Novak: inability to borrow worse than low oil prices

MOSCOW. Feb 16 (Interfax) – The lack of lending sources is having a worse effect on the Russian oil industry than the low price of oil, Energy Minister Alexander Novak said in an interview with Interfax.

“The main issue is the lack of lending resources, sources of financing, not the price of oil. Accordingly, due to the lack of financing, the volumes of their investment programs are declining, over borrowing. They can rely only on their own resources, their own revenue,” he said.

“A price of $70 per barrel for oil given the current ruble exchange rate or given partial strengthening is in principle entirely acceptable for the oil companies. The main thing is to have bank financing, at a normal interest rate. With the rate currently at 25%-30%, no one of course is taking out loans. Not a single project can withstand that,” he said.

Under the circumstances, the oil companies are maintaining investment to implement the biggest projects, but may revise drilling plans on a case-by-case basis.

“Perhaps the companies will cancel drilling into new horizons because these projects are not profitable with oil at this price or there is no opportunity to borrow the money from banks to develop them. The global projects that are currently being implemented: no one is planning to postpone them. Everyone will continue working,” he said.

Novak said previously that about 15% of investment plans that were to be implemented in 2015 may be postponed if low oil prices persist.