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The Fuel and Energy Complex of Russia - Series of Analytical Reports - 2011 (Russian Version)
National Energy Security Fund, February 2011
We present a traditional series of analytical reports devoted to main problems of development of the Russian oil and gas industry. Subscribers are provided with detailed descriptions of the condition of the Russian fuel and energy sector, the state system of administrating the sector as well as scenarios of its development in the medium-term perspective.
The range of sources used includes NESF’s in-house information, sectoral statistics, data from companies operating in the oil and gas sector, laws and bills, information from federal and regional mass media sources, materials of conferences and round-table meetings.
The series consists of 8 (eight) reports to be published in February through December 2011.
1.Prospects of Implementation of the Third Energy Package, the Future of the European Gas Market
(March 7th, 2011)
There is a fierce struggle for the European gas market. The Europeans portray an optimistic scenario of growing competition between producers: there is much talk about a sharp increase in LNG supplies, the beginning of shale gas production, the coming of new producers from the Caspian region and Central Asia to the EU market and about energy efficiency policies.
At the same time, the gradual economic revival, heightened attention to ecological issues and, the main thing, sharp decline in its own natural gas production play against Europe. Besides, China is increasing gas exports diverting gas producers from the EU market. Moreover, they are not happy with the price conjuncture in the EU and are not eager to compete against each other bringing prices down.
Under these circumstances Europe has completed development of the legal base of liberalization of access to the gas transportation infrastructure and started applying the Third Energy Package on the national level. The report will assess consequences of this policy. Special attention will be paid to possibilities of applying the Package provisions on Ukraine and to prospects of functioning of the Ukrainian gas transportation system.
2.New Legal and Fiscal Procedures in the Oil and Gas Industry
(April 18th, 2011)
The process of altering the legal base of activities in the Russian oil and gas sector has been very active in 2010 to 2011. This concerns the new law “On Oil” and amendments to the laws “On Subsoil” and “On Technical Regulations”. At the same time, all these laws have apparent traces of interests of certain administrative clans. Laws are becoming in fact dedicated; this is what actually happened to taxation procedures. The state refused working out common rules of the game allocating large-scale personal fiscal benefits to “correct” companies. The government certainly has some general initiatives such as the tax on excessive profits and promotion of exports of oil products through fiscal novelties. But strangely enough, these are secondary processes. Special attention will be paid to the influence of the oil spill in the Gulf of Mexico on the Russian legal base, which in particular is already reflected in the bill “On Protection of Marine Environment from Oil Pollution”. Changes in the conditions of work of non-residents in the RF will be also described.
3.Rearrangement of Property in the Oil and Gas Sector
(May 30th, 2011)
Preparations for the elections are accompanied by quite serious changes in the property structure of oil and gas firms. And this process will accelerate further after the elections. Consolidation of assets by Putin’s major clans is not finished yet. Serious changes are awaiting LUKOIL and TNK-BP whose owners, not accidentally, are looking for foreign projects more and more actively. The process of creating Russia’s new oil production major will be also very interesting. This process is currently unfolding on the basis of Bashneft that is being pumped with assets. Its merger with Russneft is to take place soon and later integration with Surgutneftegaz and then with Gazprom Neft may occur; the later may be included on the list of assets to be privatized. In general, the topic of privatization will be high on the agenda: completion of the transfer of licenses of large deposits to certain companies on beneficial conditions, selling a block of shares in Transneft and the state’s stake in the Novorossiysk seaport. Interests of some clans around Putin are behind these developments.
4.Export Policies in Russia’s Oil and Gas Sector
(July 18th, 2011)
Gazprom promised to sign a full-fledged contract on gas supplies with China by the summer 2011. Meanwhile, there is complete chaos in the minds of executive authorities: functionaries claim that China is ready to buy any amount of gas but during President Medvedev’s visit to the PRC in autumn 2010 the construction of the eastern gas pipeline was removed from plans. Thus, gas export plans are not clear yet. There is growing competition on the European market and there are too many problems with China. The situation in the oil sector seems to be a little bit clearer. The ESPO project is about to be completed with the access to the new market already in place. However, the BPS-2 project will be finished soon, and the issue of filling in the pipelines will become very acute. Similar developments will happen in the gas sector – it is hard to believe promises to produce 1 trillion cu m of gas in 2030.
The report will focus on the correspondence of production capacities to export plans, choice between piped gas and LNG, marketing policies of Russian oil and gas firms, government attempts to make companies export oil products instead of crude oil and prospects of such actions.
5.Central Asia and Caspian Region: Problems of Development and Transportation of Hydrocarbons
(September 5th, 2011)
The Caspian Sea region and Central Asia have long been considered a very promising area to develop deposits of hydrocarbons. However, projects in these regions do not develop as fast as they could. The legal status of the Caspian Sea is not defined yet but production has already started. Transportation of hydrocarbons from this area is also a problem. There is a real battle for supplies of Azeri gas. Turkmenistan is persistent in its attempts to pave way to its gas to Europe. A separate issue is the development of deposits in the Russian sector of the Caspian Sea.
6.State Administration of the Oil and Gas Sector before Completion of another Election Cycle
(October 24th, 2011)
Another reformatting of the executive power is coming; this time it is expected to be quite substantial since the next presidential elections will take place six years later. At the same time, having the new president (even if he is not actually new and was in this position four years ago) always means changes in the structure of executive authorities and the system of managing the economy with the oil and gas industry being its key sector. The report will elaborate on changes in the government structure that occurred on the eve of the elections and that are going to take place after them, dismissals and new appointments, redistribution of powers between state institutions, appointments of protégés of administrative and political clans in the ministries and agencies that are key for the oil and gas sector.
7.Gazprom’s Present and Future
(November 28th, 2011)
In 2011 the government intends to begin implementing a number of documents important for the gas sector. First of all, this is the General Plan of the Gas Sector Development until 2030 and the Program of Comprehensive Development of Oil and Gas Resources in Yamal. Different strategies certainly rarely become full-fledged guides for action in Russia. Yet, it is indeed high time for Gazprom to make the whole series of strategic decisions. The gas giant faces a number of challenges: it has to make up its mind about its export strategy (whether it should start gas supplies from Western Siberian deposits to China at the cost of supplies to Europe); to decide what to do with growing NOVATEK actively operating in Yamal; to figure out how to preserve monopoly on exports amid pressure by Rosneft; to see whether the stake on piped gas exports is right or it is necessary to revise its strategy of developing LNG business, including the Shtokman project. Another important issue is the pace of introduction of a new system of pricing on the domestic gas market and its future.
8.State Regulation of the Oil and Gas Sector in 2011, Prospects in 2012
(December 25th, 2011)
Over the past ten years we annually post our final report drawing up the results of a year in the oil and gas industry. This year is not an exception. The report will contain analyses of production results of the year, main novelties in the sphere of state regulation of the sector, changes in taxation policies, struggle for assets as well as a traditional forecast of the sector’s development in the medium-term perspective.