OPEC+ loses influence on the market, but participants should continue to talk: Sechin
Rosneft CEO Igor Sechin said Friday that OPEC+ has lost its ability to influence the market, but the world’s biggest oil producers should continue to talk.
“When you weigh up what has the most influence, I think OPEC+, on the whole, has already lost the significance that we attached to it. Other factors are at work – political factors, sanctions, the coronavirus, the state of the consumer market, stagnation of the economy,” Sechin said in an interview broadcast on Russia 24 TV.
Rosneft, alongside some other Russian crude producers, has previously criticized the OPEC+ agreement for damaging their attempts to secure market share, and complicating long-term investment planning. Analysts see the overall impact of the OPEC+ agreement and its impact on oil prices as primarily positive for the Russian economy and oil producers alike.
Sechin added that although OPEC+ has lost influence, it is important for participants to continue dialog.
“These are the largest oil producers, of course, we need to cooperate, exchange information. Well, strive to obtain mutual benefits by carrying out this work,” Sechin said.
Sechin said that Rosneft was prepared for the current oil price collapse, and he expects the price of oil to increase to $60/b by the end of 2020.
“By the end of the year, I assume that it will grow and return to a level of up to $60/b. If these processes continue, shale oil will exit the market,” he said.
He pointed to the coronavirus outbreak, as well as political factors and sanctions as behind the current instability on the market.
“The coronavirus factor, of course has an impact: the reduction of transport, flight cancellations, general isolation of entire regions of the world, of course, this reduces consumption, ” he said.
“And there is, of course, an oversupply of production. From my point of view, coronavirus is really a serious problem that must be taken into account when balancing the market. But there is also no need to dramatize these things. China, as we see, has already practically coped with the development of the epidemic,” he said.
He added that price volatility is also sometimes fueled by political leaders’ statements. “It shakes things up, but what consequences will this have? The market will adjust,” he said.
PRODUCTION CAN BE MAINTAINED FOR DECADES
Sechin added that even without additional investment in exploration, Rosneft can maintain output at current volumes for 22 years
“Our operating costs allow us to work in this mode for a rather long time. The resource base, in principle, even without additional investments in geological exploration, will allow us to keep producing for 22 years without reducing volumes,” he said.
Rosneft produced 230.25 million mt of crude and condesnate in 2019, equivalent to around 4.62 million b/d.
Sechin added that Rosneft’s international partners have suffered more than Rosneft itself from sanctions introduced against the company and the Russian oil sector since 2014.
“I will not name specific companies now, but there are American companies that have lost a resource base comparable to their own. That is, they could be twice as large. They were forced to go out and lose their resource base. The impact on them, I think, is more perceptible than the impact on us,” Sechin said.
Before the sanctions were introduced, Rosneft had plans to increase its cooperation with ExxonMobil, including in Russia’s Arctic offshore zone. Some cooperation continues, including on the Sakhalin 1 oil and gas project in Russia’s Far East, but progress on new projects between the two companies has stalled.
Sechin added that many contractors, manufacturers of drilling equipment and gas turbines had also lost out, as well as financial institutions.
“Before the sanctions, almost half of financing was provided by American banks – up to $35 billion in credit lines. Now it’s zero. They earned up to $4 billion/year on interest rates alone. Now it’s zero. Here, please, are the results of these sanctions, ” Sechin said.
Rosneft has also been affected by sanctions against Venezuela, with two trading subsidiaries Rosneft Trading and TNK Trading sanctioned for handling Venezuelan crude.