Caracas, February 16, 2016 (venezuelanalysis.com) – The governments of Venezuela, Russia, Saudi Arabia, and Qatar reached a deal Tuesday to freeze their crude oil output at January levels following a brief meeting in Doha.
The agreement between the countries is the first of its kind in the past fifteen years and represents the first coordinated action by major oil producers since global prices began their decade-low decline in the last quarter of 2014,
Over the past year, Venezuela has lobbied tirelessly for an international deal to cut production, efforts which previously bore little fruit due to the intransigence of Saudi Arabia and other countries who had ruled out any loss of market share.
Tuesday’s deal represents a compromise between cutting production outright– as favored by Russia and Venezuela– and allowing production to be determined freely by demand as previously advocated by Saudi Arabia, freezing output at record high January levels.
Venezuelan oil and gas minister Eulogio del Pino called the agreement “historic”, noting that the four countries together produce a total of 24 million barrels a day.
“There is a consensus between OPEC and non-OPEC countries to stabilize the world [oil] market,” he stated.
The accord will only go into effect on the condition that Iran and Iraq also agree to halt production increases, a consensus that may prove difficult to reach given the former’s desire to expand its market share following the lifting of sanctions and the latter’s costly war with ISIS.
According to reports, Tehran's representative to OPEC said it would be "illogicial" for Iran to cap its production at sanction levels, but said it was in favour of a general production cap.
Under sactions, Iran went from producing approximately 4.4 million barrels of oil on a daily basis to a significantly reduced 2.8 million.
On Wednesday, Del Pino will sit down with his Iranian and Iraqi counterparts in Tehran to discuss the proposed deal.
Venezuela Creates Military-Controlled Oil and Mining Company
Tuesday’s accord follows a new decree issued by Venezuelan President Nicolas Maduro last week establishing a new state oil, gas, and mining company under the purview of the Ministry of Defense.
According to the text of the law, the new Military Company for the Oil, Mining, and Gas Industries (CAMIMPEG) will have a mandate to pursue “everything relevant to licit activities of oil, gas, and mining services in general” and will be authorized to engage in “any licit commercial activity related to the [company’s] goal”.
These activities include the “import, export, distribution, commercialization” of products for the oil, gas, mining, and petrochemical industries, the provision of transport services on the “national and international level”, the “construction of public works in general”, among numerous others.
The company’s stock will be owned by the Venezuelan Ministry of Defense, which will be responsible for appointing the board of directors.
Under the decree, CAMIMPEG will be licensed to operate for a period of 50 years, which can be “extended or reduced in accordance with current laws”.