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If U.S. oil production continues to boom at the current pace, OPEC and Russia should extend their production cut pact into 2020, Leonid Fedun, the vice president of Russia’s second-largest oil producer Lukoil, said on Friday.
“It will all depend on the American production,” Reuters’ Russian-language service quoted Fedun as saying on the sidelines of Lukoil’s investor day in London today.
It is not clear yet how fast U.S. production will grow, the manager said. If the pace of growth continues, OPEC and Russia will need to exit the deal in 2020, Fedun said. By that time, the industry will have started to feel the impact of the slashed investment in exploration and production in the past years, Lukoil’s manager said.
Lukoil should support the idea of OPEC’s de facto leader and biggest producer Saudi Arabia to extend the oil production cuts into 2019, Fedun added.
In an interview with Reuters on Thursday, Saudi Arabia’s Energy Minister Khalid al-Falih said that OPEC would need to continue to work in cooperation with Russia and the other non-OPEC countries on curtailing production in 2019 in order to cut the excess global inventories down to their desired level.
The comment of Lukoil’s Fedun on the OPEC-Russia deal is not the first time that the company’s senior management has commented on the pact.
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In January this year, when Brent Crude prices were at $70 per barrel, Lukoil’s chief executive Vagit Alekperov suggested that Russia should start exiting the pact if oil prices stayed at $70 for more than six months.
Oil prices failed to remain at $70 even for a month, but they have mobilized renewed drilling in the U.S. oil patch, to the point that the United States is on a track to unseat Russia as the world’s no.1 oil-producing nation.
Lukoil has stuck to its share of cuts under the OPEC-Russia deal, the company said in a presentation to investors today. Lukoil has also planned its strategy on a conservative $50 a barrel oil price scenario, under which it believes it is feasible to reach its strategic goals and increase dividend payouts. The company’s strategic goals are sustainable production growth; expansion in petrochemicals; and improving sales network efficiency.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.