Russia’s Attitude about the (non)extension of OPEC supply Cuts

If OPEC and non-OPEC countries decide not to extend a supply cut deal beyond June the 30th, Russia has an option. It could climb Russian oil output To the highest pace in 30 years.

For now, OPEC and non-OPEC countries made a deal Along with Russia. It was to cut 1.8 million bpd in output in the 1H17.

Among producer countries there are many who agree that OPEC should prolong the output cuts even in the 2H17. Kuwait and Saudi Arabia last week gave a signal that they are also ready to prolong the cuts.

Position of Russia

Firstly, Russia is now left to define its attitude about whether it wants cuts to last after June. Russian contribution to the cuts was 300000 bpd. Moscow was monitoring the discussion panel on Friday. Where they were discussing the matter.

Secondly, Russian officials implied that local oil producers are really ready to push the output higher. After once the pact runs out.

– “According to investment programs of (Russian) companies, it is possible Russian oil production will increase once the deal expires,” Deputy Prime Minister Arkady Dvorkovich said, adding firms had been held back while the deal was in place.

“If there are no restrictions, they will decide not to hold back.” He stated some news at the weekend on an economic conference in the East Siberian city of Krasnoyarsk.

He was not stating the exact numbers, but a few months ago he told that the output could come to 548-551 million tons in 2H17. Equivalent to 11.01 million-11.07 million bpd, the highest average since 1987. (Reuters)

Russia produced about 547.5 million tons in 2016, or an average of 10.96 million bpd. [O/RUS1]

Russia was to cut production to 10.947 million bpd from 11.247 million bpd, under the deal with OPEC. The level Russia has achieved in October 2016, was the highest oil output in the post-Soviet era.

New Oilfields

“Russia has the new oilfields,” said Minister Aleksandar Novak.

Novak will meet Russian oil companies this month to discuss the subject. He also reminded they would discuss an extension formally with OPEC on May 24. Without the extension, Raiffeisen bank analyst said forecast for Russian output are: rising about 2 percent in the second half of 2017 to a peak of about 11 million bpd.

Russian Oil producers have lots of projects going on in the country, so it is not strange at all that they are ready to boost outputs after the deal with OPEC is done.

The biggest Oil Companies in the Country

Rosneft, the county’s biggest oil producer, has said it plans to boost output this year referring to newly acquired oil fields. Including Kondaneft group of fields in Western Siberia, which are crucial for Russian production.

The company had targeted 2 percent annual output growth in 2015-2017. Without any acquisitions, that would push 2017 production to more than 214 million tons, or 4.3 million bpd.

The Russia’s second-largest producer, LUKOIL sees its oil output rising slightly if the global deal is not extended
and could restore production to its pre – deal level in three to four months.

Finally, mid-sized producer Tatneft expects to increase 2017 output by 0.5 million tons a year, or about 10,000 bpd, if the global production pact runs-out.