OPEC production cuts curb Russian crude development, oil CEO says

Bloomberg News August 30, 2023

(Bloomberg) – Rosneft PJSC Chief Executive Officer Igor Sechin said Russia’s intermittent oil production cuts are curbing the development of the nation’s biggest crude producer.

Igor Sechin, Rosneft PJSC CEO

“Rosneft has been limiting crude oil production in one way or another since 2017, which prevents the company from fully unleashing its potential,” Sechin said in a statement on Wednesday following the release of the company’s operational results. The CEO is one of Russia’s most powerful businessmen and a close ally of President Vladimir Putin.

Still, Rosneft is committed to the current production cuts, implemented as part of Russia’s cooperation with OPEC. The oil giant reduced its liquids production in the second quarter by 2.2% to 3.9 MMbpd, compared with the preceding three months, according to the statement.

Sechin also said Russia’s tax environment “including legislative changes already enacted and new initiatives, makes the company’s operations more challenging.” The nation’s producers have seen a number of legal changes since Russia’s invasion of Ukraine — from the introduction of a minimal price of Urals crude for tax purposes to the looming halving of refining subsidies — all aimed at raising oil and gas revenues of the Russian budget.

Since Russia started working with OPEC in 2017, Sechin has consistently criticized the cooperation. The Rosneft CEO has pushed instead for the country to increase crude production and defend its market share from other global producers, including the U.S.

Most recently, at the St. Petersburg International Economic Forum, Sechin pointed out that it’s getting more difficult for OPEC to reach consensus because of different economic structures and diverging output trends in member states.

Russia pledged to cut its crude production from March 2023 and keep it curbed through 2024, in a move to stabilize global oil markets. In addition, the nation committed to reducing its oil exports by 500,000 bpd in August and by 300,000 bpd in September from an unspecified baseline.

Saudi Arabia, OPEC’s de-facto leader, has made its own voluntary production cuts of 1 MMbpd “to reinforce the precautionary efforts made by OPEC countries with the aim of supporting the stability and balance of oil markets.”

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