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Russian oil firms may cut output if unprofitable

Written by Egypt News Tuesday, 18 November 2008 The world is heading toward a sharp deficit of oil production capacity and Russian companies could cut output and exports should they become unprofitable, Russia's energy minister said on Tuesday
"Oil companies should decide themselves. If it's unprofitable, then they could decide to lower production," Sergei Shamtko told reporters in the northern Yamal-Nenets autonomous region when asked if Russia could join OPEC's oil output cuts.
Shmatko, speaking to journalists on a trip to a West Siberian oil town to open a gas processing plant, also said he believed the price of oil should be higher than $60 a barrel to suit both consumers and producers.
"Almost all OPEC members... probably with the exception of Saudi Arabia, are seriously unhappy about the current oil price levels... The situation today is that many countries are on the brink of production profitability," he added.
"And we expect and this is our joint opinion with OPEC that if it continues that way then we will not only face a substantial cut in oil supplies to the world's markets in the mid-term, but also a drop in production capacities," he said.
Russia heavily depends on oil revenues to fund its budget needs including high social spending, support stability of the national currency and help its firms refinance heavy foreign debts.
Russia's benchmark Urals URL-E URL-NWE-E crude has been trading below $50 per barrel since last week, while the Russian budget is balanced at $75 for this year and $95 for 2009.
Russian private oil producer LUKOIL has called on the government to join OPEC and its oil output cuts, but government officials have said the country would maintain independent policies.
The Organisation of the Petroleum Exporting Countries meets in the Egyptian capital Cairo on Nov. 29 to discuss tumbling oil prices amid calls from some members on non-OPEC producers to join production cuts.
Shmatko showed caution when answering repeated questions whether Russia could consider joining OPEC's output cuts as it briefly did at the start of this decade.
He also said he had not yet heard about OPEC's extraordinary meeting on Nov. 29 and was still planning to meet OPEC's President Chakib Khelil in Algeria later this month to exchange information.
"A cut is a serious issue. We are analysing the mood on the oil market and I can say that the current supply level is not the only factor (that should influence the market)," he said.
"Our strategy consists of checking our investment programmes together with other producers and show the market that a substantial drop in production is possible if there are no fair prices," he added.
EGYPT NEWS