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CNN Live At Daybreak

Can Russia Fill Oil Gap?

Aired March 06, 2003 - 05:51   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL COSTELLO, CNN ANCHOR: Fill up, pay up. California drivers are paying record prices at the pump, more than $2 a gallon statewide, around $2.20 a gallon in the Bay Area. And prices could rise even more for the summer driving season. One reason given for the higher prices, a war in Iraq could disrupt the flow of oil from the Middle East.
But if there is an oil gap, Russia would likely help fill it. But can that country do that?

We take you now to Moscow and CNN bureau chief Jill Dougherty for that story -- tell us, Jill.

JILL DOUGHERTY, CNN CORRESPONDENT: Hey, Carol.

Well, you know, if you look at the factors, the demand for oil in the United States is very high. You've got Russian oil exports really booming and you've got the war looming. So, does all of that mean that Russia actually could save the day for oil consumers?

Well, it's not that simple.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): If war comes, the flow of oil from the Middle East, at least temporarily, could become erratic. In the snow covered oil fields of Russia, there's nothing producers would like to do more than help fill that gap in world oil markets. President Vladimir Putin himself promised as much a year and a half ago during a speech in Germany.

PRESIDENT VLADIMIR PUTIN, RUSSIA: Russia stands ready to increase oil exports in case of world conflict.

DOUGHERTY: But could Russia really become the saving grace of oil consuming nations or is it just a pipe dream?

STEPHEN O'SULLIVAN, UNITED FINANCIAL GROUP: In the short run, no, it couldn't. It's already producing at capacity. Production is growing at maybe eight percent a year, so that's clearly very positive. But it doesn't have any spare capacity, unlike Saudi Arabia, that has several million barrels a day of spare capacity and can act as a swing producer, stepping in where necessary.

DOUGHERTY: For the past five years, Russian oil production has been booming. But when it comes to getting oil out of the country, that's where it gets complicated. LEONID FEDUN, LUKOIL: The basic problem we have is not development of oil fields. We have more than sufficient reserves. It's the means of transporting that oil.

DOUGHERTY: Russia produces more than eight million barrels a day but can export less than half of that through the state owned pipeline. It's a bottleneck already running at nearly 100 percent capacity.

(on camera): Russia does hope to become a stable, alternative energy supplier to the United States. Lukoil, Russia's largest oil company, predicts Russia could supply to the U.S. 13 percent of its oil by 2010. But that will require new infrastructure and major investment, and that is still in the future.

(voice-over): A disruption in Iraqi oil could have one benefit for Russia, rising oil prices would mean a tax windfall for the Russian government. So, much as Russian oil companies might dream of filling the gap if Mideast oil exports temporarily dry up, they can't. The only country that can really do that, according to the experts, is Saudi Arabia.

(END VIDEOTAPE)

DOUGHERTY: President Bush says that he wants

COSTELLO: We've lost Jill Dougherty, but we learned much from her report on oil prices and whether Russia could help out if there is an oil gap here in the United States due to a possible war with Iraq.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired March 6, 2003 - 05:51   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Fill up, pay up. California drivers are paying record prices at the pump, more than $2 a gallon statewide, around $2.20 a gallon in the Bay Area. And prices could rise even more for the summer driving season. One reason given for the higher prices, a war in Iraq could disrupt the flow of oil from the Middle East.
But if there is an oil gap, Russia would likely help fill it. But can that country do that?

We take you now to Moscow and CNN bureau chief Jill Dougherty for that story -- tell us, Jill.

JILL DOUGHERTY, CNN CORRESPONDENT: Hey, Carol.

Well, you know, if you look at the factors, the demand for oil in the United States is very high. You've got Russian oil exports really booming and you've got the war looming. So, does all of that mean that Russia actually could save the day for oil consumers?

Well, it's not that simple.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): If war comes, the flow of oil from the Middle East, at least temporarily, could become erratic. In the snow covered oil fields of Russia, there's nothing producers would like to do more than help fill that gap in world oil markets. President Vladimir Putin himself promised as much a year and a half ago during a speech in Germany.

PRESIDENT VLADIMIR PUTIN, RUSSIA: Russia stands ready to increase oil exports in case of world conflict.

DOUGHERTY: But could Russia really become the saving grace of oil consuming nations or is it just a pipe dream?

STEPHEN O'SULLIVAN, UNITED FINANCIAL GROUP: In the short run, no, it couldn't. It's already producing at capacity. Production is growing at maybe eight percent a year, so that's clearly very positive. But it doesn't have any spare capacity, unlike Saudi Arabia, that has several million barrels a day of spare capacity and can act as a swing producer, stepping in where necessary.

DOUGHERTY: For the past five years, Russian oil production has been booming. But when it comes to getting oil out of the country, that's where it gets complicated. LEONID FEDUN, LUKOIL: The basic problem we have is not development of oil fields. We have more than sufficient reserves. It's the means of transporting that oil.

DOUGHERTY: Russia produces more than eight million barrels a day but can export less than half of that through the state owned pipeline. It's a bottleneck already running at nearly 100 percent capacity.

(on camera): Russia does hope to become a stable, alternative energy supplier to the United States. Lukoil, Russia's largest oil company, predicts Russia could supply to the U.S. 13 percent of its oil by 2010. But that will require new infrastructure and major investment, and that is still in the future.

(voice-over): A disruption in Iraqi oil could have one benefit for Russia, rising oil prices would mean a tax windfall for the Russian government. So, much as Russian oil companies might dream of filling the gap if Mideast oil exports temporarily dry up, they can't. The only country that can really do that, according to the experts, is Saudi Arabia.

(END VIDEOTAPE)

DOUGHERTY: President Bush says that he wants

COSTELLO: We've lost Jill Dougherty, but we learned much from her report on oil prices and whether Russia could help out if there is an oil gap here in the United States due to a possible war with Iraq.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com