Russia may get extra 1.5 tln rbl in 2017 at oil price of $50-60

MOSCOW/AL KUWAIT, Mar 27 (PRIME) -- Russia’s budget may receive an additional 1.5 trillion rubles in 2017, if crude prices return to U.S. $50-60 per barrel as a result of oil output reduction by OPEC and non-OPEC states, Energy Minister Alexander Novak said on Monday.

“We see positive effect (of the agreement) for both hydrocarbon companies and the budget… According to our previous estimates, if the prices stay at $50-60 per barrel, the budget will earn an additional 1.5 trillion rubles annually,” Novak said in an interview with television channel Russia Today (RT).

The minister also said he is not going to change his Brent price forecast for 2017 from the current $50-60 per barrel.

Novak added that Russia plans to intensify exploration and development operations on the Arctic shelf, if the global market improves. The hydrocarbon reserves there are estimated at billions tonnes of oil and trillions cubic meters of gas, he said.

On March 26, the energy minister visited a second meeting of the joint OPEC/Non-OPEC Ministerial Monitoring Committee, which monitors compliance with a global agreement to reduce oil output. The committee comprises three OPEC nations --- Kuwait, Venezuela and Algeria, and two non-OPEC states -- Russia and Oman. Saudi Energy Minister Khalid al-Falih participated in the discussion via a conference call.

The monitoring committee suggested that the oil cut agreement should be prolonged for another six months.

During the meeting, OPEC officials said that the member countries fulfilled the agreement by 94% in February, while the non-OPEC states fulfilled it by 64% in March.

“We are making progress in balancing the market… Oil reserves of Europe and Asia are contracting, and soon we will see a decline in the U.S., too. This will calm the market down,” Algeria’s Oil Minister Nureddin Bouterfa said.

Novak said that Russia has reduced oil production by 185 barrels per day, as compared with an average daily output in October, to comply with the oil cut agreement. The country has lowered its oil production ahead of schedule, to reduce output by 200 barrel per day until the end of March and by 300 barrels a day until the end of April, he added.

“We can see a positive trend… and hope that the target levels (of all member countries) will be reached soon. We can see a significant positive effect from the agreement,” the official said.

The minister also said in an interview with Kuwaiti daily newspaper Al-Seyassah that Russia expects global oil consumption to reach at least 1.2-1.3 million barrels per day in 2017. Russia’s oil industry feels secure and is not afraid of competition from shale oil producers, he added.

“The cost of geological survey in Russia is one of the lowest in the world. It can be compared only to the Persian Gulf states,” Novak said.

The official is sure that the countries, which signed the output cut agreement, are willing to return the global commercial crude reserves to the level of 2012 and to develop “fair and predictable terms” on the market. Otherwise, the investment cycle may be “undermined”.

“The goal of the Vienna (oil output cut) agreements is to return stability to the market as fast as possible and to restore the natural level of global commercial reserves to an average level that we used to have five years ago,” he said.

The global commercial reserves of oil will begin to decrease in April-June, the minister said, adding that reserves in sea tankers have already fallen by 50 million barrels, marking positive dynamics.

Kuwait’s Oil Minister Essam Al-Marzouk said that the balance of demand and supply will return to the global crude market by July, if all members comply with the voluntary oil cut agreement.

The current market situation is in line with the forecasts of Russia’s Energy Ministry, Novak said, adding that participants of the agreement do not plan to reach a specific oil price, but aim at stabilizing the market.

Russia will consider four major factors when deciding whether to participate in prolongation of the agreement: the market situation, commercial reserves, demand and supply balance and effectiveness of the current arrangements, Novak said.

The minister said that Russia is satisfied with the results of the ministerial meeting. He also said that the date of the next meeting of the joint OPEC/Non-OPEC Ministerial Monitoring Committee has not been set yet, but it is likely to take place in late April or early May. The countries will again discuss expansion of the oil cut agreement.

A new energy dialogue between Russia and OPEC will be held in Moscow on May 31, the minister said.

OPEC states agreed to reduce their oil production by 1.2 million barrels daily to 32.5 million barrels in November 2016. Russia joined the agreement in December with a promise to cut output by 300,000 barrels daily compared with the level of October 2016. The agreement was concluded for January–June 2017 with potential prolongation.

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