Saturday , March 17 2018

Strategic alliance expands between Saudi and Russia – Kuwait needs to invest in gas sector

Yes, Saudi Arabia is not alone any more in bearing the burden and responsibility of stabilizing oil prices. It has now found a new partner to share the burden.

It happened through the new Russian strategic partnership that started early 2016 during an OPEC meeting in Qatar that was aimed at finding solutions and ways to stabilize oil prices at a comfortable and acceptable level. Through this, cuts in crude oil production by all was agreed on including the biggest producer Russia, which was initially hesitant as it did not fully trust all OPEC members to abide by the agreement.

This is now the second year of complete compliance by OPEC and Russia to reduce oil production by 1.8 million barrels. The barrel cost is doing very well much above the expectation of every oil producer, as it is hovering around $70. This is $10 more than the target set by Saudi Arabia and Russia of $60 per barrel.

Last week witnessed the launch of Sabetta liquefied gas project worth $27 billion in north Russia. The agreement to supply gas to Saudi Arabia further cements the ties that started 18 months ago with hopes that they will strengthen to become a greater strategic alliance that could have a huge impact on the relations between the two countries in all aspects, not just energy, in the coming months and years, despite their long history of disagreement without any single common factor to make them strategic partners in such short time.

Buying gas directly from Russia will give Saudi Aramco great flexibility in selling more crude oil in the open market during peak summer months when demand for electricity is high. It will also help save up to three million barrels or free them for export, while using imported Russian gas domestically. It is a win-win situation for the two strategic partners.

On the other hand, Kuwait doesn’t have such strategic partners. We can do the same by dealing directly with gas producers in Qatar, Iraq and Iran either buying into their gas fields or investing in overseas gas fields. Kuwait will be one among the gas importers for years to come and will face the same demand during the long summer months.

We can sell our overseas investments in oil companies and oilfields, and instead look into investing in the gas sector, as we have enough oil reserves that can last well for 90 years if not more.

Sharing Saudi’s burden in oil productions cuts has really opened areas of opportunities in the right direction that is leading towards greater strategic relations beyond oil and gas between Russia and Saudi Arabia.


By Kamel Al-Harami

Independent Oil Analyst



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