Sochi — Russia has benefitted significantly from the OPEC/non-OPEC production agreement, which prevented further oil price drops, energy minister Alexander Novak said Thursday, in a sign that Russia remains committed to the deal, despite recent criticism from Rosneft CEO Igor Sechin.
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"The mathematics is simple: a 2% cut in crude output resulted in a nearly 100% increase in price," Novak said, speaking at the Russian Investment Forum in Sochi.
"The deal provided Rb6 trillion, [around $90 billion], to the Russian budget over the past two years and Russian companies received Rb2.5 trillion," he said, adding that the calculations were based on "a conservative estimate of oil price premium at $10/b."
Novak's comments contrast with media reports that Russia's largest crude producer Rosneft is pushing for the country to exit the agreement over concerns that it may lose market share.
Novak didn't comment on those reports but reiterated that he believes that without the deal the market would have seen significant oversupply, and stocks would have been well above the five-year average.
"We saw prices at $25/b previously, I don't rule out that prices might have been lower [without the deal]," Novak told the forum.
Earlier this week, Russian President Vladimir Putin's spokesman Dmitry Peskov also said that Russia remains committed to the agreement and its position has not changed, according to local media reports.
Novak played down concerns about a drop in Russia's market share, which he said is impacted by various factors, including domestic crude production and tax conditions.
"Our strategy envisages maintaining output at plateau. If global oil production grows, but our output is stable, then our market share will fall anyway," he said. "If we do not set up stimuli for production in West Siberia where output is declining, then our production may drop as much as 370 million mt, as I said previously, without any deal [with OPEC],'" he said.
"On the contrary, the deal provides pluses as it offers additional resources for companies to develop their own investment programs and support output," he added.
Novak said that Russian crude output is down around 80,000-90,000 b/d from October and around 140,000 bd from December.
"In February, the average cut should be a minimum of 150,000 b/d but our companies will target accelerating the cut."
Russia committed to cut around 230,000 b/d from October 2018 volumes of 11.421 million b/d under the latest agreement, which came in to force in January. It is planning to reach this target by April.
A new OPEC/non-OPEC charter to cover ongoing cooperation may be signed in April, Novak said.
Russia is planning to increase investment in the energy sector by 50% to Rb7.5 trillion by 2024. This is equivalent to around $112 billion using current exchange rates.
"Investment in the fuel and energy sector today is Rb5 trillion, by 2024 we may increase this to Rb7.5 billion, that's a 50% increase," Novak said.
Novak also commented on risks associated with recent developments in Venezuela.
"We see major uncertainties, risks related to production and resources for exports by PDVSA. Surely this uncertainty is impacting the market," the minister said, adding that he expects to meet with Venezuelan oil minister Manuel Quevedo at the next meeting of the OPEC/non-OPEC JMMC to be held in Baku in mid-March.
Novak said there are currently no proposals to hold an extraordinary meeting within the OPEC+ agreement to discuss responding to the situation in Venezuela.
"There are no such proposals at the moment, we are acting in line with those deductions taken in December," he said.
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