OPEC and Russia agree for 6 months
OPEC and Russia have agreed a mutually accepted formula of oil production cap for half a year, Venezuela’s Oil Minister Eulogio del Pino said.
He also pointed out that Venezuela expects the signing of documents on oil production cap with non-OPEC member-states on December 10 in Vienna. "We expect that we will sign relevant documents as agreed at the upcoming meeting," TASS cited him as saying.
The minister proposed to include Russia and Oman in a commission that would monitor the implementation of the agreement, in addition to OPEC members Kuwait, Algeria and Venezuela.
Venezuela’s Oil minister said that oil market will stabilize in 6-9 months after production cap agreement.
Eulogio del Pino expects oil prices to stabilise at around $60-70 per barrel following a global oil pact reached last week.
He said that Venezuela is aiming for a moderate oil price. "Our aim is to reach a balanced level matching the interests of producers and consumers. We don't want a price that's too high or too low," he stressed.
An associate professor of the Graduate School of Corporate Management of RANEPA, Ivan Kapitonov, speaking with a correspondent of Vestnik Kavkaza, said that he believes that the Russian authorities would not have to take any special measures to reduce oil production in the last six months. "The estimated decline in oil production can be natural, due to a reduced producing rate of wells. The increase in oil production, which we have seen, already peaked due to the commissioning of new wells. New wells are not expected, and a producing rate of old fields is declining, and I think that they count on natural decline in oil production," he explained.
Kapitonov positively assessed the idea of creating a committee to monitor the reduction of world oil production. "The question, of course, is how they plan to accurately measure the reduction of production in each country," the associate professor of the Graduate School of Corporate Management of RANEPA said.
A senior analyst of 'Uralsib Capital', Alexei Kokin, in turn, recalled that there is an experience of signing an agreement between the government and the oil industry in Russia. "A few years ago the government signed an agreement with oil companies on the modernization of oil refineries, which was carried out, albeit with delays. In this situation, I think the government will resort to some kind of informal tool," he said.
"The first thing that they will need is to fix the levels of every large company's output. Smaller companies are likely to receive certain recommendations. I think everything will be implemented through setting the rates of production decline at oil fields. It's no secret that a large part of Russia's output is from oil fields, which will inevitably reduce their output," Alexei Kokin noticed.
"Companies can reduce investments in old fields - it is possible to get a general decline of the Russian production this way, especially since the majority of old fields is not covered by any tax incentives, while the new deposits, such as Yakhinskoye and Kuyumbinskoye, the Messoyakhskaya group of fields in the Eastern Siberia and such offshore deposits as Filanovsky, enjoy the tax benefits. The only question is how the government will manage to convince companies to do this. In principle, it is a matter of politics, not the economy," the expert believes.