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Houston’s annual CERAWeek energy conference draws Russia and US closer

Russia’s Energy Minister Alexander Novak is confident that the development of economic cooperation between Russia and the US would reduce tensions between the two countries
Russia’s Energy Minister Alexander Novak  Sergei Savostianov/TASS
Russia’s Energy Minister Alexander Novak
© Sergei Savostianov/TASS

HOUSTON, March 10. /TASS/. CERAWeek, the annual international oil and gas conference hosted in Houston, ended on Friday. The event that was held from March 6 to March 10, gathered together dozens of oil ministers and hundreds of top managers from the world’s largest oil companies.

The conference ended amid the sharpest fall in oil prices since last December. The oil price decline was sparked not only by the stats on oil reserves in the US, but also by a number of harsh statements made on the sidelines of the event by the world's largest oil exporter - Saudi Arabia. Russia's role in the global energy market became one of the key topics on the forum’s agenda.

OPEC plans to keep in touch with US shale producers

The discussions at CERAWeek began on the eve of its official opening - late on Sunday, March 5, when CEOs of 20 US oil shale companies and OPEC Secretary General Muhammad Barkindo gathered for dinner in a Houston hotel.

The meeting turned out to be an unexpected one for journalists who had gotten used to writing about how the rise in oil prices brought on by OPEC’s production cut that had sparked a surge of shale oil production in the US.

After that dinner Barkindo told TASS that the US shale oil producers were first of all interested in whether OPEC and Russia are committed to cutting production further (in the second half of the year), because the price of oil depends on this.

Later, at a press briefing, the OPEC Secretary General said that the oil cartel will keep in touch with shale companies from the US and some of them even promised to visit Vienna in the near future. However, it remained unclear what the cooperation between OPEC and US shale oil would imply.

CERAWeek was marked by rather harsh statements made by Saudi Energy Minister Khalid A. al-Falih. In particular, he said that Saudi Arabia, which had gone over its oil production cut quota, will not allow other producers to take advantage of it.

"We will not bear the burden of free riders. Saudi Arabia will not allow itself to be used by others. My colleagues have heard that privately, and now I'm saying it publicly," he said speaking at the forum.

Record drop in oil price

This year, CERAWeek was marked by a record plunge in the oil price in recent months. The price of the futures contract on Brent fell by 2.7%, to $51.7 per barrel. Last time such a low price was recorded on December 1, 2016.

Usually the oil price falls either after loud statements made by OPEC countries or after publication of industry statistics.

On March 8, data on commercial oil reserves in the US was announced. According to the statistics, oil reserves in the US grew by 8.22 mln barrels over a week to 528.40 mln barrels. At the same time, analysts predicted that the growth will be 75% less - only 1.97 mln barrels.

Speaking on the sidelines of the forum, Saudi Energy Minister Khalid A. al-Falih said that OPEC would refuse to cut production if other oil producers fail to meet their commitments properly. Earlier, it was reported that in February, OPEC members had fulfilled the agreement on an oil production cut by 94% of the plan, but the countries outside the cartel fulfilled it only by 50%.

Later, in an interview with CNBC television, al-Falih expressed dissatisfaction with the February rate of reduction in Russia’s oil production. Nevertheless, he noted that his country is patient and would wait for the statistics in May.

Russia’s Energy Minister Alexander Novak said that Russia would reach the required level of reduction in production of 300,000 barrels per day by the end of April.

A source in OPEC told TASS that at the forum, Novak and al-Falih held a closed meeting, which also involved the ministers of the UAE, Iraq and Mexico. At that meeting, the Saudi minister also expressed dissatisfaction over the insufficient cut in production by the UAE and Iraq. However, Novak assured his colleague that Russia would reach its quota of 300,000 barrels in April. Later at a press conference, Falih was more optimistic and said he believes in 100% implementation of the agreement on an oil production cut.

Russia-US cooperation

Speaking at a plenary session in Houston, Russia’s Energy Minister Alexander Novak was confident that the development of economic cooperation between Russia and the US would reduce tensions between the two countries. He also underscored the great potential for bolstering business interaction between both countries.

Novak assured the business community of Russia's consistent efforts on removing barriers to foreign investment.

The minister stated that Russian oil and gas projects are very attractive for foreign investments. Speaking at a Russian breakfast on the sidelines of the forum, he touched upon low production costs in Russia, a flexible tax system and "one of the world’s most liberal legislation on the repatriation of profits."

During his visit to the US, Novak held a number of meetings with the heads of the largest Western oil and gas holdings. In particular, he met with representatives of 13 world funds and companies. After that meeting the minister told reporters that investors were interested in specific projects, asked him a slew of questions and he was also surprised by their awareness of the economic situation in Russia.

First Deputy Minister of Energy Alexei Texler later specified that the meeting was attended by investors not only from the US, but from China and the UAE, including Fidelity, Wellington, Capital Group Companies, CIC, ADIA, and Silk Road Fund.

Russia’s role in OPEC deal

Russia's participation in the deal with OPEC became a pivotal topic at the forum. Most of the journalists' questions to the Russian Minister of Energy Alexander Novak precisely concerned the country’s commitment to oil production cuts and interaction with the cartel. Even the conference’s chairman, Daniel Yergin, while talking with Novak at the ministerial session, asked if Russia had planned to join OPEC after everything that had happened, and received an immediate negative response.

Russia itself became one of the key topics at the Houston conference.

"I see much more interest in Russia (this year - TASS) Last year, everyone was more occupied with their problems (due to low oil prices), and now Russia receives more attention," Vadim Yakovlev, Gazprom Neft’s First Deputy CEO told TASS.

CERAWeek conference

CERAWeek conference is one of the largest forums of the global oil and gas industry. In 2017, it was attended by 3,000 people, including CEOs of such companies as ExxonMobil, BP, Shell, Total, as well as profile ministers from Russia, Canada, Saudi Arabia, the United Kingdom, the UAE, Brazil, Iraq and India.

In 2017, the conference was held for the first time without the participation of the US Energy Secretary. Rick Perry, who was appointed to this position shortly before the forum's start, did not come to Houston.