Saudi Arabia and Russia studying new ‘working system’ for oil

There are suggestions that Russia, along with other countries, could join a restructured OPEC in the future, given weight by comments made by Crown Prince Mohammed bin Salman. (AFP)
Updated 12 June 2019

Saudi Arabia and Russia studying new ‘working system’ for oil

  • Headed by Khalid Al-Falih and Alexander Novak, the meetings were the sixth occasion the Saudi-Russian intergovernmental committee has convened
  • The meetings come with both countries recognizing the need for closer cooperation given the volatile outlook for the global economy, trade and energy markets

DUBAI: High-level talks between policymakers from Saudi Arabia and Russia last weekend in Moscow are likely to herald cooperation across a range of economic, commercial and cultural areas — possibly including a permanent mechanism to coordinate on oil supplies.
Headed by Saudi Energy Minister Khalid Al-Falih and his Russian opposite number Alexander Novak, the meetings were the sixth occasion the Saudi-Russian intergovernmental committee on economic, trade, scientific and technical cooperation has convened.
Al-Falih said there is “no doubt that the current situation at the global level, characterized once more by fluctuations, renders Saudi-Russian cooperation even more important. For this reason, we thoroughly look into setting a permanent working system among major oil producers, for future cooperation” in the global markets.
The talks involved around 50 technocrats and advisers on the Saudi side, with a similar number of Russians.
The meetings come with both countries recognizing the need for closer cooperation given the volatile outlook for the global economy, trade and energy markets.
At the end of the talks, Al-Falih said: “These meetings were held at a time when we have had more reasons to develop cooperation and integration, to achieve the goals set by both our countries.”
They followed talks in St. Petersburg between a top-level Saudi delegation and Vladimir Putin, the Russian president, who will visit the Kingdom in October.
“We, in the Saudi-Russian joint committee, completely agree that both the Russian ‘national projects,’ and the Kingdom’s Vision 2030 present new incentives, a big boost, and wider horizons to our efforts, due to the big similarities and possibilities of integration between the plans of the two countries,” Al-Falih said.
The topics discussed in Moscow covered investments in energy, petrochemicals, military industries, logistics and telecommunications, but also spanned “softer” areas like education and training as well as tourism and culture.

 

Some analysts took Al-Falih’s reference to a “new working system” as a suggestion that Russia and other oil-producing countries could become partners in a revamped version of the Organization of the Petroleum Exporting Countries (OPEC), which has helped regulate oil flows since 1960.
Robin Mills, CEO of consultancy Qamar Energy, said: “The Russians might want it for geopolitical reasons, the Saudis might want it for oil market management.”
David Hodson, managing director of energy finance firm BluePearl Management, said: “OPEC in its current form faces big challenges. A streamlined form would make the oil market easier to manage.”
There has been speculation before that Russia and others could join a restructured OPEC, and in 2018 Crown Prince Mohammed bin Salman said the Kingdom and Moscow were working on a “10 or 20-year agreement” on oil supply.
Currently 14 OPEC members are joined by 10 non-OPEC exporters in a deal to limit supply, which could be extended at a forthcoming meeting in Vienna, though both sides are still working on the details.
Apart from the oil market cooperation between Saudi Arabia and Russia, Al-Falih pointed to recent measures in the Kingdom over capital and investment flows from Russia, to improve entry procedures for businesspeople and move to electronic visas.
“(We) would like that the Russian side offers similar facilities to Saudi citizens, whether businessmen or investors, especially for those who are currently facing difficulties in getting Russian visas, due to long waiting periods, high tariffs, and inadequate visa time validity,” he added.
He also highlighted recent moves toward greater cooperation in renewable energy. There are also deals in the supply of agricultural produce, with Saudi Arabia set to become a major importer of Russian grain.
In tourism, Al-Falih said Saudi Arabia was keen to include Russia on the list of countries that can apply for the Kingdom’s new tourist visa, and would also like to encourage more Hajj and Umrah visitors from Russia.
In culture, Saudi Arabia has been chosen as guest of honor at the 2021 St. Petersburg Cultural Forum, having sponsored a prestigious art exhibition in the city last week.

FASTFACTS

There has been speculation before that Russia and others could join a restructured OPEC, and in 2018 the Saudi Crown Prince Mohammed bin Salman said the Kingdom and Moscow were working on a “10 or 20-year agreement” on oil supply.


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.