Gennady Shmal: "Russia can become less dependent on world oil prices"

Russia will participate in a technical meeting of OPEC and other oil-producing countries, scheduled for October 29 in Vienna. According to Russian Energy Minister Alexander Novak, participants of the meeting plan to discuss specific figures of oil production to stabilize the market. President of the Russian Oil and Gas Producers Union Gennady Shmal discussed the situation in the oil market in an interview with Vestnik Kavkaza.

- Observers talk about the crisis in OPEC more often recently. What can we expect from the meeting of OPEC in October, which will also be attended by Russian representatives?

- First of all, I think it is too early to talk about the crisis, because this organization still exists, it is currently responsible for about one third of world oil production, and in terms of trade - about 60%. Some countries work by themselves.

I don't think that the situation can be called a crisis, it just changed. Previously,  OPEC set clear quotas, tried to follow them, which affected the price, but today it is just one of the components, and not even the most important. Nevertheless, OPEC meeting may affect the price. March and September meetings have affected the price at the time. Today it is more than $51. Businessmen are cunning people, they are closely monitoring any occurring developments, so I think that the upcoming meeting can affect the oil prices.

- Iran is currently discussing long-term contracts on the supply of oil to Eastern European markets. Should Russia fear competition?

- There is nothing to fear, but we should not call them allies either. Although Russia actively favored lifting of the sanctions against Tehran. The emergence of Iranian oil in the market can affect the price, but it's not the most important thing. The most important thing is the development of world economy. If serious growth of the world economy will begin, at least 3-4%, then there will be a completely different demand for energy. Iranian oil, Russian oil, Iraqi oil, it just won't be enough. But if the economy will be stagnant, just like it is today, there won't be any demand.

One of the tasks that we have is to find a way to make Russia less dependent on world prices. This can happen only if we will make all oil-related products by ourselves, and not just gasoline and kerosene, but also high value-added products - plastic, composite materials and many other things. We even buy beach sunbeds in Turkey! So of course there are plenty of problems that should be dealt with.

- What can we do to reduce the cost of crude oil production?

- We must use technologies. For example, Bashkiria has very interesting scientific-production company 'Burintech', which produces drilling tools, among other things. Today, an entire borehole can be drilled by single chisel. And drilling takes just 2-3 days, not 10-15. Right now, chisel must be changed 4-5 times in oder to drill a borehole. It requires bringing all drill pipes up, replacing chisel, and only then you can continue the drilling. It costs a lot. Now it is possible to reduce the time and costs of the drilling process.

In addition, I'am talking about technologies that will allow to increase oil output. In the early 1970s, we produced approximately 45-49% of what we had, today - only 27%. Our biggest oil field is Samotlor. There million of tons of water at this field due to a huge watering. First it is extracted, and then it must be pumped back - it requires a lot of money and energy. Therefore it is necessary to seek technologies that will dramatically reduce watering. There is the Petroleum Chemistry Institute in Tomsk, which developed a number of very interesting direction, technologies, which can help to dramatically reduce it. To put it simply, there are a lot of issues that should be dealt with.

Today, small companies, not supported by the government, are often more effective than large ones, which have many officials that also must support football. Therefore, it is necessary to look for a way to significantly reduce costs, as well as for the most rational transportation schemes.