Saudi Crown Prince Mohammed bin Salman stated in a recent interview with Bloomberg that within the next 19 years, Russia’s role in the oil market might substantially decrease. He even suggested Moscow might stop exporting oil. At the same time, Prince Mohammed praised his own kingdom's supply of hydrocarbon resources, which he said will keep Saudi Arabia a top market player for decades to come.
Unsurprisingly, Prince Mohammed's Oct. 5 interview caused a negative reaction in Russia. Russian officials, supported by a large number of experts, criticized the Saudi prince for what they said is an excessively gloomy prediction. They agree there are some problems in the country’s oil sector, but say they're manageable. On Oct. 9, Russian Minister of Energy Alexander Novak declared, "Russia is a leader of the global oil industry and, from the long-term perspective, it will retain this status. Our strategy is to keep oil production at the current level" and perhaps even increase it slightly.
As is often the case, there is some truth in both sides' arguments. Yet, for now, the Saudi prince's predictions are much closer to reality than the Russian energy minister's. To begin with, just last month, Russian authorities recognized that, in the long run, they might encounter a severe drop in the level of domestic oil production. Novak said that in 2021, Moscow will be able to produce 570 million tons of oil per year, as opposed to the current 553 million tons per year. Nevertheless, after 2021 the volume of oil extraction will fall gradually, with the risk of sinking to 310 million tons per year by 2035. In other words, initially Novak was even more pessimistic about the prospects of the Russian oil industry than the Saudi prince, who told Bloomberg that Russia could "disappear" as an oil exporter in 19 years. Novak initially gave Russia only 16 years. A leading Russian market analyst, Mikhail Krutikhin, is even more pessimistic, predicting that the drop in oil production may start in 2020.
There are at least several reasons for these negative expectations.
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