Due to the OPEC+ production cut deal, Russia’s oil production could decline by 15 percent annually in 2020, Russian Energy Minister Alexander Novak told news agency Interfax in an interview published on Wednesday.
This year, Russia’s production of crude oil and condensate could be between 480 million tons and 500 million tons – or between 9.6 million bpd and 10 million bpd, in case of 100-percent compliance with the new OPEC+ agreement, Novak told Interfax.
As per Reuters estimates, a drop in 2020 production would be the first decline in Russia’s oil output since 2008.
Crude oil and condensate production in Russia hit a record high for the post-Soviet era in 2019, despite Moscow’s pivotal role in the OPEC+ cuts. Russia pumped 11.25 million bpd of crude oil and condensate in 2019—up from 11.16 million bpd in 2018, which was the previous production record in Russia’s post-Soviet era.
The new 2019 record oil production showed that one of the key parties to the OPEC+ deal, and certainly the key party in the non-OPEC camp of producers in the agreement, failed to comply with its share of the cuts for most of 2019.
Referring to the new OPEC+ deal in which Russia pledged to cut its production to 8.5 million bpd in May and June from a February 2020 baseline, Novak said that all companies would comply with the deal and Russia would have a 100-percent compliance record.
This has rarely been achieved by Russia in the previous OPEC+ pacts over the past three and a half years.
Russia will have to slash its production by around 2 million bpd, or by 19 percent, from February 2020, Novak told Interfax, adding that all companies in Russia—including projects under production-sharing agreements with international oil majors—will be reducing production. Every company has to contribute to the cuts so that the market can start balancing and exit the crisis mode, Novak told Interfax.
Earlier this week, Novak said that even though the new OPEC+ deal is set to come into force this week, oil prices will not rise much in the near future because of high global inventories.
