Iran’s participation is not essential for the oil market to move closer to balance if a global agreement on freezing production is signed in Doha next month, Leonid Fedun, one of Russia’s most prominent oil bosses, said on Thursday.
Fedun, who owns almost 10 percent of Lukoil, was the first Russian oil official to voice support for coordination with OPEC, a month before a preliminary deal on stabilizing crude output was reached in Qatar in February.
Last year, Russia and OPEC refused to cooperate on production cuts, choosing to keep fighting for market share by squeezing out high-cost producers such as U.S. shale oil firms.
Keeping production at January levels for the rest of 2016 would in practice yield one of the highest output levels on record, both for Russia and the Organization of the Petroleum Exporting Countries.
“In general, we see that the goals established by the cartel (OPEC) to clean up the market are being reached – (U.S.) shale oil production is falling … major damage has been inflicted on renewable sources of energy,” Fedun told reporters.
“Targets have been met and now proper coordination of efforts is needed, so as not to give too much hope to high-cost producers.”
Russian Energy Minister Alexander Novak has said the deal would help to balance the market even without participation by Iran. Tehran first wants to return to the output levels it had before the West imposed sanctions over its nuclear program.
Fedun, whose Lukoil works in neighboring Iraq and pumps crude at West Qurna-2, one of the world’s biggest oilfields, said Iran was not essential to a global deal.
“This does not make any difference – with no significant foreign investments, Iran cannot sharply increase production. Plus, there is significant domestic demand in Iran,” said Fedun, whose company has voiced interest in working in Iran.
He added that Lukoil, Russia’s No.2 oil producer, was awaiting clarity from Iran on access to the country’s oilfields before taking a final decision on any investment.
Lukoil’s production is expected to be roughly flat this year, Fedun said. In 2015, Lukoil as a group produced around 2 million barrels per day.
Data compiled by Reuters shows that Russia will export more oil to Europe in April than it has in any month since 2013, despite the planned deal, by re-routing some oil away from refineries undergoing planned maintenance.
By Alexander Winning and Katya Golubkova
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