December 24, 2008 / 3:11 PM / 11 years ago

UPDATE 1-Russia to cut Jan oil exports, output at risk

  (Adds Alekperov, traders, tariffs increase, details)
 By Dmitry Zhdannikov
 MOSCOW, Dec 24 (Reuters) - Russia will cut seaborne oil exports by 7.5 percent in January, about two-thirds of a voluntary reduction suggested by a top official, as high duties make exports and output unprofitable in a domestic oil glut.
 “We are about to start shutting down wells in Siberia,” a trader with a Russian major said on Wednesday.
 “A fall in output is unavoidable,” he said, adding that he either exported at a loss or close to break even despite a domestic oil price at $12 per barrel.
 The output of the world’s second largest oil exporter is set to fall by around one percent this year after a decade of continuous growth.
 The decline is expected to continue next year as plunging oil prices and heavy taxation leave no cash for producers to open new fields and maintain output at existing deposits.
 On Wednesday, a final export schedule for January showed exports will fall by 220,000 barrels per day from December to 2.69 million bpd, the lowest level since August.
 The cut follows statements by Deputy Prime Minister Igor Sechin that the country may reduce exports by up to 320,000 bpd in 2009 to help OPEC prop up prices.
 Russia, which attended an OPEC meeting earlier this month as an observer, made no firm pledges to OPEC despite previous statements it could do so.
 Russia earlier this decade joined some of OPEC’s moves to reduce exports, but its compliance has been seen at irregular. 
 Oil companies said on Wednesday they believed the cut in exports in January was mainly driven by price factors.
 “Today’s price of oil is too low to guarantee stability of supplies in the future,” the head of Russia’s No.2 oil firm LUKOIL (LKOH.MM), Vagit Alekperov, told state television.
 Alekperov, the main advocate among Russian oil executives of closer cooperation with OPEC, said he hoped Russia and OPEC would do more in future to stabilise prices.
 Russia depends heavily on oil revenues to sustain its budget needs, support its shrinking economy and maintain confidence in the rapidly depreciating national currency.
 The government has maintained the system of relatively high export duties, which backfire badly on oil companies during  periods of rapidly declining oil prices as they are based on much higher prices of previous periods.
 As exports decline, oil firms rush to refine more at their local refineries but are already facing a glut as domestic oil prices for January delivery on the free market fell to below $12 per barrel [ID:nLN619937].
 The government also approved on Wednesday a request by its pipeline monopoly Transneft to allow it to raise shipping fees by 15.7 percent in 2009, lower than the requested 21 percent but much higher than oil firms had hoped.
 Fees are calculated on a rouble per tonne basis while companies had asked to switch to calculations linked to profits or revenues.
 Following is a final export schedule for January (in millions of tonnes. Reuters uses a rate of 7.33 to convert 1 tonne of Urals crude into barrels):  
            Jan      Dec     Nov    Oct      Sept      Aug 
            final                                            Novorossiisk  3.830   3.596   3.449   3.873    3.197    3.526  Primorsk      6.100   6.800   6.200   6.100    6.400    6.000  Yuzhny        0.824   0.810   0.835   0.850    0.325    0.421  Tuapse        0.368   0.346   0.353   0.364    0.390    0.399  Gdansk        0.000   0.128   0.124   0.128    0.278    0.286  Odessa        0.255   0.635   0.562   0.618    0.580    0.635  TOTAL        11.377  12.315  11.523  11.933   11.170   11.267  
(Reporting by Dmitry Zhdannikov; editing by Peter Blackburn)  

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