Tanker opens new chapter in US energy supplies

First Russian oil arrives, further reducing America's dependence on Mideast.

It looked like any other tanker that drops anchor in the Houston Ship Channel to offload BMWs or Barbie dolls. But this ship's cargo was unlike anything seen before in an American port. Crude oil, all the way from Russia's Black Sea, was being transferred here to smaller tankers bound for Baytown and Beaumont – and all points beyond.

It was the first-ever Russian shipment of oil to the United States, and experts hailed it as a small but important step in reducing the country's dependence on Middle Eastern oil – long a concern to US officials, but one given even more urgency by the Sept. 11 attacks and the war on terrorism.

In 1980, only 34.5 percent of US oil imports came from the Western Hemisphere (mainly Canada, Mexico, and Venezuela). But in recent years, the US has been quietly turning away from Middle East suppliers and toward other countries – from West Africa to the deep waters off Brazil – for oil. Today, imports from Western nations make up almost 50 percent of the US market.

And this May, President Bush and Russian President Vladimir Putin signed an energy-cooperation agreement in Moscow, paving the way for Russia's entry into the US market.

So while last week's lightering of 2 million barrels of oil at the Port of Houston may be small in terms of overall US need, it is significant in its contribution to the nation's search for new sources of oil.

"This shipment of oil is potentially very symbolic, the same way the first shipment from the Middle East after World War II was symbolic," says Daniel Yergin, chairman of Cambridge Energy Research Associates in Washington. "It's sort of a pathbreaker."

Mr. Yergin believes that the growth of oil supplies from Russia and the Caspian can be one of the most important new contributions to stability in world oil markets. To that end, he says, the US should continue to strengthen its political and economic relationship with Russia, because "diversity is one of the foundations of stability in the oil market."

The Middle East has two-thirds of the world's known oil reserves, and therefore will continue to be a major source of crude for countries around the globe for decades to come. But new partnerships and improving technology are enlarging world supplies, lessening the ability of Persian Gulf countries to manipulate production and cost.

Canadian companies, for instance, are now spending billions of dollars to wring oil from mined oil sands, as well as to pump it to the surface with the aid of steam. Last year, Brazil's state oil company began drilling off its Atlantic shore in waters as deep as 8,500 feet – causing other deep-water producers to take notice. And just last month, Exxon Mobil announced it had started construction of a deep-water field off Angola's west coast.

"I think we are going to see big changes in the next three to five years," says Amy Jaffe, senior energy analyst at the Baker Institute at Rice University in Houston. "I expect to see a much higher proportion of oil coming in from Canada ... and Russia."

Right now there are limits to how much oil Russia can contribute to the US market. Its aging Soviet-era facilities need to be updated and its infrastructure improved. The country currently exports most of its oil to Europe because it lacks deep-water ports that can accommodate supertankers bound for the US.

Mikhail Brudno, first vice president of Yukos – the company that sent the first shipment to Houston (via a rather circuitous route) – says there are half a dozen more to come this year. After that, Russia's No. 2 oil producer will evaluate whether it's economically feasible to continue such shipments.

But with rapidly increasing production and growing political will, the country is eager to find ways to tap into the largest energy market in the world. "This cargo is not a stray aberration," says Ms. Jaffe. "As Russian production rises, it's a matter of market policy to move some oil out of the European market. And to the extent that Russia becomes a reliable partner in helping the US diversity, I see [that] as a great thing."

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