Russia's Hungry Oil Companies Throw Wrench In OPEC Works Private And Loving It.(A)

Byline: AMY REEVES

When Russia said last month it will defy OPEC and end cuts on oil exports, few were surprised. The only question was whether there were any export cuts to end.

Last fall, Russia agreed to shave 150,000 barrels a day from its exports this year. Yet in the first four months, production rose 8.8% over the prior year to almost 7.3 million barrels a day.

Granted, the original deal was murky, says Philip Verleger, an independent energy analyst. The cut was based on what output would have been without a deal, which is hard to pin down. Even so, the Organization of Petroleum Exporting Countries was in for a shock.

"It was more than expected," said Verleger. "I don't know what OPEC thought they had."

Nothing, it seems, can stop the Russian oil boom. Over the last two years, output has risen by a million barrels a day. With investor money pouring in, analysts say it could rise another 20% in the next four years.

Why the glut now, when OPEC is trying to shore up prices? It boils down to a simple fact. Most OPEC members are state-run monopolies. Russia's newly privatized energy firms -- Lukoil, Yukos, Surgut Oil & Gas, Tyumen -- answer to no one but their owners.