Shmatko Says Major OPEC Cut Coming

Energy Minister Sergei Shmatko said Wednesday that OPEC members were preparing a "significant cut" in oil production and that output was likely to decline in 2008 despite government attempts to stimulate production.

Shmatko also said Russia would give political backing to LUKoil's bid for a stake in Spain's Repsol if the country's largest private oil company asked for support.

Shmatko, speaking to reporters after meeting OPEC representatives in Moscow, said Russia expected a significant reduction in output from member countries. The next OPEC meeting is scheduled to take place in Algeria on Dec. 17.

Russia, the largest oil producer outside the group, will make its own proposal at the same meeting, which it will attend as an observer, Shmatko said.

"We have prepared our concrete proposals and will announce them at the forum," he said.

"These are linked to measures to protect our national interests and to provide, in our view, fairer and more stable rules on the oil market."

Russian oil production would probably decline this year for the first time in a decade, Shmatko said, although his comments were not linked to any specific OPEC-related output cut plans.

"Company results over the last two to three months could lead to a decline of several percent, though not a large decline," the minister told reporters.

OPEC, the source of more than 40 percent of the world's oil, may trim production by as much as 2.5 million barrels a day next week, market players have said.

Commenting on LUKoil's reported plan to spend 10.7 billion euros ($13.84 billion) acquiring a stake in Repsol, Shmatko said Russia would support such a bid politically.

"We relate very positively to such measures. It would be interesting to us from the point of view of LUKoil entering the European market," he said.

"Without doubt, if LUKoil requires it, we will provide the relevant political support."

"We always have the support of the Russian government in our international projects," said Dmitry Dolgov, a spokesman for LUKoil. He declined to comment on a potential bid for Repsol, Spain's biggest oil company.

The Energy Ministry is preparing an alternative proposal for regulating electricity prices in 2009, Shmatko said, Interfax reported.

The move comes in response to a proposal by the Economic Development Ministry earlier this week to cap growth in electricity prices at 5 percent annually starting next year.

Such a price could "bring instability to the electricity market," Shmatko said.

Shmatko said the Energy Ministry's proposal would "give a positive result without seriously changing the pricing decisions already agreed upon."

First Deputy Prime Minister Igor Shuvalov said Wednesday that the government would make a decision soon on the tariff change and pledged a swift response to any "new situations," Interfax reported.

(Reuters, Bloomberg, MT)