Russia Seeks Greater Control on Crude Prices

By Lyubov Pronina

Sept. 25 (Bloomberg) -- Russia, the world's largest energy supplier, wants greater control over oil prices as it seeks a stronger say in the global economy, Energy Minister Sergei Shmatko said.

The Energy Ministry is working on a set of measures, including the development of ``reserve'' fields that can be used to increase or decrease national oil output quickly, and will present them to members of the Organization of Petroleum Exporting Countries at a meeting in Algeria in December, Shmatko said today.

``There has to be a Russian factor'' in determining world oil prices, ``and maybe not just one,'' Shmatko told reporters in Petropavlovsk-Kamchatsky, the capital of the Far East Kamchatka region. Shmatko is traveling with President Dmitry Medvedev on a weeklong tour of remote regions to assess their economic potential.

Oil production in Russia, the largest exporter of the fuel after Saudi Arabia, is declining for the first time in a decade as companies struggle with costs and maturing fields. The government is granting tax breaks to producers to encourage development of fields in remote regions.

At the same time, price volatility is making it harder for companies to plan capital expenditures for expansion. The price of Urals crude, Russia's main export blend, has fallen 30 percent since July 4, when it reached a record high of $142.94 a barrel.

With such ``rollercoaster'' swings, Russia must take measures to better influence price performance, including some that ``may be unexpected,'' Shmatko said.

Medvedev sent Deputy Prime Minister Igor Sechin to OPEC's meeting in Vienna on Sept. 10 to forge closer ties with the producer group and offer to sign a memorandum of understanding. Sechin, who is also chairman of OAO Rosneft, the country's biggest oil producer, said at the time that ``extensive cooperation with OPEC is one of Russia's priorities.''

OPEC's Secretary General Abdalla el-Badri on Sept. 10 said he would further discuss details of the memorandum suggested by Russia at a petroleum conference that he would attend in Moscow on Oct. 22.

Russia has been an observer at OPEC meetings for 10 years. The organization controls more than 40 percent of the world's oil supply. Its membership will drop to 12 from 13 in 2009 after Indonesia decided to quit the group because it became a net oil importer.

-- With reporting by Eduard Gismatullin in Moscow and Maher Chmaytelli in Cyprus. Editors: Brad Cook, Shaji Mathew.

To contact the reporter on this story: Lyubov Pronina in Petropavlovsk-Kamchatsky, Russia, via the Moscow newsroom at lpronina@bloomberg.net