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Countries supporting oil output freeze account for 75% of oil exports — Russian minister

February 20, 2016, 13:58 UTC+3

All the oil exporting nations will keep their market shares upon production stabilization if offer on the market does not grow

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© Egor Aleev/TASS

VLADIVOSTOK, February 20. /TASS/. The consultations on stabilization of oil production that began in January and involve all oil producers are to be over by March 1, Russia’s Energy Minister Alexander Novak said in an interview with the "Vesti v subbotu" (News on Saturday) TV program on the national television.

"We agreed that all consultations should be over by March 1," he said.

Currently, negotiations are underway on the possibility of oil output freeze by the leading oil-exporting countries.

On February 16, the oil ministers of Saudi Arabia, Qatar, Venezuela, OPEC and Russian Energy Minister Alexander Novak met in Doha, Qatar, and discussed how to improve the situation with oil price on the global oil market.

The parties expressed readiness to maintain the average oil production level in 2016 at the level of this year’s January if other oil-producing countries join this initiative.

Majority supports

Novak said that the countries supporting the oil production freeze account for 75% oil exports and that it is enough to reach an agreement.

"In fact, I would like to say, the countries that have publicly expressed, so to speak, their support for such an approach, already account for about 75% of total exports. That is enough in order to reach an agreement, I think," he said.

All the oil exporting nations will keep their market shares upon production stabilization if offer on the market does not grow, Novak said.

"Certainly, if market offers do not grow, the share of each exporting nation will remain the same as before," the minister said.

Novak said that a common position had been developed.

"We considered different variants, including the variant to do nothing for the reduction of production volumes, and the variant we had offered earlier - to maintain production at the current level and if there is no additional supply on the market, then the imbalance of supply and demand will decrease by at least 1.3 million barrels per day. This will be a positive signal, which is clear for the market and does not violate market principles," he said.

Novak said that consumers and exporters could be happy with the oil price of $50 per barrel in the long term. "We talked with our colleagues, that consumers and exporters would be happy with $50 per barrel in the long term," he said.

Iran and others

Speaking about consultations with Iran Novak said that Iran took the proposals of Russia, Saudi Arabia, Qatar and Venezuela on maintaining oil production level at the level of January 2016 constructively but it has not voiced readiness to join them.

"Yes, they had consultations. But I would like to say that they will continue... As I said already Iran took the proposal made by the four of us in a constructive way. Nevertheless it has not voiced readiness to join these proposals year," he said.

On February 17, oil ministers of Iran, Venezuela, Iraq and Qatar, held talks in Teheran discussing the possibility of "freezing" the level of oil production. As a result of negotiations between Iran Oil Minister Bijan Namdar Zangeneh said that Iran would support any initiative to improve the situation with oil prices. At the same time during the talks Iran maintained an attitude that it should regain the share on the market it had lost during the years of sanctions.

Also consultations on oil production stabilization at January 2016 level will be held with Mexico and Norway, Novak said.

"Certainly, appropriate consultations will be held with them [Mexico and Norway - TASS]. Mexico participated in talks when we met in Vienna for the first time in 2014, when prices just started declining. Therefore I believe they will be positive to consult regarding approaches we discussed," Novak said.

Russia may cut investments into greenfield oil projects by 20-30% in 2016

The official also pointed out that Russia might cut investments into greenfield oil projects by 20-30% in 2016.

"Much will depend on the situation with the oil price and the ruble rate. All our corporate groups confirmed they will continue development of brownfields. Investments into greenfields will be small under current oil prices. Nevertheless, they will not be slashed in full but will decline 20-30%," the minister said.

International oil companies may also cut investments by 15-40% in 2016, Novak said. "It seems to me 30 largest energy companies will invest $200 bln less in 2016 than the amount planned before the crisis," he added.

Climate matters

According to Novak, the idea to maintain oil production at a certain level rather than reduce it emerged partially due to Russia’s climatic conditions.

"We have different climatic conditions and other geological conditions. I will give a simple example. We have more than 170,000 wells that pump oil. At the same time we produce 534 million tonnes of oil. Saudi Arabia, which produces roughly the same volume, uses only 3,500 wells. The debit of wells is 20 times higher. In Saudi Arabia it is enough to lower the pressure there, and they can reduce the amount of production. Later they can increase it again. In our situation it is impossible because, if we reduce the production, we have to shut down a well and in our climate we won’t be able to reactivate it,"  the minister said.

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