• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 hours Could Someone Give Me Insights on the Future of Renewable Energy?
  • 4 hours The United States produced more crude oil than any nation, at any time.
  • 4 hours How Far Have We Really Gotten With Alternative Energy
  • 3 hours "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 21 hours Bankruptcy in the Industry
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Related News

Former Russian Energy Minister: OPEC Deal Working Exactly As Planned

OPEC held a technical meeting in St. Petersburg on July 24 to monitor compliance with the group’s cuts and assess the progress of the rebalancing of the oil market. Unlike their official meetings, these meetings are not typically headline-making events, but with the rebalancing taking much longer than expected, OPEC is eager to speed things up. Oilprice.com spoke with Igor Yusufov, a former Russian energy minister and founder of a $3 billion energy investment fund called Corporation Energy, to get the latest view from Russia.

Oilprice.com: The OPEC meeting in St. Petersburg was intended to just be a gathering to monitor the progress of the OPEC/non-OPEC cuts, but it took on greater importance because of the recent downturn in prices. From Russia's perspective, is more aggressive action needed to accelerate the rebalancing in the oil market? Is Russia open to cutting its production deeper, or is that off of the table?

Igor Yusufov: To my opinion, the results of the Saint-Petersburg session of the ministerial Joint Ministerial Monitoring Committee (JMMC) composed of three OPEC Member Countries (Algeria, Kuwait and Venezuela) and two non-OPEC countries (the Russian Federation and Oman) are a clear sign that solidarity cuts of oil production decided by both OPEC and non-OPEC producers belong now to the category of proved mid-term market measures introduced by joint efforts of very different countries united by a common goal – stability on global crude markets.

Indeed, there were numerous factors which could bring down the significance of the OPEC+ process I co-initiated as Russian Energy minister in 2001. Among them were crude prices fall in recent days, U.S. intentions to flood traditional markets with American energy commodities and the unwillingness of Nigeria and Libya to join the move.

Nevertheless, JMMC stated the readiness of most oil producing nations to remain on the line of production reduction even after March 2018, and Russia is not an exception.

As one of the co-founders of the OPEC+ practice dating back to 2001 I see an extraordinary importance of effective technical measures decided by the Committee for monitoring of oil production and exports. Each of the members of JMMC will nominate a contact person to form a Joint Technical Committee (JTC), which shall include the Presidency of the OPEC Conference and shall assist the respective Ministers.

The JTC will regularly cooperate with the OPEC Secretariat in preparing the monthly report for the JMMC and meet on a monthly basis before submitting their report to the JMMC. The JMMC will communicate monthly, after the 17th of each upcoming month, to consider the reports presented by the JTC and the OPEC Secretariat, as well as meet after the 17th of March 2017 and before the OPEC Conference in May 2017.

Russia claimed in Saint-Petersburg its readiness to join further measures in the OPEC+ framework ideology. But a declaration of outstanding important are words of the OPEC Secretary General Mohamed Sanusi Barkindo who did not exclude the American participation in OPEC measures.

This is exactly what Corporation Energy [a $3 billion investment company founded by Yusufov in 2011] experts predicted: U.S. is committed to market measures and would exactly calculate every stage of delivery of American oil and gas to traditional markets in order not to make those exports lose economical sense.

Related: The Only Way OPEC Can Kill U.S. Shale

OP: Saudi Arabia is said to be capping its exports at 6.6 million barrels per day. Will this action accelerate the drawdowns in inventories in the second half of 2017?

IY: As for objective data – yes, you are right. But taking into considerations numerous other factors influencing the inventories state, I would assume that this will not definitely be the only significant factor.   

OP: Libya and Nigeria have undermined the effectiveness of the OPEC/non-OPEC cuts. The latest meeting in St. Petersburg seemed to pay a lot of attention to this, with Nigeria apparently agreeing to voluntarily cap production once it reaches 1.8 mb/d. Will output from Libya and Nigeria continue to rise and if so, will it undercut the OPEC cuts?

IY: Nigeria and Libya crude oil production has risen by an average of 300,000–500,000 bpd (barrels per day) since January 2017. These countries were exempt from the deal due to political and economic instability, they did not join the OPEC+ production and export cuts in Saint-Petersburg.

But analyzing the importance of possible U.S. inclusion onto the pricing dialogue and the general willingness to enhance stability on global markets I would not guess that the production on Nigeria and Libya will break the fragile balance of interests of crude producers and consumers which is now in sight.

OP: The crisis in the Middle East that has seen Saudi Arabia, the UAE, Bahrain and Egypt blockade Qatar has so far not interrupted Qatar's oil and gas exports. But with Qatar isolated, Ecuador recently pulling out of the collective OPEC cuts, and less-than-perfect compliance from Iraq and the UAE - do you see resolve in the OPEC cuts waning? Will compliance falter over time? What will it take for members to begin cheating?

IY: It is exactly the very concrete effort of the OPEC+ JMMC which is aimed at preventing every kind of “cheating”. In fact cheating is very difficult due to already functioning controlling mechanisms on oil market and the growing global transparency of world economy.

The isolation of Qatar and unilateral actions of Ecuador are phenomena of the same kind as the line adopted by Nigeria and Libya. You cannot force a country, even an OPEC member, to pledge a production cut – even more, you cannot sue an OPEC state for not fulfilling its pledges. So the main goal of energy diplomats sharing the OPEC+ ideology is to find a good compromise between quiet understandable national interests and the needs of common action of benefit for every player in the market.

In 2001 heading the Russian delegation at the 177th OPEC ministerial meeting in Vienna I conducted talks with fellow energy and oil ministers from OPEC states for approximately 48 hours practically without interruption. And I would admit that the present situation is a bit more complicated due to factors you enumerated. Corporation Energy experts part of who, were at that time at the cradle of the OPEC+ decisions would be glad to contribute to the qualitative expansion of the prediction and exports cuts practice.            

OP: Will the OPEC cuts be extended beyond March 2018? What conditions will be necessary for them to declare victory and return to full production?

IY: A complete victory you mentioned can hardly be achieved: the practice of economic and political life would create new factors of both stability and instability all participants of the oil market should take into account. To my opinion the decisive factor for the prolongation of the agreements reached now till March 2018 would be the participation of even a signal of the American readiness to share responsibility for international energy markets.

I would say more: even a refusal of key players to prolong the present deal would not signify the death of this practice: it will be for sure revoked into business life of the steadily unstable world on another stage of the markets development. Related: Underperforming Energy Sector May Soon See M&A Wave

OP: Do you expect any major changes to the OPEC/non-OPEC agreement at the official meeting in Vienna in November?

IY: To me it is a rather technical question: if the OPEC+ accords will be postponed, they will be modified and reshaped every time with appearance of new important developments. Looking back at decades of my experience in international energy I would not remember a single international discussion where the eternal question of OPEC consistency would not be evoked. But anyway the 1960 founded cartel comprising now 14 nations is still the only sound internationally renowned body expressing the interests of oil producers, although according to Corporation Energy data OPEC produces some 43% of oil extracted worldwide.

Since a kind of dialogue of oil producers with American participation seems to be inevitable for market stability, the role of OPEC as a significant party in this dialogue could be even enhanced. Anyway, in the early 2000s when I was Energy Minister we laid down an efficient background for the cooperation between Russia-OPEC and even OPEC – International Energy Agency, which I still consider my personal contribution to markets stabilisation efforts. 

OP: Shifting gears, the U.S. is poised to tighten sanctions on Russia for its alleged interference in the 2016 U.S. presidential election. How, do you believe, will Russia respond? What will be the impact on Nord Stream 2?

IY: As a representative of a private energy business I would not conjecture about possible Russian reaction to the House of Representatives vote on further restriction of U.S. energy enterprises in cooperation with Russian partners.

But in a certain sense I would call them self-restrictions motivated by some contradictions in American internal policy. Otherwise pragmatism would prevail opening doors towards a new stage of Russian-American energy cooperation based on synergy between huge projects Russia has to offer and American investment, management practice and technologies.

As for Nordstream-2, I would remember you on the words of President Putin told after the G20 summit in Hamburg this month. Putin sees the statement about the U.S. readiness to increase exports of shale gas to traditional markets as an expression of "healthy competition which brings benefits to everybody."

Thus, the head of Russia emphasized our support for open markets including energy markets and shared the U.S. commitment to "open and fair competition". So Russia is trying to use its competitive advantage in hydrocarbons trade in a just and fair competition, and these benefits will find their confirmation and illustrative embodiment in the success of the "Nord stream-2" project which is really needed by Europeans.

This interview was edited for brevity and clarity.

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News