Russian Energy Minister: Era Of Cheap Oil Is Over

Telegraph/UK
June 13, 2006

Russia has served a double warning over the price of oil and intervention to block attempts by its energy firms to move into EU markets.

Viktor Khristenko, Russian's energy minister and guardian of 5pc of the world's oil reserves, declared that motorists and business would have to learn to live with expensive fuel because "the era of cheap hydrocarbons is over". He also made it clear that any intervention by EU states if Russian firms sought to buy their European rivals would be regarded as unfriendly.

He was speaking shortly after the Chancellor, Gordon Brown, indicated that any bid by Gazprom, the Russian gas giant, for Centrica, the British Gas parent, would be treated as a political rather than commercial move.

Russia with its huge oil and gas reserves has been one of the main beneficiaries of soaring oil price and shares the industry consensus that there is little prospect of relief. Mr Khristenko said: "Forecasting is a thankless task in hydrocarbons, but one can say with certainty that the era of cheap hydrocarbons is over."

Mr Khristenko, appointed energy minister by President Putin in 2004, said EU governments should stand back from the merger and acquisition activity in the energy sector which is sweeping Europe.

Speaking to The Daily Telegraph yesterday, he said: "The less political issues there are in this area, the easier and calmer it will be for suppliers and consumers and businesses." In today's global market, a firm's nationality was increasingly irrelevant, he said.

"We have global companies - it can be hard to pinpoint where a company comes from. BP is considered a British company and in America it is an American company. There is nothing contradictory in that because its assets are spread all over the world." Russia was intent on "the expansion of our own participation in others' assets".

He understood the nervousness about Russia's increasing influence - by 2030 nearly two thirds of the EU's gas needs will come from Russia. "If dependency on Russia is not good then one needs to move out of this dependency," he said. "So it is legitimate to encourage Russian participation in other markets like China, Japan and the USA."

Last winter he turned off the taps to Ukraine. Such a situation was unlikely to befall the UK. "Nobody should worry about gas supplies from Russia. None of our contracts have ever been broken. This did not happen, this does not happen and this will not happen."

He denied Russia was using energy dominance as a "weapon". British firms had nothing to fear about expanding in Russia, despite the politically motivated break-up of the Yukos oil group. Times had changed with 50pc of Gazprom now owned by outside shareholders, and the flotation of Rosneft in London later this year.

He pointed to the Putin administration's relaxed view of the steel merger between France's Arcelor and Russia's Severstal.