Lukoil to back cut in oil output to raise prices to acceptable level above $50
ISTANBUL. Oct 11 (Interfax) - Lukoil backs an initiative by OPEC to cut oil output as that may lift prices to an acceptable level of $50 a barrel or more, Leonid Fedun, the Russian oil major's vice president, told reporters.
Oil production in Russia is bound to fall in 2017 due to a planned hike in the tax burden on the oil and gas sector, Fedun said, adding that a tax increase next year is most likely inevitable.
"Show me anyone who is happy when they have to pay more tax. I think that this option is already set, that this will be the MET [mineral extraction tax] and some excise tax hike. Yes, this is tough, unpleasant, painful. But as I understand it, the government has no other revenue sources," he said.
"That is why we back a cut in output as that would give us a target price of $50 plus at which would balance our budget. So long as production grows, the sheep will be shorn. When production is declining, there will be a more comprehensible dialog. At the moment, the dialog is: 'You have been whining for a year already, and your production is still growing.' My answer is, production is growing, because we whined, and there are a lot of projects where there is only discounted production. It is only growing where there are discounts. Where there are no discounts, production is dropping. But for the time being, they are not listening to us," he said.
He also said the positions of Russia and OPEC had strengthened markedly after the price war in the oil market began.
"I have always advocated coordination of our actions with OPEC, since the cartel now controls virtually 50% of all oil sold, and its position since the start of the price war has only strengthened," Fedun said.
"Russia's position has strengthened in the same way. We today are producing the maximum in the post-Soviet era: 11 million barrels. We are working effectively, despite low prices and sanctions, and for that reason there are today no physical, political or financial factors preventing us from beginning to coordinate our production with OPEC, to include succeeding in agreeing a certain cut in production," he said.