A top Russian oil executive may just have killed off any lingering talk of an agreement among producing countries to freeze output.
The world’s top exporters, including Russia, failed to agree a production freeze at talks on Sunday, but said they would continue to work together to find a way to support prices.
Whatever happens now, there’s very little chance of Russia — the world’s second biggest oil producer after the U.S. — ever agreeing to restrain output, said Lukoil CEO Vagit Alekperov.
Asked whether Russia and OPEC could eventually reach a deal, Alekperov told CNN: “I don’t think so, despite the fact that work on so called coordination of our activities is underway.”
He said Russia wouldn’t “integrate” with OPEC, noting that his country had maintained its distance from the cartel even during the Soviet era.
Lukoil is Russia’s second biggest oil company after Rosneft. It claims to produce around 2% of the world’s crude oil.
Alekperov said Lukoil and other Russian oil companies have adjusted to low prices and are able to “earn money to invest and money for shareholders.”
Alekperov, who owns 23% of Lukoil, said he believed oil prices bottomed out earlier this year and will now rebound.
“What we’re seeing today … indicates that we’re coming to a period of stability of prices and a trend towards higher oil prices,” he said.
Alekperov also downplayed the Russian government’s claim it could increase production in response to the failure of the Doha talks. He said most of Russia’s oil reserves are in mature oil fields.
“You need new oil fields to boost the production in new territories,” he said. “They’re in the Arctic of course, the Far East, the deep waters of the Caspian sea…so it’s hard to talk today about getting these territories producing soon, because they require colossal spending.”
Investment in Russia’s oil and gas industry has been held back by international sanctions, introduced after Russia seized Crimea from Ukraine in 2014.
Alekperov added that he expects prices to reach $50 per barrel by the the end of this year, or early 2017.
Energy revenues are key for the Russian economy — around half of the government’s income comes from oil and gas.
The slump in oil prices has helped push Russia into recession. Its GDP is expected to shrink 1% in 2016.
