Not all OPEC+ producers able to increase output due to insufficient investment: Putin

Not all OPEC+ producers are able to quickly increase crude production due to declining investment in oil development, Russian President Vladimir Putin said Oct. 21.

"OPEC + countries are increasing production volumes, even more than they agreed to do. But not everyone can do this, not all oil-producing countries are able to quickly increase production," Putin said during a meeting of the Valdai discussion club. "From 2012-2016, investment in oil production totaled around $400 billion/year, and in recent years, even before the pandemic, this decreased by 40%, and now it amounts to $260 billion," he added.

Putin said that while political cycles in leading economies are four-five years, investment cycles for energy projects are 15-30 years.

He warned this may lead to a situation similar to the current undersupply on the gas market.

Nord Stream 2

Putin also said that Russia could increase gas supplies to Europe quickly if the 55 Bcm/year Nord Stream 2 pipeline receives regulatory approval from Germany.

"The first line of Nord Stream 2 is filled with gas," he said. "If tomorrow the German regulator gives permission for deliveries, then the day after tomorrow supplies could begin – 17.5 Bcm."

Gazprom subsidiary Nord Stream 2 is waiting for a draft decision from the German regulator on its application for approval as an independent gas transmission network operator, which could take up to four months from Sept. 8.

Nord Stream 2 was completed in September, but commercial operations are yet to begin as the operator waits for regulatory clearance. Earlier in October, Nord Stream 2 said that it has completed the gas-in procedure for the first string of the pipeline.

Russia has repeatedly said that the early launch of Nord Stream 2 would help ease the current high gas prices in Europe, which have soared in recent weeks on intensifying concerns over winter gas supply amid lower-than-expected Russian deliveries.

The TTF day-ahead price hit a record high of Eur116.10/MWh ($39.51/MMBtu) on Oct. 5, according to S&P Global Platts price assessments.

Russian officials, including Putin, have pointed to cold weather last winter, high demand in Asia, insufficient wind power generation, declining domestic production, and insufficient pumping into gas storage as key drivers behind European prices. Russia is also calling for greater use of long-term supply contracts over spot market purchases as a way to reduce price volatility.