MOSCOW (Bloomberg) — Russia’s oil producers have started preparations to meet the nation’s pledge to curb output as part of the “historic” pact between OPEC and 11 producers outside the group, Energy Minister Alexander Novak said.
“The first stage of the cut we will see as soon as early January,” Novak said in a Bloomberg Television interview in Vienna on Saturday after the deal was reached. The pact, the first global oil deal in 15 years, was “a crowning achievement of a very long process, of a lot of work which has been put into this over the past several months.”
Russia and 10 other non-OPEC nations pledged to curb oil production by 558,000 bpd, joining forces with the Organization of Petroleum Exporting Countries to help rebalance the market and boost prices.
Russia will contribute 300,000 bpd in cuts, decreasing its output gradually from October levels—a post-Soviet record of 11.247 MMbpd—to reach the promised target in April to May, according to Novak.
“Our companies are well aware that such agreements are there in place, and they are voluntarily willing to participate in this because they definitely see benefits for themselves,” Novak said in the interview. “They are already taking actions today to prepare for January.”
Oil prices surged as trading resumed Monday, rising as much as 6.6% in London to the highest since July 2015. Brent crude has risen 22% since OPEC announced on Nov. 30 that it would cut production for the first time in eight years and was at $56.64/bbl at 12:36 p.m. in Singapore. The current price is “fully satisfactory” for Russia, Novak said.
“The country’s budget is based on a price of $40, so with the price in the range of $50 to $60 we will definitely be more comfortable.” It’s a good price for producers and consumers in the current market, he said.
Russian oil executives, who met Novak days before his trip to Vienna, said they support the ministry. President Vladimir Putin has also pushed Russia’s commitment to the deal, speaking directly with key crude producers. While the government sees companies sharing the output cuts in proportion to their production volumes, the ministry will take into account that some companies have a natural decline. It plans to meet with oil chiefs again this week, Novak told reporters in Vienna after the talks.
Putin played “a key role” in negotiations, including with other countries. He “has been pushing us forward,” Novak said.
‘Not a Dogma’
OPEC sought as much as 600,000 bpd in cuts from states outside the group. The eventual deal was for a lesser volume, even after some surprise moves, especially from Kazakhstan. The second-largest crude producer from the former Soviet Union has pledged a 20,000 bpd cut after coming under strong diplomatic pressure.
“600,000 is not a dogma,” Novak said. “The main thing that countries have joined—maybe as a fact we will see different figures, maybe more” than the level agreed on at the meeting. “Other countries could participate in the agreement,” he said.
“The door will be opened for them, and I think the key point is that such a precedent is created,” he said.
Even after becoming a driving force in the global oil deal this year, Russia has no plans to formally join OPEC, Novak said. Recent talks and the pact the countries reached lay “a very solid foundation” for the future long-term cooperation.