Moscow — Russian oil producer Gazprom Neft may increase output from April 1, Chief Executive Alexander Dyukov said on Thursday after a deal on production cuts between OPEC, Russia and other oil producers collapsed last week.
Russian major oil producers met Energy Minister Alexander Novak on Thursday but did not discuss returning to a deal with the so-called OPEC+ grouping, Dyukov said.
Gazprom Neft, an oil arm of Russia’s gas giant Gazprom , would have preferred to see the previous OPEC+ deal remain in place but the company had been prepared for the failure of talks and lower oil prices, Dyukov said.
Saudi Arabia and the United Arab Emirates, both members of OPEC, have both announced plans to ramp up production.
Gazprom Neft was now considering increasing oil output by 40,000 to 50,000 barrels per day (bpd) within a month, Dyukov said.
“Indeed there was some disappointment from the (OPEC) talks in Vienna,” Dyukov told reporters after the meeting with Novak.
“We were ready for such developments,” he said, although he added: “We don’t think that this move is rational and pragmatic.”
Gazprom Neft would complete its investment programme despite the drop in oil prices as its operational costs for producing a barrel of oil was between $3 and $5, Dyukov said.
Russian companies now faced no restrictions on output and would no longer face a threat for selling extra oil volumes, he said.
But Russian oil will face more competition, after sources said Saudi Arabia had stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead.
The recent slump in oil prices has already battered the rouble, posing new challenges for the Russian economy on top of the uncertainty caused by the coronavirus outbreak.
Dyukov said that, even if a new deal with OPEC had been reached, “we would have reached the situation with $35 per barrel anyway given the market factors,” citing the virus impact and risk of a global recession.