[Track 35B] “I expect Saudi Arabia will win but it will be a very tight game. + laughter”
Nadia: That was Saudi energy minister Khalid al-Falih speaking hours before the opening of the World Cup in Moscow in mid-June. His comments had reporters guessing over whether he was referring to Saudi Arabia’s chances in the game, or the tenor of negotiations over OPEC and non-OPEC production volumes in the second half of 2018.
As it turned out OPEC and non-OPEC, which is led by World Cup host Russia, managed to reach an agreement to bring up to 1 million b/d of oil back to the market. Our Moscow based oil editor Rosemary Griffin has monitored the OPEC coalition’s talks. Rosemary was it a good result for Russia?
Rosemary: I think so. There were some signs that Iran may not agree to bring more oil to market, but eventually a deal was reached. Russian energy minister Alexander Novak said that Russia plans bring up to 200,000 b/d of oil back to the market in July, depending on what consumers need and to some extent on how quickly it can ramp up production.
Nadia: He went even further recently, saying that Russia may increase crude production further should the OPEC coalition see difficulties with meeting the new target. This is amid growing concerns that plans by Saudi Arabia and Russia to boost output may not cover shortages expected in the fourth quarter due to looming US sanctions on Iran, sliding output from Venezuela and a new threat to Libyan exports.
Rosemary: Exactly. With Saudi Arabia and UAE apparently also agreeing to pump more, an emergency meeting by OPEC ministers could be called to discuss the new quotas. At least this is what Iran suggested, but it remains unclear if OPEC supports the move.
Nadia: Saudi Arabia wasn’t the only key energy player to take part in the World Cup. Our Editor Nastassia Astrasheuskaya tracked some of other key talks during the ongoing championship. Nastia, what about other talks?
Nastia: Indeed, South Korean president Moon Jae-in-- on his way to watch South Korean opening game in the southern city of Rostov on Don-- dropped by Moscow for talks with Russian counterpart Vladimir Putin. The leaders agreed to expand energy cooperation, South Korean Kogas and Russian Novatek signed a deal that could see Kogas taking a stake in Novatek 's planned Arctic LNG 2 project and agreeing LNG offtake from it.
Despite South Korean losing the first two games, Moon brought his team luck as they went on to pull off a historic victory against Germany, which put the current trophy holders out of the tournament.
ROSEMARY: These negotiations could see an additional boost from peace talks with North Korea. Recent progress raises the prospect of new energy opportunities for Russia, if it leads to a significant increase in energy cooperation around the Korean peninsula. To date North Korea’s isolation has meant that Russia's oil and gas export potential to the Northeast Asian market has been underutilized. A credible and lasting peace would increase the viability of projects such as a gas pipeline proposed by Gazprom to South Korea via the North. That could also have implications for onward shipments to Japan and China.
Nastia: Absolutely,Moscow and Seoul in fact did agree to consider gas pipeline and energy transmission projects to strengthen trilateral economic projects between Russia, South Korea and North Korea.
The gas pipeline is a revival of a project the countries had agreed back in 2008 before shelving it due to geopolitical risks to do with North Korean nuclear program.
But right after the landmark meeting between US and North Korean leaders Donal Tump and Kim Jong Un in mid-June,
there have been talks again about possible trilateral projects between Moscow, Seoul and Pyeongyang, including power transhipment grids and others.
Nadia: We’re likely to hear more about possible multilateral cooperation in the Northeastern Asia in September as leaders of both Koreas and Japan are invited to Russia’s major economic forum in Vladivostok.
Meanwhile, the World Cup has brought a fantastic festive mood to streets of Russian cities, with thousands of tourists and football fans from around the world celebrating the championship. The tournament has brought quite a number of surprises including Russia beating Spain and entering the quarter final, for the first time since 1980.
The end of the tournament will be marked by yet another important event as the Kremlin and White House last week announced a meeting between the US President Donald Trump and Russian President Vladimir Putin, the first formal summit between the two since Trump took office.
Rosemary: The meeting will take place on July 16 in Helsinki. The talks will focus on the bilateral relationship and security issues. Although the situation on oil markets and US sanctions against Russia may also be discussed.
Nadia: With the World Cup now in full swing, we’ll continue to monitor the games, including those on the oil market. That was Rosemary Griffin, Nastassia Astrasheuskaya and Nadia Rodova today in the studio. Join us again next time for the Oil Markets Podcast.