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Russia’s Energy Minister Alexander Novak said at this year’s edition of CERAWeek that the country’s oil and gas industry has successfully gotten over the U.S. sanctions, raising crude oil output by 400,000 barrels daily since 2014.
The sanctions, targeting individuals and legal entities close to President Putin, many from the energy industry, were imposed in 2014 by the Obama administration, following Russia’s annexation of the Crimea peninsula and its military involvement in Ukraine.
In his speech, Novak went on to say that unlike many Western companies, Russia’s oil and gas operators fared much better during the crisis, adding that they have managed to bring down production costs to between US$10 and US$15 a barrel on average.
While the latter part of the statement should be taken with a pinch of salt, the former is largely true – Russia’s oil majors had all the government support they needed to weather the worst of the crisis, and they have a lot of experience with slimmer profits, again courtesy of the government, so the shock wasn’t as bad as it was for Western Big Oil and the Middle Eastern Gulf producers.
Asked whether Russia was contemplating OPEC membership, Novak responded in the negative, nevertheless noting that collaboration with the cartel was important for Russia. He added that lack of cooperation over the last few years had resulted in US$500 billion in lost global investments.
Related: Oil Price, Sanctions Weigh On Russian Stocks, Moscow Unfazed
The Energy Minister’s speech comes amid worry that Russia is curbing its crude oil output slower than it should: the country agreed to shave 300,000 bpd off its average output in the first half of the year, but its compliance rate has been less than exemplary compared with Saudi Arabia’s – the initiator of the supply reduction deal.
Riyadh has already cut more than its quota. It slimmed down daily output to 9.78 million barrels last month, versus a quota of 10.06 million bpd. Russia, on the other hand, announced cut of 100,000 bpd. Novak says Russia’s energy industry has overcome U.S. Sanctions
in January and has made no change in this rate of compliance in February. However, Novak said, the 300,000 bpd target will be struck by the end of April.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.