* Rosneft and Aramco chiefs discuss possible joint projects
* Relationship born out of necessity after oil price
* Russian election, Aramco IPO spurring need for dialogue
* Growing American shale oil output remains a big challenge
By Dmitry Zhdannikov and Vladimir Soldatkin
MOSCOW, June 1 A meeting between the two men who
run Russia and Saudi Arabia's oil empires spoke volumes about
the new relationship between the energy superpowers.
It was the first time that Rosneft boss Igor
Sechin and Saudi Aramco chief Amin Nasser had held a formal,
scheduled meeting - going beyond the numerous times they had
simply encountered each other at oil events around the world.
Their conversation also broke new ground, according to two
sources familiar with the talks in the Saudi city of Dhahran
last week who said the CEOs discussed possible ways of
cooperating in Asia, such as Indonesia and India, as well as in
The sources did not disclose further details, but any
cooperation in Asia between Russia and Saudi Arabia - the
world's two biggest oil exporters - would be unprecedented.
State oil giant Aramco confirmed the meeting took place but
declined to give details of the closed-door talks, which took
place on the same day as OPEC kingpin Saudi Arabia and non-OPEC
Russia led a global pact to extend a crude output cut to prop up
prices. Kremlin oil major Rosneft declined to comment.
The meeting - which also saw Nasser give Sechin a tour of
Aramco's HQ, according to the sources - gives an insight into
the newfound, unexpected and fast-deepening partnership between
the two countries. It is one that will be closely watched by big
oil consumers around the world which have long relied on the hot
rivalry between their top suppliers to secure better deals.
Such a detente between Moscow and Riyadh would have been
almost unthinkable in the past.
Up until a year ago, the two sides had virtually no dialogue
at all, even in the face of a spike in U.S. shale oil production
that had led to a collapse in global prices from mid-2014.
Sechin was strongly opposed to Russia cutting output in tandem
In a sign of their white-hot Asian rivalry, Rosneft outbid
Aramco to buy India's refiner Essar last year and boost its
share in the world's fastest growing fuel market.
Fast forward a matter of months, and Moscow and Riyadh have
become the main protagonists of the pact to cut output - agreed
in December and extended last week - and are even discussing
possible cooperation in their core Asian markets.
"It is a new 'axis of love'," one senior Gulf official said
of the relationship.
On Tuesday, Putin welcomed Saudi Deputy Crown Prince
Mohammed bin Salman in the Kremlin and both men said they would
deepen cooperation in oil and work on narrowing their
differences over Syria, where Moscow and Riyadh are backing
opposing sides in a civil war.
"The most important thing is that we are succeeding in
building a solid foundation to stabilise oil markets and energy
prices," said Prince Mohammed.
Putin said the countries would work together to resolve a
The first attempt at cooperation between the two countries
failed spectacularly with both sides unable to agree joint
actions at an OPEC meeting in December 2014, six months after
oil prices began tumbling from above $100 a barrel.
To add insult to injury, Sechin pledged to keep pushing
output higher, even if prices fell to $20 per barrel. Saudi's
then oil minister, Ali al-Naimi, retaliated by saying the
Russian oil output would collapse as a result of low prices, a
prediction that turned out to be wrong.
Much has changed since then, however, economically and
politically - and the unlikely partnership between Moscow and
Riyadh has been born out of necessity.
When oil prices collapsed, both economies were driven into
deficit after years of high spending and are only now slowly
recovering. With Russia heading for a presidential election in
early 2018, and Prince Mohammed having pledged to reform the
Saudi economy and publicly list Aramco, neither country can
afford another oil price shock.
The ousting of veteran minister Naimi and his replacement
with the more pragmatic Khalid al-Falih last year also appeared
to have helped, with their dialogue facilitated by OPEC's new
secretary general Mohammad Barkindo.
"If minister Falih says something, I know it will be done,"
Russian Energy Minister Alexander Novak said last week in Vienna
after Russia and OPEC agreed to extend output cuts.
Novak is looking to organise a trip for Falih to a Russian
Arctic field, having visited Aramco's facilities in the Empty
Quarter desert himself last October. "Last year, minister Falih
took us to a desert - we want to show him an ice desert," Novak
joked last week.
On Tuesday, Novak and Falih reiterated in Moscow they would
do "whatever it takes" to stabilise oil markets, borrowing a
famous phrase used by European Central Bank President Mario
Draghi five years ago to defend the euro.
They also discussed the outlook for non-OPEC production
including U.S. shale output, which has resumed growing over the
past year as private American producers have cut costs and
adapted to lower prices.
U.S. crude is now being exported all over the world and the
chances of private producers agreeing to cooperate with OPEC are
minimal because of tough U.S. anti-monopoly legislation.
"Both Russia and the Gulf countries are interested in some
type of oil price stabilisation and they hope that they can
achieve this without undertaking a sort of massive cuts which
they had to do back in the 1980s," said Paul Simons, a former
U.S. diplomat now serving as deputy executive director of the
International Energy Agency.
Saudi Arabia and Russia say they will remain in partnership
long after the current output reduction deal expires.
"It is necessary to work out new framework principles for
continued cooperation between OPEC and non-OPEC even after the
expiration of the Vienna agreements," Novak said on Wednesday.
Falih, for his part, ended his speech by thanking Novak in
(Additional reporting by Rania El Gamal, Reem Shamseddine,
Nerijus Adomaitis and Olesya Astakhova; Writing by Dmitry
Zhdannikov; Editing by Pravin Char)