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Washington State Gearing Up For Russian Oil `Boom'

  • Bruce Keppel



Bellingham, Wash., July 17 (RFE/RL) -- There's excited talk in the northwestern U.S. state of Washington of the prospects of a coming oil boom in the Russian Far East.

Not since the opening of Alaska's rich North Slope oil fields in the 1970s has Washington State buzzed with such economic excitement. One Seattle newspaper -- The Post-Intelligencer -- last week portrayed the state as being on the brink of a new oil boom, and said Seattle could prosper from Russia's venture.

The newspaper was referring to the announcement late last month that two major international oil consortiums with U.S. partners are now starting to design development projects in the Russian Far East worth 30,000 million dollars.

According to that announcement, actual production of oil and gas could start before the end of the century. Key for Washington state would be the needed construction of off-shore drilling platforms and pipelines running from the platforms to land and on to the port, along with storage facilities, housing for the crews and a shipping terminal.

The agreements require the international consortiums to work with Russian partners in the venture. But Washington state, given its closeness by sea to the Russian Far East, expects to win a share of the support work. That would echo the oil boom felt in Washington during development of the Alaska fields a generation ago.

That experience created a manufacturing capability in Washington state that continues to supplement and help diversify a regional economy. It is based on aircraft and transport construction, such as Boeing, the jetliner giant in Seattle; shipbuilding and fishing all along the sheltered harbor provided by the arm of the Pacific known as Puget Sound, and electronics and computer software.

Even without an oil boom, trade between Russia and the United States has been growing by about a thousand-million dollars a year for several years now. The fastest growth has come among the Pacific Coast states of California, Oregon, Washington and Alaska. Container ships sail weekly now from Puget Sound ports, filled with export goods that have given Washington state a trade surplus with the Russian Far East, despite the overall deficit in trade with Russia for the United States as a whole.

Washington state maintains a trade office in Vladivostok. And three years ago, Russia chose Seattle as the site of its first new consulate in the U.S. in 20 years.

The current focus of economic excitement is Sakhalin Island, which is closer to the twin ports of Seattle and Tacoma than to any other U.S. ports.

According to industry analysts, the Puget Sound ports stand to benefit because the oil companies in the U. S. participating in the Sakhalin venture would most likely use Washington State ports and suppliers to send drilling equipment, building materials and provisions to the Russian Far East development camps.

One shipper active in the Russian Far East, the Seattle-based Jore Group, expects a whole new trade lane to be established to supply and support the Sakhalin fields.

Signing of the oil-development agreements assumed added significance with this month's re-election of Russian President Boris Yeltsin. That is expected to bring stability for such ventures in contrast to the increased uncertainties that a victory by the Communist Party candidate Gennady Zyuganov would have generated among foreign investors.

Washington state knows that it will have to compete with the state of Alaska to the north. But the ports of Seattle and Tacoma are far more convenient for U.S. shippers with their easy continental rail connections and container-shipping facilities. Alaska, on the other hand, is separated from the U.S. mainland by Canada's huge province of British Columbia. It also lacks much of Washington's well-developed and sophisticated trade infrastructure.

Still, Alaska enjoys a sister-state agreement with Sakhalin. And the investor-owned Alaska Airlines, which already has regular flights to the Russian Far East, has been studying expansion of service to the provincial capital of Yuzhno-Sakhalinsk. It now serves the cities of Khabarovsk, Magadan, Petropavlovsk and Vladivostok.

One of the two international consortiums is Sakhalin Energy Investment Company Limited. Sakhalin Energy includes two Texas companies: Marathon Oil and McDermott International. The other consortium is Sakhalin One and Sakhalin Two. Sakhalin I includes an affiliate of Exxon Corporation, also based in Texas. Sakhalin Two includes Mitsubishi and Mitsui of Japan and the Anglo-Dutch firm, Royal Dutch Shell.

The economic potential for these ventures is much greater than it was in Alaska. That's because Alaska's North Slope fields contain an estimated 13,400 million barrels of oil, and Sakhalin's fields are thought to hold more than three times that.

Frank Duffield, the president of Sakhalin Energy, told reporters that "we are looking to move as quickly as possible. We are talking here," he said, "of what will be a major oil province. There will be a huge amount of opportunities" and Washington state, he added, "is quite well positioned."

The American publisher of the Russian Far East Update newsletter, Elisa Miller, welcomed what she called "good actions" on both sides of the Russian oil ventures. But Miller also warned against premature celebration. She said "the fact that the Communists were rejected "is good. It gets one cloud out of the sky. But full exploration," she reminded, "isn't a done deal."

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