Alekperov: oil price below $24 most of the projects in the industry can be stopped

Alekperov: oil price below $24 most of the projects in the industry can be stopped

DAVOS, January 21. The heads of major oil companies in the world believe that in the second half of 2016 will begin the rise in oil prices, said the head of “LUKOIL” Vagit Alekperov on the sidelines of the economic forum in Davos.

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“We (the heads of major oil companies – approx. ed.) discussed relevant topics, forecast of supply and demand. And all bowed to the fact that in the second half will still begin the growth trend of oil prices”, – he said.

The working scenario of “LUKOIL” stipulates the price of oil at $30 per barrel, stressful – $20, he said. The stress scenario also assumes a reduction of investment of the company in 2016, another $1.5 billion. “We at the last Board of Directors gave instructions to pass to the script “20-30-40″. The investment panel on Monday these scripts will be considered” – said the head of the oil company.

Threshold price

However, Alekperov noted that at an oil price below $24 per barrel most of the projects in the industry can be stopped.

“I think still that shelf that we can expect, bottom shelf is 24 dollars (per barrel). All the analysis shows that just below this price a lot of projects, even existing ones, will be stopped,” he said, noting that the company can reduce its own investment program.

“We are now preparing at the price of $ 30 reduction investment program somewhere in the 1.2-1.5 billion dollars. Processing will not be cut. Production is likely to be somewhere in the Siberian fields for a small percentage reduced to 0.5-0.6 percent, depending on the investment programme that we will be able to withstand,” – said the head of “LUKOIL”.

About oil production in the Russian Federation

According to him, oil production in Russia will decline amid falling investment in the field. “The volume of production from fields with late stage development directly related to investments. Today there is a tendency to reduce investments, respectively, this will affect the volume of production. Large fields who are preparing to enter, they are almost there,” said he.

Earlier, Minister of energy Alexander Novak said that Russian oil companies plan to maintain oil production in 2016 at the level of last year, when a record was produced for the RF volume.

According to the Central dispatching Department of fuel energy complex (SE “CDU TEK”), in 2015, Russian oil companies produced a record 534,081 million tonnes, which is 1.4% higher than a year earlier.

Alekperov said Russian oil industry needs a stable tax system. “We need a stable tax system,” he said, answering the question about what should the oil industry from the state. Should a collegial discussion of the problems of the oil industry in crisis, also said the head of “LUKOIL”.

Earlier in mass media there was information that the Ministry of Finance returned to the idea of increasing the tax on mineral extraction (met) to compensate for the lack of revenue in the budget due to low oil prices.

However, the Ministry of energy of the Russian Federation looks forward to working with the Ministry of Finance to prepare for the spring session of the state Duma the draft law on added tax income (JPM), which will replace the current rent tax mineral extraction tax.

The fall in oil prices

The fall of quotations Brent from the highs of June 2014 close to 70%. Earlier in December, Brent crude dropping to its lowest level since 2004, falling to $36 per barrel. For comparison, in December 2008 the price of Brent crude fell to $36,2 per barrel, down 75% in 5 months.

Oil prices accelerated their decline after the OPEC meeting on December 4 last year. According to the results of 168-th meeting in Vienna Ministers of oil of the OPEC has not taken a clear decision on production quotas because of the position of countries that are not members of the organization.

Currently the volume of oil production by OPEC members is estimated to be 31-32 million barrels/day. The previous quota was 30 million barrels/day.