Russia wields output for advantage in Opec talks
moscow — As Russia gets ready for talks on cooperation with Opec on Monday, it’s using the playbooks of Iran, Iraq and Venezuela to gain leverage.
Just days before Energy Minister Alexander Novak heads to Vienna for discussions that could include output curbs, Russian officials emphasised the nation’s ability to keep increasing record output to even loftier heights. They were echoing several other Opec members that claim the group is underestimating their own production — a strategy that could secure them advantageous terms in any supply deal.
“What most Opec countries do ahead of any Opec meetings is to talk up their own production prospects so that when they make any concessions, those concessions are not necessarily as big as they might have been,” James Henderson, senior research fellow at the Oxford Institute for Energy Studies, said. “I suspect Russia is playing the same game.”
After reaching a surprise agreement on the first production cuts in eight years last month, Opec is now trying to establish which members will reduce output, and by how much. Russia has pledged cooperation, but President Vladimir Putin has sent mixed messages over whether he’s willing to lower the nation’s output, or simply freeze at September’s post-Soviet record. These details, due to be finalised by Opec’s November 30 meeting, will determine whether the deal can finally end three years of oversupply.
New optimism
The latest draft of Russia’s energy strategy included for the first time this year an “optimistic” scenario. This estimate sees annual oil production potentially rising from 534.1 million tonnes last year to 555 million metric tonnes, or 11.1 million barrels a day, by 2020 and stabilising through to 2035. It compares with the existing “conservative” outlook for production of 548 million tonnes in 2020 declining to 490 million tonnes by 2030.
Igor Sechin, a close adviser of Putin and CEO of Russia’s largest oil producer Rosneft, went several steps further on October 20, saying Russia has the capacity to add 200 million tonnes of annual production capacity, or four million barrels a day, by 2045 should the global market need it.
Russia’s energy minister said long-term forecasts have little bearing on the negotiations with Opec. Even if an agreement is reached, there’s no need for the nation to change its energy strategy, Novak told reporters at an industry forum in Ufa, Russia.
“The freeze, it won’t last forever, it will be there for a limited time, maybe for six months,” he said. “So, it does not affect our strategic plans in any way.”
Nevertheless, he implied shortterm increases are negotiable. Russia’s annual production could set
What most opec countries do ahead of any opec meetings is to talk up their own production prospects so that when they make any concessions, those concessions are not necessarily as big as they might have been James Henderson, Senior research fellow at the Oxford Institute for Energy Studies
another post-Soviet record of 548 million tonnes, or about 11 million barrels a day, next year, although the plan may be adjusted if there’s an Opec deal, Novak said.
“Russia is trying to create a very optimistic story of a healthy oil industry” to pursue its own goals in upcoming negotiations, something Opec nations also do, Chris Weafer, a partner at Macro Advisory consultancy, said. — Bloomberg