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Russia deliberates on OPEC+ cuts as Novak meets with companies, Kazakh minister

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Russia deliberates on OPEC+ cuts as Novak meets with companies, Kazakh minister


Kazakhstan, Russia aligning on OPEC+: Nogaev

Most Russian companies support extension: Lukoil VP

No deeper cuts needed: Gazprom Neft CEO

  • Author
  • Anastasia Dmitrieva    Rosemary Griffin
  • Editor
  • Gary Gentile
  • Commodity
  • Natural Gas

Moscow — Russia's energy minister Alexander Novak held a series of meetings Wednesday, first with his new Kazakh counterpart and later with Russian oil producers, as the country moves towards a decision on deeper oil production cuts recommended by the OPEC+ technical committee.

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"At the moment, Kazakhstan and Russia are at the stage of discussing their positions. We understand that high oil prices are good, but we also must take into account interests of companies that hold resources," Nurlan Nogaev told journalists after meeting Novak in Moscow for the first time since being appointed as Kazakhstan's energy minister in late December.

The OPEC+ Joint Technical Committee last week recommended that the alliance of OPEC members, Russia and nine other countries cut production by an additional 600,000 b/d through the second quarter -- more than a third greater than the current 1.7 million b/d cut accord in place until the end of Q1 -- to support prices in the wake of the coronavirus outbreak.

Nogaev said he would work out with Russia "a joint position" on the proposal, which would see Kazakh output cut an additional 20,000 b/d.

"In principle, we have aligned key issues with Mr. Novak on OPEC+. That we should first take into account interests of our companies and make a decision that will benefit both companies, our countries and OPEC," the minister said.

"There is no final decision yet, but we will align our position because Kazakhstan and Russia are strategic partners with common interests and we will continue our cooperation," Nogaev said.

According to a statement from the Russian energy ministry after the meeting, Novak noted the constructive nature of the Russian-Kazakh energy partnership, as well as "a mutually beneficial partnership between the two countries, including in the field of oil and gas transportation."

Companies for extension at current levels

Representatives of Russian oil companies meanwhile indicated widespread support for an extension of the OPEC+ production cuts through to the end of the second quarter, but at current production levels rather than with any deeper cuts.

"We discussed everything, but the majority is inclined to extend the agreement for another quarter," Ravil Maganov, first executive vice president of Lukoil, told reporters after a meeting between oil companies and Novak.

Most representatives voiced their support for extending the existing production cuts, not deepening them.

"Our company proposes to maintain current quotas. Given the current situation on the market, it makes sense to extend the agreement through the second quarter and then monitor," Gazprom Neft CEO Alexander Dyukov said.

The final decision on Russia's position would be taken by the Russian government, he added.

Russian producers are splitting the country's 300,000 b/d cut quota proportionally, but have repeatedly expressed concerns about the impact of complying with the deal on their longer-term development plans and market share.

OPEC+ ministers are scheduled to meet March 5-6 in Vienna, though delegates have said the meeting could be moved forward to immediately implement the new cuts if there is a consensus to do so.