BELARUS NEWS AND ANALYSIS

DATE:

10/01/2007

Russia Holds Talks on Oil Production Cuts

MosNews

Russian officials and oil executives held talks to discuss output cuts, the Reuters news agency reports. The talks took place after a trade dispute with Belarus shut down a major export pipeline to Europe.

Energy Minister Viktor Khristenko met oil executives on Tuesday night and on Wednesday morning after President Vladimir Putin said Russian oil firms should consider cutting output if disruption along the Druzhba pipeline were not resolved quickly.

"Talks started late on Tuesday and are continuing today. The minister and oil firms discuss what to do in light of the halt of the Druzhba (pipeline), including oil production cuts," one source told Reuters.

European leaders have condemned the trade row between Russia and Belarus, which shut exports of over 1.4 million barrels per day, or one third of total oil exports, from Russia to five European states from Sunday night.

Moscow accuses Minsk of forcing the closure by stealing oil from the Druzhba pipeline, which serves Slovakia, Hungary, the Czech Republic, Poland and Germany, Europe's biggest economy. Belarus says Russia should pay higher transit fees.

Russian officials and traders say production cuts might be needed because the country, the world's second largest oil exporter, has no alternative routes to send crude abroad bypassing Belarus and cannot refine more at home.

"If Putin tells oil firms to get ready for production cuts, I would consider it very seriously. It means he is ready to go all the way in the dispute with Belarus," a second industry source said.

Russia produces over 9.7 million bpd and exports around five million. The biggest producers are private firms LUKOIL, TNK-BP and Surgut and state-controlled Rosneft and Gazprom Neft.

LUKOIL, Russia's largest oil company with daily output of 1.8 million barrels, said on Tuesday it hoped no cuts would be necessary. "We hope a compromise will be found and there will be no need to cut production," said spokesman Dmitry Dolgov.

Source:

http://www.mosnews.com/money/2007/01/10/oiltalks.shtml