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Russia discussing possible measures to cut oil output: minister

http://www.chemnet.com   Nov 24,2014 Platts
Russia is discussing possible measures to cut oil production to support falling oil prices and believes the situation may require "coordinated action" by major oil producers, energy minister Alexander Novak said Friday.

"Such an issue is being discussed," he told reporters on the sidelines of an industry event, when asked if Russia was considering a possible cut in its oil output.

But he added that the issue "requires thorough consideration" and "there is no such decision as of now." Novak pointed out that the Russian budget is heavily dependent on oil earnings.

In addition, the country's oil technology doesn't allow it to cut or raise crude output quickly, he said.

He said Russia expects to continue discussing the situation on international oil markets with Venezuela and other countries during a visit to Vienna next week.

"All crude producing countries are concerned about the recent drop in oil prices from levels at which they have stayed over the past three years," Novak said.

"This requires a thorough analysis and possibly the development of some coordinated action," he said, when asked what topics he planned to discuss in Vienna.

Novak declined to elaborate on any possible measures.

"It would be too premature to tell you about Russia's proposals as they need discussion with our colleagues first," he said.

Novak said there are a number of countries "that are also major producers" that are likely to take part in the discussions, although he didn't name any.

Early this week, Venezuelan foreign minister Rafael Ramirez visited Moscow, where he met with Novak and Rosneft CEO Igor Sechin.

Following the meeting, Rosneft said that Venezuela and Russia plan to hold an international conference in Vienna Tuesday, two days ahead of the OPEC meeting there.

The conference was initially expected to take place in Caracas but was moved to Vienna at Venezuela's request, Rosneft said, prompting speculation that Sechin is heading to the Austrian capital to meet with OPEC representatives before their meeting.

The same day, Venezuelan President Nikolas Maduro was reported as saying that Ramirez was coordinating efforts to organize a meeting of representatives of countries -- both OPEC members and non-OPEC members -- to discuss the situation on the oil market.

Ramirez, a former oil minister who still heads Venezuela's delegation to OPEC, was on an overseas trip ahead of the OPEC meeting as Venezuela looks to gather support for a plan to halt the slide in global crude prices.

Ramirez visited Moscow after a meeting earlier this month with Saudi Arabian oil minister Ali Naimi in Venezuela; Algerian President Abdelaziz Bouteflika and the country's oil minister, Youcef Yousfi, in Algiers; and with Iranian oil minister Bijan Zanganeh in Tehran.

RUSSIAN OIL OUTPUT

Meanwhile, Russian crude production is already under pressure as natural decline in West Siberia requires a dramatic increase in drilling, which is difficult due to sanctions against Russia and falling oil prices. Nonetheless, Novak said the ministry had not reconsidered its forecast for 2015 because of falling prices.

The energy ministry expects crude production in Russia to amount to 525 million mt, or around 10.5 million b/d, this year, up 0.3% year on year, and to remain at the same level next year.

Novak reiterated that Russian output currently exceeds levels set by the national strategy until 2020, which sees the output at between 505 million and 520 million mt/year.

And "it has becoming more and more difficult to maintain this level" due to a falling reserves base, he said.

Novak, however, declined to say at what price, the ministry estimates, the decline in crude production would accelerate.

"You should remember that a fall in price is being mitigated by the weakening ruble, which supports oil producers' earnings," he said.

The ruble has hit a number of historic lows recently against the dollar and euro.

But the ruble is falling at a similar pace to oil prices, compensating for a drop in oil exporters' earnings. While the bulk of their earnings are in dollars, most of their expenditure is in rubles.
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