Dubai — OPEC and non-OPEC producers have only just agreed to extend their crude oil production cut deal through to March next year, but one of the key architects of the agreement, Saudi Arabia's Khalid al-Falih said Saturday he will consider the need for deeper output cuts in July.
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Falih was optimistic that the deal struck between OPEC and non-OPEC producers May 25 would begin to start bearing fruit by the end of June.
"I think we have to wait. We have to see the market and I think by the end of June, in July we will see that the action we have taken has a big impact," Falih said in an interview with Russia's TASS news agency during his four-day tour of Russia.
"If for some reason we need to do more, we will consider to do more including extension ... bigger cuts," Falih said, adding "Nothing is off the table but today nothing is on the table either."
Saudi Arabia and Russia played a key role in negotiations between OPEC and non-OPEC producers to cut output by 1.8 million b/d from January 1. On May 25, the 24 producing countries participating in the deal agreed to extend it through March 2018. The aim is to bring global crude oil stock levels back down to their five-year average.
A five-country monitoring committee overseeing the deal will meet in Russia over July 22-24. The next OPEC and non-OPEC meeting is set for November 30.
Falih said he hoped compliance to the agreement in May would be even better than April, when the committee reported 102% overall adherence to the cuts.
"I know that Russia achieved more than 100% [by cutting 305,000 b/d]. We are more than 100%," Falih added. The pair are the world's two biggest oil producers with a combined output of around 20 million b/d.
RUSSIAN LNG EXPORTS TO SAUDI ARABIA
Following meetings with Russian President Vladimir Putin and the heads of oil companies in Moscow and St Petersburg, Falih said a joint fund will be established to invest in Russian oil and gas projects.
One area covered was the potential for LNG projects, although he noted that it was too early to talk specifics.
"If it is economically justified, we will consider investing in them, especially if they can be used to supply LNG to Saudi Arabia. Saudi Arabia is a huge market for gas, we have a shortage of gas in the western region," he said.
Falih met with Rosneft CEO Igor Sechin to discuss cooperation in various spheres, including gas and LNG projects, and also toured the Yamal LNG plant site in the Arctic.
The $27 billion project comes on stream later this year and is expected to reach its full 16.5 million mt/year capacity in 2019.
Plans for the construction of an LNG import terminal on the Red Sea were mooted in 2013, but Saudi Arabia has so far stuck to its long-standing policy of meeting its gas needs through domestic production.
Gas makes up 50% of Saudi Arabia's energy mix, and the oil ministry hopes to raise this to 70%, using domestic production or imports, Falih said in June last year when announcing the kingdom's National Transformation Plan to diversify the Saudi economy.
--Adal Mirza, firstname.lastname@example.org
--Edited by Irene Tang, email@example.com
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