OPEC urges Russia to join the group, cut production

OPEC, aiming to exercise greater control over global oil production and pricing, wants Russia to become a member, according to OPEC Pres. Chakib Khalil.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Dec. 15 -- The Organization of Petroleum Exporting Countries, aiming to exercise greater control over global oil production and pricing, wants Russia to become a member, according to OPEC Pres. Chakib Khalil.

"We always wanted [Russia] to join OPEC," Khalil said, adding that the move would increase the authority and influence of the group, which currently accounts for about 40% of global supply.

Russia is the world's major non-OPEC oil producer, sometimes producing more oil than OPEC member Saudi Arabia, which has a quota within the group of 8.5 million b/d.

Mindful of the potential effect on prices of OPEC-Russia coordination, which would control about 50% of global production, Khelil played up Russian support ahead of the OPEC ministers planned Dec. 17 meeting in Oran.

"We expect concrete support from them," said Khelil, who would not predict whether a formal announcement on Russian membership in the group would take place at the meeting in Oran.

High hopes in Oran
However, Khelil noted that Russia's 20-member delegation was headed by the country's deputy prime minister for energy, Igor Setchin. "I hope the importance of their delegation is a measure of the importance of the decision they'll announce," Khelil said.

Regardless of any decision over membership, OPEC still wants substantial Russian cooperation regarding production cuts.

Ahead of the meeting in Oran, OAO Lukoil Pres. Vagit Alekperov said OPEC members, who are unhappy with the current price of oil, expect Russia to cut its oil production by 200,000-300,000 b/d based on planned output for 2009.

Russia's unlikely membership
The issue of Russian membership in OPEC arose earlier this year when Deputy Prime Minister Igor Sechin said that his country would coordinate oil production with OPEC (OGJ Online, Oct. 27, 2008).

This stated intent later took the form of a cooperation agreement handed by Russia to OPEC. It is expected to be brought for consideration and approved at the OPEC session this week.

Yet, much though OPEC would like to bring Russian exports under its quota system, cooperation is thought unlikely to extend much beyond coordinating some production cuts, with full-blown membership out of the question.

"We just examined our options and pitched to see how the market would respond," said Alexei Gromov, deputy general director for science at Moscow's Institute for Energy Strategy.

"Joining OPEC would seriously curb our space for maneuver," Gromov said, adding that, "Russia has already taken its own niche in the market and would not want to give it up."

Contact Eric Watkins at hippalus@yahoo.com.

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