Saudi Arabia may cut oil output after sanctions on Iran removed - BP
Baku, Azerbaijan, Oct. 15
By Azad Hasanli - Trend:
Saudi Arabia may cut oil output after removal of sanctions on Iran, says BP's senior economist for CIS and Russia, Vladimir Drebentsov.
Iran and "Six" international negotiators reached a historic agreement on the settlement of long-term problem of the Iranian atom in mid-July. In case of fulfilling this agreement, the international sanctions will be lifted off Iran and allow foreign investors to cooperate with the country.
"In 2011, when oil prices fell by $30 [what was considered then a significant fall], Saudi Arabia reduced oil output to balance the market," Drebentsov said Oct. 14 in Baku at the presentation of statistical analysis for the global energy sector for 2015 and the forecasts for 2035.
"Saudi Arabia can do the same again, but even if it does, the reduction won't be as significant to change the market's balance," he added.
However, as Drebentsov said, the continuation of growth in oil production in Iraq is more significant event for the Middle East.
"OPEC quotas aren't applied to Iraq, so nothing limits the growth of oil production in this country," he said. "Moreover, the fiscal regime for oil companies that exists in Iraq stimulates the growth of production regardless of oil prices. In accordance with the law of Iraq, oil companies receive a fixed income from each barrel of oil produced. In other words, the income of oil companies is directly proportional to the volumes of oil production."
The economist said that in connection with this fact, Iraqi oil companies don't care how much oil costs on the world market.
As an example, the BP representative mentioned Russia.
"In Russia, tax regime is designed in a way that during the years of high oil prices, the state received all the income in the form of taxes.
"Russian oil companies have been receiving $30 per barrel for the last ten years regardless of the oil price on the world markets," he said. "The remaining part of the proceeds is transferred to the state treasury. The change in the world oil prices does not affect the oil production in Russia."
"Oil production is growing twice as fast in Russia this year, compared to the last year," he said. "The oil companies' revenues remained the same, while the costs dropped due to the depreciation of the ruble rate. The costs are being reduced in the Russian oil industry because the oil service companies reduce their rates for services."