Russia is looking to Modernize OPEC to Change Oil Production Calculation Method

The Russian OPEC sources have indicated that Russia will call on other oil producers to change Moscow’s production calculation. Point to be noted that most of the major oil-producing countries are expected to meet in Vienna next month. OPEC and other oil-producing countries have been curbing oil production for 3-years to balance the market and boost oil prices. But, Russia measures its output differently. Russia introduces condensate a light and high-quality type of crude oil often extracted during gas production into its crude oil production figures, unlike Saudi Arabia and other OEC producers. It wasn’t an issue for Moscow in the past. It is noteworthy that Russia is launching new gas fields in the Arctic and eastern Siberia and opening a pipeline to transport gas to China.

Russia is looking to Modernize OPEC to Change Oil Production Calculation Method

The recent move clearly indicates that it does not comply with its quota under the agreement between OPEC and other producers. A source close to Russian officials said, “Russia will inevitably raise the issue of condensate at the December meeting because its production will grow”. OPEC and other producers are due to meet in Vienna on December 5 and 6. It is still unclear whether Russia would make other deals with OPEC conditional on the group’s approval to change Moscow’s quota. Another source said, “The idea of ??excluding condensates was entirely the result of increased gas production in Russia and hence the associated gas condensate”.

The source added that Russia was definitely moving to raise the issue. Russian Energy Minister Alexander Novak said on Wednesday that the OPEC + meeting might discuss amending output quotas. It is important that Russia launched a major field in eastern Siberia in the month of September to feed the new gas pipeline to China. Gazprom monopolizes Russian gas pipelines and supplies a third of Europe’s gas requirements and experiences a surge in demand from Europe over the winter. Russia has cut its crude oil production along with OPEC since 2017 to help support prices at around 50 to 70 USD/ barrel, in spite of a U.S production boom. Russia has agreed to cut its oil production by 228,000 BPD to around 11.18 million BPD for 2019. It is a part of a total OPEC + cut of 1.2 million BPD, equivalent to 1.2% of the global demand.

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