Russian oil production growth rate expected to fall in 2006

Vladimir Putin met on Tuesday the industry and energy minister Viktor Khristenko. During the meeting minister announced the situation conserning oil production. The growth of oil production, Russia's main source of revenue, is expected to be much lower next year.

Production growth rate could drop below 2%. In January-August this year oil output had only increased 2.5%. Last year, it went up 10%. A number of measures was announced Tuesday to address the issue. Putin suggested encouraging oil companies to develop and invest in new fields."

Khristenko proposed tax breaks for oil companies developing hard fields and urged infrastructure modernization. In Vienna, the Organization of the Petroleum Exporting Countries (OPEC) was expected to finalise measures to curb soaring oil and petrol prices and prevent supply disruption.

Deputy Industry and Energy Minister Andrei Reus told OPEC Russia shared global concerns about a surge in oil prices. Reus also said Russia's production "helped compensate for losses from the fall in oil output in the North Sea, the United States and other regions." Back home the Russian government was working to stabilise domestic petrol prices, which are dependent on global markets, and promote oil industry development. The government set up a special group to tackle the task, RIA Novosti reports.

On Monday, Khristenko met with the country's largest oil companies, which promised to freeze retail petrol prices until the end of the year. The ministry said the oil majors had made the decision voluntarily. But freezing only retail prices appeared to be not enough. Some experts and officials voiced concerns the move could damage private gas stations. The Federal Anti-Monopoly Service threatened sanctions against companies, which decline to freeze wholesale prices as well. Sibneft oil major's press secretary said the company would fix both retail and wholesale prices.

The government-owned Rosneft said freezing both retail and wholesale prices was only logical, but only decided to fix retail prices so far. Other oil majors are yet to make a final decision on the matter.