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Russia, Saudi Arabia sign joint statement to stabilize oil market

September 05, 12:48 UTC+3
The document was signed by Russian Energy Minister Alexander Novak and Saudi Minister of Energy, Industry and Mineral Resources Khalid Al-Falih
1 pages in this article
© Vladimir Smirnov/TASS

HANGZHOU (China), September 5. /TASS/. Russia and Saudi Arabia have agreed on measures - joint or in cooperation with other oil producers - with the aim of maintaining stability on the crude market and providing a sustainable level of long-term investment. That's according to a joint statement signed Monday by Russia's Energy Minister Alexander Novak and Saudi Arabia's Minister of Energy, Industry and Mineral Resources Khalid Al-Falih.

In the statement, the ministers recognized "the current challenges in the supply side of the global oil market, including major contraction of capital investments in oil extraction on a global scale, particularly in exploration, as well as mass deferrals of investment projects, which made the market, as a whole, more volatile and therefore unsustainable to both producers and consumers in the long term," as well as "an imperative to mitigate excessive volatility harmful to global economic stability and growth."

"In this regard, the ministers noted that constructive dialogue and close cooperation among major oil producing countries is crucial to oil market stability to ensure sustainable levels of investment for the long term. Therefore, the ministers agreed to act jointly or with other producers," the statement said.

Also, "the ministers agreed to continue consultations on market conditions by establishing a joint monitoring task force to continuously review the oil market fundamentals and recommend measures and joint actions aimed at securing oil market stability and predictability," the document said.

According to the statement, the first working group meeting will be held in October. The energy ministers of the two countries will meet in October in Algeria, and in November in Vienna.

Joint Statement of the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid A. Al-Falih and Minister of Energy of the Russian Federation Alexander Novak

The Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid A. Al-Falih and the Minister of Energy of the Russian Federation Alexander V. Novak met in Hangzhou, China on the sidelines of the G20 Summit.

In their meeting, the Ministers recognized the importance of maintaining their ongoing dialogue about current developments in oil and gas markets and indicated their mutual desire to further expand their bilateral relations in energy. This stems from the fact that the two countries currently shoulder the responsibility of producing more than 21-percent of global oil demand which is required to fuel global economic growth, improve standards of living and help achieve the Millennium Development Goals.  

1. The Ministers recognize the current challenges in the supply side of the global oil market, including major contraction of capital investments in oil extraction on a global scale, particularly in exploration, as well as mass deferrals of investment projects, which made the market, as a whole, more volatile and therefore unsustainable to both producers and consumers in the long term. There is an imperative to mitigate excessive volatility harmful to global economic stability and growth.

In this regard, the Ministers noted that constructive dialogue and close cooperation among major oil producing countries is crucial to oil market stability to ensure sustainable levels of investment for the long term. Therefore, the Ministers agreed to act jointly or with other producers. In addition, the Ministers agreed to continue consultations on market conditions by establishing a joint monitoring task force to continuously review the oil market fundamentals and recommend measures and joint actions aimed at securing oil market stability and predictability.

2. The Ministers agreed to promote cooperation between the Kingdom of Saudi Arabia and the Russian Federation in the oil and gas industry, including deployment of new technologies, exchange of information and expertise to raise the level of technology applications in production, refining, storage, transport and distribution, as well as equipment production, support services such as engineering, manufacturing and research activities, along with collaboration in power generation and renewable energy.

3. The Ministers committed to explore the possibility of creating a joint database on advanced energy technologies, along with feasibility assessments of their deployment, utilization, and financing through sovereign funds of both countries.

4. The Ministers decided that the first meeting of the Saudi-Russia Working Group on oil and gas cooperation established according to Article 4 of the Cooperation Agreement between the Government of the Kingdom of Saudi Arabia and the Government of the Russian Federation on oil and gas cooperation dated the 2nd of September 2003 and the Execution Program of the agreement dated the 18th of June 2015, shall be held during October 2016, to enhance the cooperation, and implementation of what has been agreed upon.   Furthermore, the Ministers will meet again on the sidelines of the upcoming meetings of IEF in Algeria and OPEC’s November meeting in Vienna.

Historic moment

Russian Energy Minister Alexander Novak has pointed out that Moscow and Riyadh were switching to strategic partnership in energy sector. Novak noted that the two countries' deep mutual trust enabled a joint response to global challenges.

"In fact, we are opening a new era of our cooperation today. Our energy cooperation is moving towards a deeper and closer interaction, a strategic partnership. This became possible thanks to trust relations with our Arab friends," Novak said at a briefing.

"I am confident that this new stage of relations between the two countries, OPEC and non-members. This is a historic moment, in my opinion." - Novak said.

According to the minister, Moscow is ready to join oil production freeze if such a decision is made. 

"We believe that bringing oil market into equilibrium has lingered for quite some time, more than 2 years. Of course, joint measures that has been reviewed in the beginning of the year, including freezing oil production, could bring market stabilization closer," Novak said.

"It requires a lot of work, and it has been in discussion since the beginning of the year. Russia was always positive towards the idea. We are ready to join freezing oil production, if it is decided," he added.

"Russia and Saudi Arabia are top oil producers with the highest impact on the industry. Our coordination will be crucial in stabilizing the market," Novak said.

"We have several specific instruments of joint efforts, including the issues discussed earlier related to keeping the production volumes, the so-called freeze. We’ve agreed with our colleague that a working group will be set up to work out recommendations on joint actions aimed at delivering stability and predictability of the markets," he said.

"We’ve agreed to hold the first meeting of the Russia-Saudi working group in October in Moscow on cooperation in the oil and gas sector," Novak added.

Russia-Saudi cooperation at unprecedented level 

Saudi Arabia's Minister of Energy, Industry and Mineral Resources Khalid Al-Falih has also commented on the agreement saying the cooperation between Russia and Saudi Arabia in the oil sector has reached an unprecedently high level. 

The Saudi official has called on all other big players on the oil market to join the agreement between Russia and Saudi Arabia to stabilize the oil market.

"I have to say all other producers are expressing interest in coordinating... with Saudi Arabia and other like-minded countries to reach a consensus," Al-Falih said at a briefing.

"We are optimistic that Algiers meeting will provide a forum, and pre-Algiers that consultations which will take place bilaterally and in groups will bring us to Algiers with some sort of coordinated decisions. But the two countries agree that even if there is no consensus, we will be willing to take join action when necessary," he added.

On September 26-28 Algiers will host the International Energy Forum. Venezuela, Ecuador and Quwait have intiated a new round of talk of capping oil production to be held at the forum.

Russia and Saudi Arabia produce more than 21-percent of global oil demand.

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