Russia's Oil Producers Told to Cut Output by Fifth

(Bloomberg) -- Russia’s oil producers have been told by the Energy Ministry to cut their production by about a fifth to comply with the new OPEC+ deal starting May 1, said two people with knowledge of the matter.

After days of consultations on how to divide the supply curbs, companies were instructed to split Russia’s 2.5 million barrel-a-day cut proportionally, the people said, asking not to be named because the information wasn’t public. Under those terms, Rosneft PJSC would implement about 40% of the country’s total reduction.

During the negotiations Rosneft disagreed with the principle of pro-rata cuts, according to two people familiar with company’s position. The company didn’t respond to a Bloomberg request for comment.

Russia agreed a collective 9.7 million barrel-a-day output cut earlier this month with the Organization of Petroleum Exporting Countries and its allies, ending a brief price war with Saudi Arabia. In the next two months Moscow and Riyadh will each cut their crude output by 23%, or 2.5 million barrels a day, from a baseline level of about 11 million barrels a day.

In the fourth quarter, Rosneft pumped around 4.67 million barrels of crude oil and condensate a day, or nearly 42% of nation’s daily output, making it the country’s biggest producer. If Russia applies the pro-rata principle under the OPEC+ agreement, the company will need to cut its daily production in May and June by roughly 1 millions barrels a day.

Russia’s second biggest oil producer Lukoil PJSC will reduce its output by more than 40,000 tons a day, Interfax reported on Monday, citing Chief Executive Officer Vagit Alekperov. That equates to more than 293,200 barrels a day, according to Bloomberg calculations based on 7.33 barrels-per-ton conversion ration, and accounts for about 12% of Russia’s quota.

--With assistance from Olga Tanas and Dina Khrennikova.

To contact the reporters on this story:
Irina Reznik in Moscow at ireznik@bloomberg.net;
Evgenia Pismennaya in Moscow at epismennaya@bloomberg.net

To contact the editor responsible for this story:
James Herron at jherron9@bloomberg.net