9 percent of gross domestic product, but 25 percent, and that services account for just 35 percent of GDP, not 55 percent.

Russia's purported shift to a service-driven economy is "mythical," said Christof Rßhl, the World Bank's chief economist for Russia and the author of the report. "The government shouldn't expect services to take the lead in economic growth."

Rßhl said he recalculated official figures to negate the affect of transfer pricing -- when an oil or gas company sells to a trading affiliate at knock-down prices to minimize profit taxes.

The new figures show that the oil and gas sector, despite employing less than 1 percent of the workforce, makes up half of all industrial production. Transfer pricing also artificially inflates the services sector, a major component of which is trade. Oil and gas production is statistically disguised as trade when producers sell to affiliated traders who turn around and sell abroad at an enormous profit, with the difference considered "value added" in the services sector.....cont'd

http://www.themoscowtimes.com/stories/2004/02/19/002.html