A preliminary agreement between Russia and three OPEC countries on a possible crude production freeze at January levels implies Russian output could grow by between 1.7% and 1.9% year on year, deputy energy minister Kirill Molodtsov said Thursday.
"As of mid-January, there was an annual increase of around 1.7% to 1.9% on the year in daily crude production," Molodtsov told reporters.
In an effort to stabilize global markets, non-OPEC Russian and OPEC members Saudi Arabia, Venezuela and Qatar agreed in Doha on Tuesday to freeze their output at January levels, if other major oil producers also join the initiative.
Molodtsov said it is hard to say at the moment whether Russia's crude production would continue to grow at the same pace through the year.
"There are three options: [output] can grow, it can remain stable, or we can regulate the production volume," he said
His comments are in sharp contrast to previous statements by various officials that regulating Russian crude output at will is impossible due to geology and climatic conditions. The government also cannot dictate what companies, especially private ones, do, officials have said.
The state does however have the option of raising taxes, which would make some resources uneconomic to develop in a low oil price environment.
With oil prices at multi-year lows, a fresh hike in taxes is becoming more likely as the government looks for ways to boost its coffers, which have been hammered by the oil price collapse.
The government is considering options to squeeze additional funds from the sector, on the heels of the latest tax hikes approved in late 2015, although no decisions have been taken so far.
Even if there are no changes to the current tax burden, various forecasts have predicted that crude production in Russia could start falling this year, as oil producers have started to cut investment in response to low oil prices and Western sanctions that have pressured company finances.
Still, there are a number of greenfields ready for launch this year that should mitigate natural declines in West Siberia, Molodtsov said.
The Doha production freeze pact comes at a time when both Saudi Arabia and Russia have been pumping record amounts of oil. Russia's crude production has hit fresh record highs for the past four months, averaging 10.88 million b/d in January.
The deal is contingent on Iran, Iraq, Oman, Kazakhstan, Azerbaijan, Mexico and other producers within and outside OPEC joining in.
Iran, however, appeared to have rejected a request to join in the proposed oil output freeze the day after the idea was announced, according to comments by Iranian oil minister Bijan Zanganeh after a meeting with his counterparts from Iran, Qatar, Iraq and Venezuela in Tehran.
The proposed freeze, if agreed, is expected to trigger a stock drawdown and lend support to prices, a senior OPEC delegate said Tuesday.
