President of Russia Dmitry Medvedev: Igor Ivanovich, let us begin with national issues – perhaps with one of the most relevant ones: the beginning of springtime agricultural work and the capability of our agricultural companies to buy fuel products in current conditions, by which I mean the price policy of this issue. The success of all agricultural work in the near future depends on whether we can achieve a reasonable balance. Please tell me about what has been done, what suggestions you have, and what we will suggest to our countrymen this year.
And I would like to discuss a second topic, which we have already talked about before. I instructed you specifically to coordinate our interaction with member-countries of OPEC, and the world’s main oil exporters in general. Right now, the situation is not very simple. Oil prices are low – in my view, they are unreasonably low. So the countries that export oil are currently coordinating their positions.
We received the OPEC delegation some time ago, and you went to the corresponding session. I would like to find out how things are going, what agreements we are heading toward, and what, in your view, are the prospects for regulating these issues throughout the world. Please tell me about all issues relating to this situation, and let’s think about what to do next.
Deputy Prime Minister Igor Sechin: Dmitry Anatolyevich, I’ll talk about the first issue. Last week, there was a Government presidium where preparations for springtime agricultural works were discussed, and the Prime Minister gave a number of instructions. According to those instructions, I have worked together with the Ministry of Agriculture, the Ministry of Energy, the Federal Taxation Service, the Federal Antimonopoly Service, and all government offices concerned and oil companies; we have arrived at several unified positions.
First. This year, in order for agriculture-producing companies to obtain necessary volumes of fuel, oil companies will use average weighted pricing for diesel fuel and low-octane gasoline, which will correspond with the level of prices from January 15 of this year. This price will be the lowest in the last 3 years, since 2007.
Dmitry Medvedev: When will we be able to announce this price?
Igor Sechin: We can announce it now; in fact, I was about to announce it to you. We are talking about the selling price at oil refineries: for diesel fuel, the price is about 13 823 roubles [around $390] per tonne, for 76-octane gasoline, the price is 12 589 roubles [around $360]. But I would like to emphasize that this is the average weighted pricing at oil refineries, the selling price which will be applied all throughout the spring planting season.
The volume requested by agricultural producers is around two million tonnes. In the regions, the price will differ somewhat, depending on the distance for fuel deliveries. But this price will be used by all oil refineries for supplies directed toward agriculture.
Second. In order to eliminate intermediaries from the fuel supply process and to deliver directly to the agricultural producers, we are jointly suggesting, along with the Ministry of Agriculture, to organise a unified supply channel. Using the Russian Agricultural Bank as a base, a special company will be created to deal specifically with this issue. Its supervisory council will include representatives of the antimonopoly service, the taxation service, the Ministry of Energy, and the Ministry of Agriculture, and it will serve as a unified channel.
This company will obtain the necessary volumes of fuel (those fuel volumes have already been divided between companies). It will conduct business with the oil companies and will transfer fuel at the unified prices for agriculture-providing companies. We are counting on such a system to be taken into account in setting the prices of agricultural products for Russians.
Dmitry Medvedev: You know that for agricultural producers, the most important thing is stability, the predictability of price policies, including for the petrochemicals they use and for combustive-lubricating materials. In this regard, it is good that we have formed a base price, which should be applicable to all oil refineries, and that this price has been announced. Thus, it should be used in interactions with agricultural producers, including through the use of the plan that you spoke about. It is particularly important to do this during the early period of springtime agricultural works.
I would like for you to discuss this issue separately with the new Minister of Agriculture and simply help her with this issue, so that this information is accessible to our new colleague.
Igor Sechin: Absolutely. And I would like to add that if agriculture-producing companies are unable to collect the volumes they need in due time, in order to prevent overflow at oil refineries and petroleum storage facilities, we have made an agreement with the Russian Agency for State Reserves and Transneft to transfer that fuel to the Russian Agency for State Reserves and deliver it when it becomes needed.
Dmitry Anatolyevich, based on your instructions, we are constantly working with OPEC and other major oil producers. This situation is inarguably directly linked to the exacerbation of the worldwide financial crisis. Based on data from OPEC and independent experts, crude inventory is currently on the market for up to 62–63 days. This volume influences market indicators and leads to price decreases.
Coordinated action with OPEC and other major oil-producing countries has already led to certain results, stabilising the price at around 40 dollars. We feel that this is the result of cooperative work. We support cutting deliveries to markets, and Russia is a participant in this work.
I can tell you that the decrease in crude production at the end of last year was based on a decrease in prices; in Russia, it came to three million tonnes, and crude oil deliveries for export were cut by 15 million tonnes for the whole year. That is why we feel that the input of Russian companies played a role in stabilising prices; still, this work needs to continue.
We also feel that we must diversify our work. The new mechanisms and instruments that you spoke about must be applied, including new commercial platforms and new markers. Unfortunately, at this time, only two types of oil are mainly being traded on the world markets: Brent and WTI. All Russian oil types, for example, have coefficients, as is also the case for other national oil producers, such as Arabian Heavy, Arabian Light, and Venezuelan Heavy.
Dmitry Medvedev: And fairness in regard to these coefficients raises some doubts.
Igor Sechin: That is why we suggest insistently, consistently moving toward organising a new system of pricing. In this regard, as I mentioned, the issue of reserving crude oil and oil derivatives takes on particular importance, given the presence of large reserves. These are also suggestions that we will be making.
Furthermore, Dmitry Anatolyevich, based on your instructions, we will make suggestions on organising an international conference of major oil producers and will invite OPEC countries and other oil-producing countries, oil transport companies, and other market participants to a conference in Moscow at the end of the year on your behalf. We will further continue this work, and on March 15, based on your request, I will go to Vienna, where the next OPEC session will be held, and will brief you on its results.
Dmitry Medvedev: Very well. I have already talked many times about the fact that Russia is interested in stable, predictable, fair pricing for oil. We do not want excessively high prices, which would have a destructive effect on the structure of the economy, and we certainly do not want a significant drop in prices, below what would be considered fair.
In order to achieve fair pricing, international communities, Organisation of Petroleum Exporting Countries, and other countries with which we have friendly relations, will need to make certain efforts, in order not to allow the crisis to expand and the economy to further decline.