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State Regulation of the Oil and Gas Sector in 2010, Outlooks for 2011

State Regulation of the Oil and Gas Sector in 2010, Outlooks for 2011

The oil and gas industry seems to be at standstill waiting for serious novelties prepared by the government: changes in the taxation sphere are actively discussed, variants of privatization of state assets in the oil and gas sector are considered and there are speculations about possible revision of licensing, conditions of offshore work and even return to the PSA procedures.

At the same time, there is no distinct plan – on the contrary, the situation constantly changes. The matter is that several processes overlap each other. There is expectation of soon beginning of decline in production and approaching of a new election cycle, which does not allow Vladimir Putin to define the role of the oil and gas sector. The prime minister does not know whether the industry should be given a tax break in the situation when before the elections it is necessary to raise social expenses. The premier does not understand whether oil and gas companies should be allowed to earn more on the domestic fuel market or to recognize growth in prices socially and economically dangerous.

An additional factor is growing competition of main administrative and political clans in Russia on the eve of elections. Clans fight against each other for new transportation routes, control over exports and schemes of selling state property.

The report elaborates on the following topics:

  • Preliminary production results of the year

    • Formally optimistic parameters do not mean wellbeing
    • Major hindrances in the Russian upstream and downstream segments
  • Pipeline wars

    • Choosing export routes of Russian hydrocarbons is one of the most dramatic topics in struggle between Russian administrative and political groups
    • Creation of the system of transferring hydrocarbons from the west to the east
    • The new law “On Oil” as an instrument of administrative control over exports
    • Shortage of money on pipelines amid demands of major clans for new construction
  • Situation on the domestic fuel market

    • Why was transfer to the principle of equal profitability on the domestic gas market postponed?
    • The election campaign and its influence on prices of gas and oil products
    • War between the Federal Anti-Monopoly Service and oil producers and the reasons of its failure
    • The test of the system “low taxes on gas firms and low domestic prices; high taxes on oil firms and high domestic prices on oil products”
  • Struggle around taxation of the oil and gas industry

    • Collision of the pre-election and production logic
    • The situation around export duties on oil products
    • How to encourage processing and simultaneously solve the “Belarusian puzzle”
    • Switching from the general fiscal policy to a dedicated one – emergence of too many projects with special fiscal rules
  • Property redistribution

    • Public beginning of the phase of the big Putin privatization
    • Preparing for sale of large assets
    • Simultaneous continuation of quiet privatization – transfer of licenses from the undistributed subsoil reserve to state and private companies
    • Political results of the Trebs and Titov tender
  • Medium-term forecast of developments during the period of election turbulence

The contents of the report:

Introduction 3
Chapter 1. Production Results of The Year 4
Chapter 2. Struggle for Transportation Routes 17
Chapter 3. Domestic Market: Between Interests of Sectoral Players and Election Logic 25
Chapter 4. Taxation of Oil and Gas Industry: from the General to the Particular 30
Chapter 5. Property Redistribution on the Russian Oil and Gas Market 40
Chapter 6. Main Legislative Initiatives 50
Forecast of Developments in 2011 54
Date of issue: December 29, 2010

If you are interested to obtain please contact » Elena Kim

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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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