Novak: reducing production, Russia to increase oil revenues

Novak: reducing production, Russia to increase oil revenues

The head of Russian Ministry of Energy Alexander Novak said that an agreement with OPEC and other oil-exporting countries to cut the oil production will have a positive effect on the Russian economy, as it will help to make more money by selling oil, than at the current level of its production.

"A certain slight decline in output can be considered as a negative factor from the point of view of the production program, but it is fully covered by incomes in the form of higher oil prices, additional incomes and the possibility of implementation of new investment projects in terms of long-term understanding of the situation on the market," he explained.

"OPEC should decrease daily output by 1.2 million barrels from January 1. As for non-OPEC countries, of course, it is more complicated, because the countries outside OPEC are taking part in such agreement for the first time, and each has its own characteristics. In particular, Russia is required a smooth transition to the specified parameters: we have the climate, natural, territorial and technological features," Alexander Novak warned.

The minister pointed out that all the exporting countries have expressed interest in the coordinated limitation of oil production, which indicates a common understanding of the benefits of the agreement.

The Chief Advisor to the Head of the Analytical Center of the Government of the Russian Federation, the Head of the Chair of World Economy of the Faculty of World Economy and International Affairs of the HSE, Leonid Grigoriev, speaking to Vestnik Kavkaza, noted that not only Russia, but also all the other countries, which have signed the agreement, will benefit. "Above all, this agreement was necessary to Venezuela, because it raised its budget expenditures so high, that even $110 were not enough, because of the severe economic crisis," he said.

The expert positively assessed the effect of a coordinated reduction of oil production for Azerbaijan as well. "Azerbaijan will cut its production at not a very large amount, but the increase in oil prices will be substantial for the country. Given the fact that the state-owned company SOCAR is engaged in production and sale of oil in Azerbaijan, the reduction of oil production and the subsequent rise in prices will be a direct win for the state," Leonid Grigoriev stressed.

As for Russia, then, according to the expert, "it would be better if the money we get in the next 10 years there are received equally, it will allow to plan our actions. Almost everyone is agree with the price of $ 60-70 per barrel, since this level - it would mean a less threat of returning the US shale oil and the collapse of the market," the Chief Advisor to the Head of the Analytical Center of the Government of the Russian Federation concluded.

First Vice-Rector for International Cooperation and. External Communications of Financial University under the Government of the Russian Federation, the founder and CEO of the national energy security Fund of Russia, Konstantin Simonov, in turn, pointed out that now the main thing is to fulfill the agreements by the OPEC countries and other exporters. "In January we have to start this process, and we must monitor if the countries cut production, if they do not cut and why, and what guarantees they can give that they will cut it during these six months," he said.

The expert also assessed the agreement for Azerbaijan as comfortable. "Azerbaijan must reduce its production by 35 thousand barrels per day, it's not such a big number. Like Russia, the republic intends to benefit by reducing production. If prices rise to $60 a barrel, it will be a solid increase for the state budget," Konstantin Simonov expects.

The same price, in his view, will be suitable for Russia. "Too low prices are not profitable for us, but too high prices are unprofitable too, because they prevent the oil to be a promising product. Therefore, I believe that the level of $60 per barrel would satisfy both sellers and buyers," the first Vice-Rector for International Cooperation and. External Communications of Financial University under the Government of the Russian Federation summed up.

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