Russia’s largest oil producer, Rosneft, will slash its investments for 2020 by 21 percent from earlier plans, due to the dramatic situation on the oil market and the new OPEC+ deal in force since May 1, Rosneft’s chief executive Igor Sechin told Russian President Vladimir Putin on Tuesday.
Considering the dramatic state of the global oil market and the decision to cut oil production, Rosneft will have to optimize its capital expenditures, Sechin told Putin, the Kremlin said today.
Rosneft will try to keep its investment program for this year at around US$10.2 billion (750 billion Russian rubles), down from US$12.9 billion (950 billion rubles) in capex planned earlier, Sechin said.
Rosneft’s boss also asked Putin to look into ways to make obtaining credit easier, to help producers, contractors, and suppliers.
Sechin also asked if the government could defer oil exploration-related taxes to a future period, in order to help oil companies to go through the current crisis, and recalibrate oil transportation tariffs to the current price of oil. Currently, transportation costs account for 32 percent of Rosneft’s final cost of oil, Sechin said.
Oil executives in Russia, including Sechin, have often criticized the OPEC+ pact, which began its efforts to fix the market and prop up prices in January 2017. Russian firms have argued that the OPEC+ cuts only serve to prop up U.S. shale production with higher oil prices, giving America more share on the global market at the expense of Russia and its OPEC allies in the OPEC+ deal. Many analysts saw Moscow’s refusal in early March to back a collective 1.5-million-bpd cut from all OPEC+ members as the end of the Russian patience for propping up U.S. shale.
As part of the latest OPEC+ pact, Russia will have to cut its oil production from around 11 million bpd to 8.5 million bpd in May and June—and many analyst expect Russia would not be able to fully comply with its share of the cuts, again.
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.