Russia to proceed with oil cuts through June

ChrisD(RJ) chrisd at russiajournal.com
Wed Apr 17 06:23:45 PDT 2002


INTERVIEW-Russia to proceed with oil cuts through June By Geert Linnebank and Dmitry Zhdannikov

MOSCOW, April 17 (Reuters) - Russia's top energy official said the government will meet domestic oil firms in mid-May to discuss oil export strategy but is likely to maintain the oil export curbs it pledged to OPEC at least through June.

Deputy Prime Minister Viktor Khristenko, in an interview with Reuters late on Tuesday, also said Russia had no plans to join OPEC or reduce oil output in a long-term energy strategy to be discussed in cabinet in June.

"We will meet in mid-May to consider preliminary results of our (oil price) monitoring. But the second quarter (schedule) is already in place and by the time we meet there will not be much resources or volumes to review," he said.

"We will meet in mid-May to analyse the situation and determine what to do in the third and following quarters."

Shortly after that meeting the government would finalise its long-term energy strategy for the next two decades, already under discussion for several years.

"It is already absolutely clear that this strategy will not envisage any oil output reduction, or Russian membership of OPEC," he said.

"All decisions we have taken in the last six months have nothing to do with strategy. They were a matter of tactics," Khristenko added.

He was referring to the decision by Russia, the world's second largest oil exporter, to help OPEC support oil prices by cutting its oil exports by around five percent, or 150,000 barrels per day, from January to June.

The government had said export targets could be revised in mid-May after oil prices recovered from the sharp fall in response to last September's attacks on the United States.

Many analysts have questioned Russia's record on curbing shipments in tandem with OPEC. Unofficial data suggests its oil output and exports have continued to increase. But Khristenko and other officials insist the country has stuck faithfully to its promises.

OIL PRICES TO STABILISE

Khristenko said he saw a positive short-term price trend for Russia's main export blend Urals because of tension in the Middle East and Iraq's halt to oil exports in protest against Israeli action in Palestinian areas.

Prices for Urals jumped to $22.30 per barrel in March from only slightly above $18 per barrel in January and February, and Khristenko said he expected them to stay within Russia's government target range of $20-$25 per barrel in the short term.

"Of course, the events in the Middle East and in Venezuela are affecting oil prices, but I do not think they will lead to very sharp fluctuations," he said.

While the Russian domestic oil and petroleum products markets are liberalised, tight caps have been set on price increases in regulated areas of the energy sector, such as gas and power, to curb inflation.

Khristenko said that although state-controlled gas monopoly Gazprom was granted a 20 percent tariff increase in March, it still sold gas at a loss domestically.

He said the government may raise domestic gas prices again this year, but did not elaborate.

"(Gazprom's) annual losses from domestic gas sales amount to 40-45 billion roubles or about $1.5 billion. Of course, we are thinking about how to fill this gap... But we are doing it gradually, because our industry and citizens are not yet fully ready," he said.

NEW OIL ROUTES AND PRODUCING REGIONS

Khristenko said the cabinet was keen to diversify oil export routes, though it could not dictate to mostly private oil firms who to sell to, or where to ship.

"We can control oil supplies via (the state pipeline monopoly) Transneft. But Russia does not sell crude. It is the business of oil firms to ship oil to markets," he said.

Russia exports up to three million bpd of its own crude as well as shipments from neighbouring Kazakhstan and Azerbaijan to northwestern Europe and the Mediterranean.

Khristenko said the government would meet to discuss two pipeline projects to Asian markets by mid-year, one to China, the other to the Pacific Coast. He said the latter would depend on how profitably new oilfields could be developed in Eastern Siberia.

Russia says Eastern Siberia may hold as many energy riches as western parts of the vast region, where it extracts 60 percent of its crude and 90 percent of its natural gas.



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