SPIEF 2012: Interview with Peter Caddy, Argus

Modern Russia spoke to Peter Caddy, business development director at energy price assessment provider Argus, in the margins of SPIEF, just after President Putin gave the keynote address. Caddy explained the reasons for the recent dip in oil prices, how Russia is behaving as a responsible producer and his take on President Putin’s speech.

Oil prices have slipped recently which puts pressure on producers like Russia. What can you say about this?

Oil prices are falling at present, and have been for about six months. It’s surprising that many people haven’t recognised that the fall has been going on, but in rather simplistic terms the price in the international market has fallen from around $125 dollars a barrel to now less than $100 a barrel. The fall is occurring for two reasons: the fact that we are facing a more uncertain, or indeed more worrying global economic environment, and the fact that producers are acting responsibly to reassure people that there will be a supply of crude and not at prices which they cannot afford, consequently international crude price has been declining for a while.

What could Russia be doing to make the market more stable?

Russia has always been a reliable supplier of oil and also a reliable supplier of gas. Russian oil companies want to export as much oil on normal commercial terms as they possibly can. So I don’t think there’s anything more that Russia can do in terms of exporting oil, more than it already has. [Russia has] a responsible attitude - responsible not only to its own people but also to its customers. So the flow of oil in Russian exports is there, it’s going to continue to be there and as Russian oil production increases the oil exports out of Russia will also increase on normal commercial terms. So I don’t think there’s much more Russia can do other than continually reassure people that as a responsible supplier, they will be there, meeting their needs.

Does the new administration make a difference from your point of view on the way investors see Russia?

I don’t think it makes any difference for Russian oil exports. I think in terms of the way investors see Russia, then obviously as with any new administration, even a new administration with politicians who have been in power for a while, people are going to want to see what type of fiscal and legal environment will be created going forward. President Putin gave a very powerful and a very positive speech today and I think everybody will want to see whether or not the attitudes and direction that the president laid out will actually be implemented.

How important is Russia in your global business?

Well, it’s very important for the economy as a whole: Whenever you look at the global economy and whenever you look at the oil sector, you can’t afford to ignore Russia.

I think there are always three levels of interest. The first is amongst consumers; there the issue is whether or not Russia is perceived to be a reliable supplier of oil and gas: constant reassurance is important.

The second area that people are always interested in is exports. The level of exports is going to continue and of course we are going through a period of investment assessment right now, regarding possible extra routes for the export of natural gas.

And the third area is obviously in production. Russia is a major producer of oil and indeed has major reserves of oil, so any independent oil company in North America or Western Europe would be more than willing to participate, in the right commercial way, with Russian companies, to see how Russian hydrocarbons can be efficiently and more fully exploited.

As the first day of SPIEF is drawing to a close, what are your impressions?

Well the key presentation is always going to be the presentation from the president, and President Putin, like [former] President Medvedev in the past, has projected a very positive future for the development of the Russian economy. And by that I mean reassuring outsiders that they will be able to repatriate their profits, ensuring that Russia is a willing partner in terms of investment and that the barriers to investment in Russia – the barriers that many countries face like corruption and bureaucracy – those issues are going to be addressed and dealt with. And as long as the administration can implement the strategy that the president has outlined then of course people will always be interested in seeing what the potential is for joint arrangements.

Founded in 1970, Argus provides price assessments, business intelligence and market data for the global energy and transportation industries