Saudi Arabia and Russia are working on a long-term deal to extend their alliance on oil curbs that began in January 2017, after a crash in crude prices.
“We are working to shift from a year-to-year agreement to a 10-20 year agreement,” Saudi Crown Prince Mohammed bin Salman told Reuters news agency. “We have an agreement on the big picture but not yet on the details.”
In 2014, oil prices plunged from over $100 a barrel to below $30 a barrel, shaking the economies of oil-producing nations.
Crude prices have since recovered to $70 a barrel, but the fast-rising output from US shale producers has capped prices.
Russia is not a member of OPEC but has worked alongside the 14-member group during previous oil surpluses. Moscow’s involvement until now has been considered unique, but a 10 to 20 year deal between the two would be unprecedented.
News of the potential oil alliance came at a time when the two countries have been working to cement an economic relationship, despite their differences over the conflict in Syria, where they back opposing sides.
Saudi Arabia has long sought to raise prices to fund economic and social reforms at home, the main goal being to eventually reduce the kingdom’s reliance on oil-related income.
It also needs higher oil prices so its state energy giant, Aramco, can achieve the $2 trillion valuation it is aiming for to support a successful stock market listing. Time is running out for an initial public offering this year, but the crown prince said it could still take place at the end of 2018 or early 2019.
Oil price stability would also allow greater investment into oil and gas to meet future demand, according to Saudi Arabia.
Last October, Saudi King Salman became the first Saudi monarch to visit Russia, providing investment and political support for Russian economy battered by Western sanctions.
A meeting between the Saudi crown prince and Russian President Vladimir Putin on the sidelines of a G20 meeting in China in 2016 was instrumental in bringing Russia on board to support OPEC and non-OPEC oil curbs.