OPEC Secretary General Mohammad Barkindo has praised Russia’s commitment to the oil production cuts Opec and Non-Opec had agreed in December 2016.
Asked about Russia’s level of compliance the OPEC Secretary General this week confirmed Russia had said from the start that it wouldn’t immediately be able to fully comply to the production cuts that had been agreed.
He was responding to journalists’ questions at a press conference during this week’s CERAWeek by IHS Markit conference in Houston.
A day earlier, Russian Energy Minister Alexander Novak had said that Russia would have cut 200.000 boe per day by the end of March, and the full 300.000 by the end of April.
Commenting further on the matter, Barkindo said:”As far back as December, he (Novak) was very clear with us that he was not in a position to provide a 100 percent level of conformity in the first month or second month of the implementation, because of the structure of production in the Russian Federation.”
Russia’s pledged level of cuts makes around 50 percent of the total non-OPEC contribution to the cuts.
Barkindo said that Novak had warned him that since Russia has multiple producing companies, some of them public, some private, that there would some problems initially, but in the course of time, they are going to ramp up their compliance to reach their target.
The OPEC Secretary General said: “He’s been working round the clock with all the companies, 200 or so companies. It’s not an easy task especially for something that is new to them. They had not been subjected to this type of mechanism before.”
According to a recent report by the International Energy Agency, Russia’s output was cut by 100 kb/d in January.
“Russia has done an excellent job in trying to mobilize ten other countries to join us, and its commitment has never wavered, so we are confident that Russia would reach his target of 300.000 barrels a day in supply adjustment,” Barkindo said.
He also confirmed having met with fund managers and the U.S. shale producers, something previously considered “almost a taboo, for OPEC to meet with players in other market centers.”
“Times have changed, the industry has changed, we are more globalized, and the impact on financial markets on oil continue to be magnified and in this world we believe we should adapt to these new changes and therefore reach out, and hence my reach out to them here at CERAWeek.
“We’re all in the same boat, because this downturn has affected everybody in the industry, conventional and non-conventional, or the fund managers themselves.”
Asked whether he had fears that the effects of the OPEC / Non-Opec deal could be undermined by U.S. shale producers ramping up output he said: “We are focusing first and foremost on the level of compliance among our new group of 24 participating countries.”
He also said that shale producers were probably hurt the most, more than any group of producers around the world, in this downcycle.
He’s said the U.S. shale players have lost production of over a million barrels, several companies, with hundreds in distress, with layoffs, so, “they do not need to be persuaded that we have to find ways and means of avoiding these severe downturns with high level of volatility and uncertainty and the sharp contraction that we’ve seen in the operations of companies and investments.”
Offshore Energy Today Staff