WILL THE NEXT OIL
WILL THE NEXT OIL SURPRISE' COME FROM THE SOVIET UNION?
WASHINGTON, Nov. 18 /PRNewswire/ -- "The Soviet Union is increasingly seen as the next great prize' in world oil. There is growing evidence that its oil reserves could be huge -- even as large as Saudi Arabia's -- though no where near so convenient to produce," according to Daniel Yergin, author of the international bestseller "THE PRIZE: The Epic Quest for Oil, Money & Power," just released in an updated paperback.
Yergin told the National Press Club today: "But, that prize may well be a decade away. In the meantime, the Soviet oil industry is in a sharp decline, which could be very risky over the next few months -- threatening the viability of the Soviet economy and possibly tightening world oil supplies and pushing up prices."
"Boris Yeltsin's decision on Friday to suspend all oil export licenses reflects the fact that the formerly highly centralized export system has sprung big leaks," says Yergin. "The Russian Republic is trying to prevent a shortage of oil products this winter and gain control over desperately needed hard currency earnings."
Yergin, president of Cambridge Energy Research Associates, adds that the Soviet oil industry, the world's largest, is "in big trouble that is getting bigger," a crises brought on by inefficiency, low productivity, poor organization, technological backwardness, waste and environmental neglect -- and sharp cuts in investment.
Between 1988 and 1991, Soviet oil production plummeted 20 percent from 12.6 million to 10 million barrels per day. "This is a volume greater than either Iraq, Kuwait or Venezuela were producing before the crisis. It's as though a major oil exporting country has disappeared from the face of the world. And it's continuing to decline."
Oil exports, the Soviet Union's number one source of hard currency earnings, have fallen from 4.1 million barrels per day in 1988 (when the Soviet Union was the world's second largest exporter) to around 2 million barrels per day -- "an immediate economic threat to the Soviet economy," says Yergin.
"Yet the failure of the coup attempt in August 1991 and the new radical economic program in Russia will probably accelerate efforts to bring Western oil companies into the Soviet Union. The oil companies recognize the many political, economic and technical risks and obstacles -- but, given the possible size of the reserve base, the biggest risk may be not to be a participant."
/CONTACT: Maria Rodriguez of Vanguard Communications, 202-331-4323, for Daniel Yergin/ CO: ST: District of Columbia IN: OIL SU: SB-TW -- DC006 -- 1268 11/18/91 09:19 EST