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Thursday, October 23, 2008

Russia 'weighing up oil reserve'

22 October 2008 - Upstream OnLine - Russia may create an oil reserve to influence global prices, Deputy Prime Minister Igor Sechin said as Opec secretary-general Abdullah al-Badri was due to hold a first meeting with President Dmitry Medvedev. "The Ministry of Energy is considering creating an oil production reserve, which would allow it to work more efficiently with prices on the market," Sechin told Reuters. When asked how big the reserve should be, he said: "Enough to reach efficient pricing parameters." Al-Badri, who came to Moscow on Tuesday, said he would meet Medvedev to discuss the exchange of market data and will not raise the issue of oil production cuts. "I will meet the president this afternoon. I will not ask Russia for a cut ... But I will ask for data on markets," al-Badri said ahead of the first ever meeting between Opec and the head of the Russian state. Other Opec officials have called on Russia this week to join opec in cutting production. The organisation will hold an extraordinary meeting on Friday and is widely expected to reduce its deliveries to global markets. Moscow agreed to reduce exports several times earlier this decade in tandem with Opec, but market watchers then said the pledge never materialised as private companies raised shipments instead. Russia has long toyed with the idea of an oil reserve, which could allow it to become a swing producer. But the expensive and logistically difficult plan was never implemented as the government and private companies failed to reach a compromise. The current oil production scheme in Russia does not allow the country to change its flows significantly. International Energy Agency (IEA) boss Nobuo Tanaka, attending the same industry conference as Badri, said he was worried by Russia's production outlook as the country heads this year for its first annual output decline in a decade. "We see worrying signs in some producing countries, including Russia, in the ability to invest enough to meet demand," Tanaka said. "We see Russian supply growth slowing, with all projects declining in production over the next decade. Further government incentives would be welcome to increase production," he said. Russian oil producers have called on the government to ease taxes and slash export duties in November, one month earlier than planned, because of a steep price decline this month. Sechin said the idea was being discussed but no decision had yet been taken.

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