On Thursday, Brent crude oil once again approaching $30 per barrel. At 20:00 Moscow time falling of quotations to the previous trading session amounted to 1,984%, price was $30,24 per barrel. Reasons for price increases in the short term — no, stated the International energy Agency (IEA). The market demand still exceeds the supply, and the only thing that now could support the market, is the reduction in the production of major players. But hope is in vain, writing in the February report, the experts of the Oxford Institute for energy studies.
In the study, “Russia and OPEC: awkward partners” (*.pdf) they remind us that attempts at joint reduction of production was made before, but to a real reduction in production they did not.
For example, in 1999, against the background of falling prices to $10 per barrel, Russia, OPEC, and Mexico, Norway and Oman announced that the total reduction of oil production by 2.1 million barrels. a day. Russia then promised to reduce production by 7% (about 100 thousand barrels. a day). But in fact Russian oil production for the year even increased slightly — 6,17 million to 6.2 million barrels. per day (data from BP).
The situation repeated itself in 2001 when oil prices fell from $36 to 20 per barrel. Then OPEC promised to cut production by 1.5 million barrels. on the day, but only if not included in the cartel of the country will reduce its own production by 500 thousand barrels. a day. Russia in two stages agreed to reduce production by a total of 180 thousand barrels per day, but in reality, increased production by 300 thousand barrels. a day, the report says: the oil companies simply sent their export flows to bypass the pipeline system “Transneft”.
Another case of a collapse in oil prices occurred in 2008/2009 (for half a barrel fell from $147 to 39). Then, Russia also called on OPEC to cut production, who held the post of Vice-Premier Igor Sechin has even attended several meetings of the cartel. But in reality, the sale of Russian oil abroad has grown by 700 thousand Barr. a day, the report of the Oxford Institute.
Constant growth of oil production in Russia is confirmed by BP Statistical Review. Compared with 1998 oil production in 1999 increased from 6,17 million to 6.18 million barrels. on the day, according to the results of 2001 with up to 7,06 million to 6.54 million barrels, and in 2009 — with 9,95 million to 10.14 million barrels.
In late January energy Minister Alexander Novak said that Saudi Arabia had offered to meet representatives of oil-producing States at the Ministerial level. Speech on it, said Novak, can go about reducing each country’s level of oil production by 5%. Later, Novak said that Russia is ready only to “consider” a reduction in oil production, and noted that such a step would not make sense in the absence of “consensus” with other exporters. But it was enough, the price of April futures on Brent rose by 8% from $32,03 to of 36.72 per barrel.
Russia could cut production, just ceasing to drill new wells (now the number of wells grows to 3 thousand annually), the report said. But the probability of such scenario is very small — of the Russian oil company, on the contrary, plan to increase investment in new fields and to increase production by old. About the increase in the investment in Bashneft to the development of new sites talked in late December, the company’s President Alexander Korsik. “Gazprom Neft” reported about plans to increase production at the Novoportovskoye and Prirazlomnoye fields.
Taking into account the sharp devaluation of the Russian oil companies to profitably increase production and exports, according to the authors. This is especially significant for Rosneft with its large foreign currency debt. In addition, tax legislation is designed so that the main effects of falling prices takes over the government. In particular, in the framework of the past in 2015 “tax maneuver” the export duty on oil was reduced to 42% instead of the planned 57% (in 2016 remained at the same level).
No one to trust
The Russian government through state-owned companies controlled more than 50% of oil production in the country, but claim that they can have an impact on manufacturers, the report says. “Russia as a state could not flexibly adjust the production of oil — it is the prerogative of the companies operating in our oil sector. They make investment decisions within the framework of the existing system of regulation of the tax system,” — said, in particular, at the end of January, Deputy Prime Minister Arkady Dvorkovich.
Despite the continuing decline in prices, in the current situation Russia is unlikely to agree with Saudi Arabia even negotiate to reduce oil production, according to the authors of the study. The Saudis understand that the motivation of private oil companies in Russia does not coincide with the interests of the authorities.
That Russia and OPEC may agree, and analysts do not believe the IEA. In the latest report of the Agency’s January statement Novak on the preparation of negotiations to reduce production called “speculation”. On Thursday, the press service of the Ministry of energy on the inquiry said that in the near future meetings with representatives of OPEC over possible production cuts are planned. “Russia is not initiating such meetings, if there is an invitation, we will come,” — said the representative office.