Russia’s President Vladimir Putin has tasked the government with implementing a set of measures aimed at supporting the oil industry for the duration of the OPEC+ production cut agreement.
According to a document published on the website of the Russian presidency, the measures include a prescription not to sanction companies that stray outside their production quotas and a temporary lifting of penalties for state oil companies for not sticking to their 2020/2021 investment programs.
The document also lists “special rates” to be implemented by pipeline operator Transneft and Russian Railways for transporting crude oil and oil products for the duration of the OPEC+ deal.
As part of the OPEC+ deal, Russia pledged to cut its production to 8.5 million bpd in May and June from a February 2020 baseline of some 11 million bpd, which translates into more than 2 million bpd, or by 19 percent, Russian Energy Minister Alexander Novak told Interfax in an interview last month.
However, many were sceptical the country would stick to its quota given its track record with the previous OPEC+ agreements. Yet this time the oil price crisis is serious enough to have spurred Russia’s oilfield operators into fast action, with Deputy Energy Minister Pavel Sorokin saying earlier this month that Moscow expects to achieve “the maximum reduction level as soon as practicable.”
According to Reuters calculations, Russia’s crude oil production—net of condensates—averaged 8.72 million bpd in the first twenty days of May. This is the largest production cut Russian producers have had to implement in decades, which is probably why the government is lending a hand to help them manage the situation. This situation will last until the end of June, after which the combined OPEC+ production cuts will be relaxed from 9.7 million bpd to 7.7 million bpd.
By Irina Slav for Oilprice.com
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