Baku, Azerbaijan, Jan. 29
By Aygun Badalova - Trend:
Russia will be able to ride out low oil prices and focus on ensuring Russia's long-term role in the global oil market, Energy Security Analysis (ESAI), which is the leading US-based independent research firm said.
"This perception reinforces the conventional wisdom that Russia will not agree to production cuts," ESAI said in a report, obtained by Trend.
Russian Energy Minister Alexander Novak confirmed Russia's readiness to meet with producers to discuss oil production.
He said that the topic of discussion at the planned OPEC meeting in February with representatives of other oil-producing countries could be the question of oil production reducing for each producer country at the level of five percent, but a general agreement is needed for it.
The report stressed that the economics of Russian production provide a glimpse of how painful current prices are. According to ESAI Energy's analysis, when the Urals price is $30 per barrel, a producer's net revenue after paying the crude export duty and Mineral Extraction tax is $17.
Meanwhile, the report said that since the costs are paid in rubles, the value of which has plummeted, lifting costs and pipeline transport from West Siberia are roughly $8 per barrel.
These numbers indicate Russian producers can withstand prices as low as even $20 per barrel without them having a significant impact on production in 2016.
Nevertheless, the report said, Russia's government revenue from the oil sector is plummeting.
If OPEC proposes to Russia production limits that do not undermine Russia's long-term objectives, and key Russian producers back the deal, Russia may indeed agree to production limits, ESAI believes.
"Such a prospect seemed all but inconceivable until now. But then again the lower oil prices since the beginning of the year and little sign of a recovery may upend conventional wisdom. There is a real chance, however, that Russia is ready to bargain this time, eliminating one of the potential impediments to a grand bargain," the report said.
ESAI believes the absence of concessions by Iran and thus other Arabian Gulf producers will scuttle a grand bargain to cut output.
Russia's oil production amounted to 10.95 million barrels per day in 2015, according to the Energy Information Agency's (EIA) estimates.
EIA forecasts Russia's oil production to amount to 10.85 million barrels per day in 2016 and to 10.74 million barrels per day in 2017.