No sign of oil freeze at home as Russia meets OPEC
MOSCOW : Russian energy minister Alexander Novak will fly to Algeria this week for talks with OPEC on output cuts, developments at home indicate non-OPEC Russia is not preparing for any coordinated production action.
Five leading Russian oil companies says that they will be boosting output next year after reaching record levels in recent months. No doubt, all these companies would obey if President Vladimir Putin ordered them to curtail production.
But so far Putin has had no meeting with leading Russian oil producers and even the energy ministry has yet to hold such consultations to sort out details and logistics of any output action.
“We think that it is impossible to agree, everyone has been just ramping up production (within OPEC and outside).” a source at Russia’s leading oil producer said.
Kremlin-controlled Rosneft, which accounts for over a third of Russian production has been the biggest opponent of the global oil freeze deal since it was first discussed at the beginning of the year. Rosneft’s influential chief, Igor Sechin has said internal differences were killing OPEC and its ability to influence the market.
The Rosneft source said the firm’s position has not changed despite the latest developments, which even saw Putin meeting Saudi Deputy Crown Prince Mohammad bin Salman in China in early September and the country’s ministries agreeing to work together to help stabilize oil markets.
Days after the pact was signed Russia reported a new post-Soviet production record of over 11 million barrels per day. The Russian oil landscape is also dominated by No.2 firm, private Lukoil, private producer Surgut, state-owned GazpromNef and Tatneft.
The companies plan to raise production by around 1.6 percent on average in 2017, according to their forecasts and Reuters calculations as they benefit from a weaker rouble and cheaper costs at home.
The jump in production comes not only thanks to conventional oil deposits but also as Kremlin oil champions Rosneft and GazpromNeft are increasing output of hard-to-extract oil, despite Western sanctions on Russian shale projects. Analysts from Swiss bank UBS forecast a rise of 2.7 percent next year of Russia’s overall oil production.
“I am skeptical not only about the agreement but about the results too,” said chief economist for BP in Russia and the former Soviet Union, Vladimir Drebentsov. As price is rising, production in the United States is rising too,” he added.
On Monday, Iran played down chances of OPEC and non-OPEC producers clinching a deal in Algeria later this week even though several other OPEC members said they still hoped oil nations would finally take steps to address the global glut.
Source : Agencies