Lukoil CEO on output cuts: ''I believe no timeframes are needed''

Vagit Alekperov suggested stopping talks about any expiration dates for oil production cuts

Lukoil CEO on output cuts: ''I believe no timeframes are needed'' Photo: kremlin.ru

Although the OPEC-non-OPEC agreement on output cuts is supposed to last at least until the end of 2018, its future extension or premature termination is periodically discussed by media and market participants. Head of Lukoil Vagit Alekperov claimed last week that the deal should have no timeframes at all. Instead of it, market players need to maintain flexibility on when to exit the deal.

OPEC coalition's production cut deal should have no timeframes, says Platts citing Lukoil's CEO Vagit Alekperov. "[The deal's participants] need to see how the market will react, to see firstly on stocks and how the market will react on the demand increase and then react flexibly — to increase or cut [output]," Alekperov said at the company's Investor Day in London.

Earlier, Lukoil's officials spoke out against maintaining the cuts through 2018 and warned that the market might tighten too much and provoke a new wave of price volatility. However, the producer stayed committed to Russia's obligations to reduce the national oil output. According to Alekperov, Russian oil companies are not taking part in the talks but adjust their plans in line with the government's decisions, as subsoil resources in Russia are owned by the state, with producers having the right just to develop them. As for Lukoil, the country's second-biggest oil producer has reduced its production by 45,000 bpd by decreasing the output from its least efficient mature fields in West Siberia and Timan-Pechora regions.

Lukoil has reduced its production by 45,000 bpd by decreasing the output from least efficient mature oil fields. Photo: Bearas

Last Thursday, Saudi Arabian Energy Minister Khalid Al-Falih told Reuters in an interview that the production cuts could continue beyond their scheduled expiry at the end of 2018. OPEC is currently working on a document that would institutionalise the cartel's market engagement with Russia and the other deal participants, but details of the pact remain unspecified. Minister of Energy of Russia Aleksandr Novak told reporters earlier last week that no proposals had been exchanged.

The oil output cut deal obliges OPEC and 10 non-OPEC nations led by Russia to limit their oil production to support oil prices and rebalance the market. The agreement went into force in January 2017 and was later extended through the end of 2018. The limitations, which totalled to 1,8 million bpd, helped lift oil prices to their current level of around $65 per barrel. It is supposed that further cooperation will be discussed at OPEC meeting in Vienna in June.

By Anna Litvina