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Russia Oil and Gas Report Q3 2012

The Russia Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's oil and gas industry.

BMI View: A high level of investment will be required to maintain Russian oil output at close to recent record levels, putting pressure on the domestic industry and hindering global expansion .Gazprom faces similar challenges in developing sufficient gas to meet European and, possibly, growing Asian demand. Revisions to the Russian tax and regulatory system will be required if Russia is to meet its targets.

The main trends and developments we highlight for Russia’s Oil and Gas sector are:
- Russian oil production reached a post-soviet high of 10.29mn barrels per day (b/d) in 2011, according to preliminary data from the country's energy ministry. This represented a rise of 0.4% month-onmonth (m-o-m). Production rose owing to the implementation of a new tax structure, which includes a reduction in export duties on crude and certain refined products. Duty on Russian oil exports has been cut by 4.3% to US$53.62 per barrel (bbl) from US$56.13 per bbl, according to a decree published in the Rossiiskaya Gazeta newspaper.

- Production from the Vankor field averaged 250,000b/d in 2010. Peak production capacity of 500,000b/d is expected by 2014. Lukoil has now brought into play its Yuri Korchagin field, one of the first to be developed in Russia’s section of the Caspian Sea, with a peak capacity of 50,000b/d. TNKBP is pushing ahead with further development of the Uvat oil project in the Tyumen region of West Siberia. The company expects to reach peak output of around 220,000b/d in 2015-2016. BMI is assuming average Russian production of 10.29mn b/d in 2011, with scope for an increase to 10.61mn b/d by 2016. The economy ministry’s latest long-term production forecast sees output stable at 10.60mn b/d in 2015-2020. However, we see output slipping from its 2016 peak to 10.36mn b/d by 2021.

- Beyond 2011, Russian oil consumption is expected to rise at an average rate of 3.08% per annum, much faster than supply expansion. Oil consumption, which is believed to have hit 3.12mn b/d in 2011, should therefore edge towards 3.60mn b/d by 2016 – providing export potential of 7mn b/d.

- With Russia having produced an estimated 630bn cubic metres (bcm) of gas in 2011, BMI’s latest projections show output rising to 723bcm by 2016 – dependent on growth in European demand. Gas output rose 3.7% year-on-year (y-o-y) to 547bcm in January-October 2011, and was up 4.7% y-o-y at 56bcm in October 2011, according to RosBusinessConsulting, which refers to data released by the energy ministry. Gas exports climbed 9% y-o-y to 159bcm in the first 10 months of 2011, but slid 14.5% in October to 14bcm. BMI is anticipating gas exports of close to 200bcm by 2016, thanks to domestic consumption reaching almost 530bcm.

Russia’s dependence on oil prices leads to high volatility in the country’s export revenues. We assume tight supply due to booming demand in emerging markets will present opportunities for the country. As a result, we assume OPEC basket oil prices will increase from US$107.52 per barrel (bbl) in 2011 to US$111.47/bbl in 2012, thus creating upside risk to the Russian macroeconomic outlook.
BMI Industry View 7

SWOT Analysis 8

Russia Oil and Gas SWOT 8

Global Energy Market Outlook 9
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) 10
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) 15

Regional Energy Market Outlook 16

Russia Energy Market Overview 20
Table: Russia – Upstream Projects Database 22

Industry Forecast Scenario 25

Oil And Gas Reserves 25
Table: Russia Oil & Gas – Historical Data And Forecasts, 2009-2016 27
Table: Russia Oil & Gas – Long-Term Forecasts, 2014-2021 29

Oil Supply And Demand 31

Gas Supply And Demand 32

LNG 35

Refining And Oil Products Trade 36

Revenues/Import Costs 37

Key Risks To our Forecast Scenario 37

Oil And Gas Infrastructure 38

Oil Refineries 38

Central Federal District 38

North West Federal District 38

Southern Federal District 38

Volga Federal District 39

Urals Federal District 39

North Caucasus Federal District 40

Siberia Federal District 40

Far East Federal District 40
Table: Refineries In Russia 42

Oil Terminals/Ports 43

Oil Pipelines 43

LNG Terminals 45

Gas Pipelines 48

Regional and Country Risk/Reward Ratings 51
Table: Upstream Risk/Reward Ratings 53
Table: Downstream Risk/Reward Ratings 55

Russia Upstream Rating – Overview 57

Russia Upstream Rating – Rewards 57

Russia Upstream Rating – Risks 57

Russia Downstream Rating – Overview 57

Competitive Landscape 58

Executive Summary 58
Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector 59

Overview/State Role 60

Licensing And Regulation 60

Government Policy 63

International Energy Relations 64

Gas Transit And Marketing 68

Oil Transit 73
Table: Key Upstream Players 76
Table: Key Downstream Players 77

Company Monitor 78

Gazprom 78

Gazprom Neft 83

Rosneft 86

Lukoil 90


Tatneft 98

Total 100

Imperial Energy 103

Novatek 105

Russneft 108

Surgutneftegaz – Summary 110

Sistema – Summary 110

Bashneft – Summary 110

Itera – Summary 112

Royal Dutch Shell – Summary 113

ExxonMobil – Summary 113

Transneft – Summary 114

Sakhalin Energy – Summary 115

Wintershall – Summary 115

Lundin Petroleum – Summary 115

Irkutsk Oil Company – Summary 116

Aladdin Oil & Gas – Summary 116

Chevron – Summary 116

PetroNeft – Summary 117

Alliance Oil/Repsol – Summary 117

Others – Summary 118

Former IOC Partners – Summary 120

Central And Eastern Europe – Regional Appendix 121
Table: Oil Consumption Forecasts, 2009-2016 (000b/d) 121
Table: Oil Consumption Long-Term Forecasts, 2014-2021 (000b/d) 121
Table: Oil Production Forecasts, 2009-2016 (000b/d) 122
Table: Oil Production Long-Term Forecasts, 2014-2021 (000b/d) 123
Table: Refining Capacity Forecasts, 2009-2016 (000b/d) 123
Table: Refining Capacity Long-Term Forecasts, 2014-2021 (000b/d) 124
Table: Gas Consumption Forecasts, 2009-2016 (bcm) 124
Table: Gas Consumption Long-Term Forecasts, 2014-2021 (bcm) 125
Table: Gas Production Forecasts, 2009-2016 (bcm) 126
Table: Gas Production Long-Term Forecasts, 2014-2021 (bcm) 126
Table: LNG Gas Exports Forecasts (bcm) 127
Table: LNG Gas Exports Long-Term Forecasts, 2014-2021 (bcm) 127

Glossary Of Terms 129

Oil And Gas Risk/Reward Ratings Methodology 130

Ratings Overview 130
Table: BMI’s Oil & Gas Business Environment Ratings – Structure 131

Indicators 131
Table: BMI’s Oil & Gas Upstream Ratings – Methodology 131
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology 132

BMI Methodology 134

How We Generate Our Industry Forecasts 134

Energy Industry 134

Cross checks 135

Sources 135
Companies Mentioned
Gazprom , Gazprom Neft , Rosneft , Lukoil , TNKBP , Tatneft , Total , Imperial Energy , Novatek , Russneft , Surgutneftegaz Summary , Sistema Summary , Bashneft Summary , Itera Summary, Royal Dutch Shell Summary , ExxonMobil Summary , Transneft Summary , Sakhalin Energy Summary , Wintershall Summary , Lundin Petroleum Summary , Irkutsk Oil Company Summary , Aladdin Oil & Gas Summary , Chevron Summary , PetroNeft Summary , Alliance Oil/Repsol Summary ,
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