The oil market is on the verge of a big repartition, CEO of Russia’s oil major Rosneft, Igor Sechin, said in an interview with Austria’s Die Presse on Thursday.
“The crisis situation creates additional possibilities. Naturally, some companies will not be able to operate in conditions of low oil prices. The crisis will trigger a redistribution of the market. Due to non-traditional production in the United States, we are on the brink of a big repartition,” Sechin said.
Russia may well cut its daily oil production by 200,000-30,000 barrels a day if oil prices are low.
“If oil prices drop, Russia will halt a number of projects. Russia’s potential of reducing production in conditions of low oil prices will be about 200,000-300,000 barrels a day,” he said/
Earlier, he was reported to say that his company had reduced its daily output by 25,000.
On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) decided to keep oil production quotas unchanged at the current level of 30 million barrels a day. Oil prices have plunged by more than 30% since be beginning of the year.
Shale oil production will be going down after 2025, Sechin said.
To substantiate his words, he singled out several factors. He said that the current supply was somewhat bigger than the demand. “Apart from that, the United States has ceased to underpin the dollar,” he said. “Another factor concerns the United States’ regional market, that is increased production of shale oil.”
“Production is on the rise. Practically all experts agree that in the period from 2017 to 2025 the ceiling will be reached. After 2025, production will go down due to the resource base to the extent we know as of today. Presently, the United States’ oil production spurs downwards movement of oil prices but in future reducing production will send the prices upwards,” he said, adding that he did not rule out that oil prices may drop below 60 U.S. dollars.
“But only in the first six months, to be more precise, by the end of the first six months,” he noted. “I would like to say that Rosneft is flexible enough and has some reserve, so a price of 60 U.S. dollars will do as well. Of course, we will have to postpone some expensive projects.”
The oil market needs a council of oil producers, consumers and regulators rather than cartel-type organizations, Sechin said.
“It should be admitted that, regrettably, the existing structures, such as the International Energy Agency or the Energy Charter Secretariat, have failed to fulfill their functions. I think cartel-type organizations have no potential, the future belongs to a market council that is to embrace both oil producers, oil consumers and representatives of regulators,” he said.
Sechin noted that oil prices had been going down for five months in a row. “I thinks all market players will reckon with fundamental and situational factors that have triggered the current situation,” he said.
Sechin also criticized anti-Russian sanctions.
“Who is affected more by the sanctions? In Germany, for example, 300,000 jobs are connected with production of equipment imported to Russia. The transfer of sanctions from the political level to the level of enterprises is a big mistake,” Sechin said.
He cited a phrase once said about Napoleon’s actions: “It was a mistake that was worse than a crime.”
“Mistakes need to be corrected. It seems to me that continuation of these senseless sanctions is counterproductive. It is necessary to get down to the negotiating table, politicians should agree,” Sechin said.
Besides, answering the question what a ban on entry to the United States meant personally for him, Sechin said: “Of course, I take it to heart. But I have no property or accounts in the United States. But I have very many friends there.”
Entry to the US for Sechin, among other people, was banned in April.
The West, inspired by the United States, subjected Russian officials and companies to the first batch of sanctions, including visa bans and asset freezes, after Russia incorporated Crimea in mid-March after a coup in Ukraine in February.
New, sectoral, penalties against Russia were announced in late July over Moscow’s position on Ukrainian events, in particular, what the West claimed was Russia’s alleged involvement in hostilities in Ukraine’s embattled southeast.
Russia responded with imposing on August 6 a one-year ban on imports of beef, pork, poultry, fish, cheeses, fruit, vegetables and dairy products from Australia, Canada, the European Union, the United States and Norway.
Moscow has repeatedly dismissed Western allegations that it could in any way be involved in hostilities in the southeast of Ukraine.