UPDATE 3: Russia to cut oil output, not exports proportionately

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MOSCOW, Dec 14 (PRIME) -- Russian oil producers have agreed with the government to reduce output, not exports, proportionately to the volume voluntary, officials said on Wednesday.

“We’ve agreed that the output decrease will be proportionate to the volume. This will create equal conditions for everyone. I am emphasizing once again that these agreements will be fulfilled on a voluntary basis,” Energy Minister Alexander Novak told reporters after a meeting with companies.

“The situation can be different for each company… In this case, we are not establishing separate quotas company by company. We do not have the right to do this, we do not have an organization like OPEC. We have gathered so that companies confirm their consent to participate in that.”

Nikolai Tokarev, CEO of oil pipeline monopoly Transneft, said that Russia will only cut production under the agreement, but will not reduce exports.

“We are talking about production, about reduction of production…We will fulfill all the export schedules and requests that will be filed, but I don’t think that (the exports) will fall significantly,” Tokarev said.

REDUCTION

OPEC and 11 non-OPEC countries, including Russia, agreed on December 11 to cut combined oil production by 1.8 million barrels a day in January–July 2017 in order to balance supply and demand. OPEC will reduce output by 1.2 million barrels daily, while Russia is to decrease the production by 300,000 barrels.

Novak said that 12 largest companies, which together account for 90% of Russia’s oil production, participated in the meeting with him and agreed to stick to the restrictions. The companies participating in production-sharing agreements were not present at the meeting, and discussion about output limits will be held with them separately, he said.

He said that the Energy Ministry will create a workgroup to monitor the fulfillment of the liabilities by oil companies. The workgroup will hold meetings at least twice a month and will consist of representatives of oil companies.

Output reduction will take place gradually. The reduction will amount to 200,000 barrels by the end of March and by 300,000 barrels at the end of June, he said.

Alexander Dyukov, CEO of oil company Gazprom Neft, said that local oil producers will be able to agree on production quotas on their own. “Agreements between the companies are possible, the main idea is that Russia’s oil production is to fall by 300,000 barrels a day. We are able to agree among ourselves,” he said.

OPEC has improved global demand outlook for 2017 by 11,000 barrels a day to 95.56 million barrels. Non-OPEC oil output growth forecast was raised by 70,000 barrels to 300,000 barrels daily, output is expected at 56.5 million barrels a day.

The oil demand forecast for 2016 was raised by 11,000 barrels daily to 94.41 million barrels.

The 2016 demand outlook change is due to data suggesting a stronger demand in the European states in the Organization for Economic Cooperation and Development (OECD) and Asia-Pacific. The non-OPEC oil supply forecast for 2016 remained unchanged at 56.2 million barrels a day.

Russia’s oil output forecast for 2016 was retained at 11.05 million barrels daily. In 2017, OPEC expects Russian oil producers to raise production by 80,000 barrels daily to 11.13 million barrels.

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