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Russia leaves door open to Opec deal even as output hits high

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Two senior Russian officials talked up potential cooperation with Opec to prop up prices, but data showed oil production in Russia hit a post-Soviet high in January, suggesting the world's top producer was locked in a fierce struggle for market share.

[MOSCOW] Two senior Russian officials talked up potential cooperation with Opec to prop up prices, but data showed oil production in Russia hit a post-Soviet high in January, suggesting the world's top producer was locked in a fierce struggle for market share.

Russia has in the last week sent mixed signals about possible cooperation with Opec to support prices. It first suggested it should start talking to Opec before saying there was no decision to do so.

On Tuesday, the pendulum swung the other way again.

Top oil producer Rosneft, after its head Igor Sechin met Venezuelan oil minister Eulogio Del Pino, said the two men had discussed possible join efforts to stabilise global oil markets.

Foreign Minister Sergei Lavrov also said Moscow was open to further cooperation in the oil market with Opec and non-Opec countries.

Despite the rhetoric, preliminary data from the Energy Ministry on Tuesday showed Russia was actively ramping up production adding to a global glut.

Production hit another post-Soviet high last month of 10.88 million barrels per day (bpd), up from 10.80 million bpd in December, the data showed.

Opec production also jumped to its highest in recent history in January as Iran increased sales after the lifting of sanctions and rivals Saudi Arabia and Iraq also boosted supply, a Reuters survey showed last week.

That suggests an intensifying battle for market share, a trend that runs counter to growing speculation about some kind of coordinated output cut.

"I very much doubt there will be any success in coordination - there is no consensus inside Opec itself," said Alexander Kornilov, a senior oil and gas analyst with Aton in Moscow.

According to Tuesday's data, Russia extracted 46 million tonnes of oil and gas condensate last month, up 0.7 per cent from 45.69 million tonnes in December. The increase was fuelled by Gazprom Neft, Bashneft, Novatek and projects under production sharing agreements.

Gas production was at 61.94 billion cubic metres (bcm) last month, or at 2 bcm a day.

"The growth was expected from Novatek, Bashneft and Gazprom Neft and I believe this trend will continue in the near future. Lukoil was the only one who actively cut drilling, while the picture was the opposite for others," said Kornilov.

On Monday, Russian Energy Minister Alexander Novak met Venezuela's Del Pino, who is visiting Opec and non-Opec countries to try to drum up support for joint action to prop up low crude prices.

Both discussed the possibility of holding joint consultations between Opec and non-Opec countries in the near future, the Russian Energy Ministry said.

Novatek, co-owned by its CEO Leonid Mikhelson, President Vladimir Putin's ally Gennady Timchenko and France's Total, started to pump oil at the Yarudeyskoye field last month at its full capacity of 3.5 million tonnes a year.

Gazprom Neft, the oil arm of state gas producer Gazprom , plans to start two new major oil projects, Novoport and Messoyakha later this year. That should help cover declines at other Russian brownfields countrywide.

Meanwhile, at the Samotlor field in Western Siberia, still one of the world's largest and which produced over 3 million bpd alone at its peak in the 1980s, drilling is under way to maintain production, a senior official told Reuters.

One of Rosneft's largest fields, Samotlor, produced 21 million tonnes of oil last year.

"The key task for 2016 is to stabilise production. All the programmes have already been approved," Valentin Mamayev, chief executive of Samotlorneftegaz, told Reuters.

He added that Samotlor plans to drill 227 new wells this year, twice as many as in 2014. "If we produce 20 million tonnes a year, this (Samotlor) could last for the next 50 years minimum," Mamayev said.

REUTERS