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Russia still working on how to freeze oil output ahead of OPEC talks

OPEC talks

Ahead of OPEC talks on a production cut, Russia says it has yet to find a solution on limiting the country’s output as produciton is dominated by several oil majors.  AFP photo by Tatyana Makeyeva.

OPEC talks on Nov. 30

By Vladimir Soldatkin and Oksana Kobzeva

MOSCOW, Nov 23 (Reuters) – Russia has yet to plan how to freeze oil production and there has been no agreement among its leading producers on output curbs, three senior industry sources told Reuters on Wednesday, prior to OPEC talks next week.

Painstaking talks among the Organization of the Petroleum Exporting Countries and the world’s other leading oil producers on how to restrict output have dragged on for almost a year without yielding any firm deal.

In September, OPEC agreed to reduce production to between 32.5 million and 33.0 million barrels per day – an effort to prop up prices – from the organisation’s latest production estimates of 33.64 million b/d.

The pact is expected to be firmed up on Nov. 30 when OPEC holds a regular semi-annual meeting in Vienna, while the group expects other oil producers, notably Russia, to join the freeze.

However, Russia, whose production is dominated by several oil majors, is yet to find a solution on how to limit its output, which in October reached a post-Soviet high of 11.2 million b/d.

“The freeze is technically possible, but first of all, the level of curbs should be defined and it should be clear which companies want to take part,” a senior industry source, who is not authorised to talk publicly to the media, told Reuters.

“The options (for a freeze) have been discussed,” another source said. A meeting among experts from OPEC and some non-OPEC nations is scheduled for Nov. 28 in Vienna and expected to work out details ahead of the Nov. 30 OPEC gathering.

A third source confirmed that discussions were ongoing.

Russian Energy Minister Alexander Novak has said an output freeze had been discussed with the Russian companies, while declining to give details. President Vladimir Putin said this month that Moscow was ready to freeze output.

The first source said the Energy Ministry was talking to producers that account for about 80 per cent of Russia’s output and no concrete plan had yet emerged on how to cap production.

An Energy Ministry spokeswoman did not immediately reply to a request seeking comment.

Leading Russian oil companies, responsible for three quarters of output in the world’s largest producer, say they will boost output next year after reaching record levels in recent months.

And there is another caveat to the possible freeze arrangement.

Igor Sechin, a long-standing Putin ally and head of the country’s top oil producer, Rosneft, has long expressed doubt about OPEC’s power to regulate markets and been sceptical about the deal.

Moreover, Russia seems unlikely to stop commissioning new oilfields, crucial for sustaining its production.

Russia has launched several key oilfields, including Lukoil‘s offshore Filanovsky field in the Caspian Sea, this year. said there were no plans to curtail the introduction of other greenfields.

(Additional reporting by Olesya Astakhova; Editing by Katya Golubkova and Dale Hudson)

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