Russia may cooperate with OPEC to check falling oil prices

New Delhi, Nov 25 (PTI) The fall in global oil prices may
bring the world's largest oil producer Russia and oil cartel
OPEC together to control the freefall as Kremlin today said
low crude oil prices were hurting the oil producers who have
budgeted their investment at USD 70-90 per barrel prices.

Russian Energy Minister Sergei Shmatko said Russia was
looking at coordinating investments and policies with
Organisation of Petroleum Exporting Countries (OPEC) to get a
grip over the markets even as it plans to form a cartel of gas
producers with Iran and Qatar.

"We cannot rule out cutting down of production," he said
when asked if Kremlin was looking at cutting oil production,
just like OPEC, to shore up crude oil prices which have fallen
from USD 147 per barrel in July to around USD 50 a barrel
currently.

"In OPEC, they are actively discussing measures to
protectcurrent market of oil and reduce production," he said
addressing the India-CIS Roundtable on Hydrocarbons.

He blamed the freefall of crude oil prices to recession
in major economies and speculation in the oil market.

Even after OPEC cut oil production by 1.5 million barrel,
crude prices have fallen 7 per cent. "Today's oil prices are
not determined significantly by traditional parameters of
demand and supply but it is under effect of whole financial
crisis and speculation," he said.

"Russia will cooperate with OPEC to defend its interest.
We want to understand the process involved and protection
mechanism."

Russia, which is targeting to produce 480-490 million
tonnes of crude oil in 2009, was keen on exchange of
information on market developments and investment programmes
with OPEC.

"I would like to say that many of the budgets of oil
producing countries have been balanced based on the oil price
band of between USD 70 to 90 per barrel," Shmatko said.
"Russian investment has also been budgeted at USD 70 per
barrel."

Russia, he said, was planning to form an Organisation of
Gas Exporting Countries with Iran and Qatar to control prices
of environmental friendly fuel. "We, in fact, are planning to
cartelise the export of gas producing countries. We are
planning to have an Organisation of Gas Exporting Countries,"
he said, but did not give any details like timeframe and
policies it will pursue.

Shmatko said oil cartel, Organisation of Petroleum
Exporting Countries (OPEC) produces about 75-77 million
barrels of oil per day, of which its exports about 65-67
million barrels on a daily basis.

"The bubble has blown. We are at a threshold where we
need to understand the situation and know why the rise in oil
prices is dangerous for consumers as well as for producers,"
Shmatko said.

The rise in oil prices have to justify the hefty
investments made by oil firms in exploration and production
(E&P) and marketing and distribution, he said.

The minister cautioned that 2009 is going to be difficult
year for oil markets in view of pessimistic views as well the
recessionary trends plaguing the world.

"How long this situation will last is difficult to say.
The year 2009 is going to a difficult year as there will be
pessimistic views and recession in oil markets," Shmatko said.

International crude oil prices had touched an intolerable
level of USD 147 per barrel in mid-July. Today, prices are
ruling at USD 50-level mark. Shmatko said that he expected
crude oil prices to fall further significantly. MORE PTI KV
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