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Announcement of a series of analytical reports «The fuel and energy complex of Russia» - 2014

The Fuel & Energy
Complex of Russia:
Reality and Possibilities – 2014

The National Energy Security Foundation presents 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 March through December 2014.

1. Russia on the liquefied natural gas market: is there response to old and new competitors?

(March 2014)

The market of liquefied natural gas is the most dynamic segment of the world gas business. Russia has been lagging somewhat behind in developing its LNG projects, and now it is trying to catch up. However, competition on the world LNG market remains tough.

Experts are awaiting Australian and American LNG on the market; offshore gas potential in southeastern Africa is discussed. Qatar that has already caused many problems to us is to decide on the future of its gas projects in 2014. Besides, competition on the foreign market overlaps with domestic competition.

Russian projects are starting to compete against each other. Gazprom, Rosneft and NOVATEK are promoting their LNG plants, while liberalization of LNG exports sharpens this competition. The question is which project will be completed? But the main thing is whether this struggle of Russian projects against each other will strengthen our standing on the LNG market?

2. Different approaches in the Russian oil industry: search for the strategic development vector

(April 2014)

There are three absolutely different approaches towards strategic development in the oil industry.

Production at traditional deposits in Western Siberia is going down, and it is necessary to find fields that will replace them in the medium-term perspective.

Otherwise, the future of not only the industry but also of the Russian budget will be unattractive. Russia can be compared to a knight standing at a crossing of three roads. Different recommendations are given: some experts recommend offshore development. Others believe it would be correct to focus on Eastern Siberia. And there are those who recommend forgetting the previous options and concentrate on development of untraditional oil in Western Siberia where reserves are hard to recover but where there is ready infrastructure for transporting hydrocarbons to sales markets.

However, it is impossible to have strong standing in all these spheres. Thus, the choice has to be made. The state should decide which direction is priority for promoting investments through tax preferences. And companies should realize which stake is the most reasonable.

3. Dragon hunting: Russia fighting its way to oriental markets

(June 2014)

Aggressive squeezing-out of Russia from the European market makes Moscow think more and more often about consumers in Asia. Moreover, this part of the world is forecasted to have stable growth in the demand for oil and natural gas. Yet, there are some difficulties. There is no clear understanding of the level of the demand and imports. Many things depend on success in development of domestic reserves of untraditional hydrocarbons. Moreover, it is important to realize the level of real competition against other suppliers of hydrocarbons in Asia.

Russia has competitive advantages, but some difficult questions arise. For instance, should we make price concessions to gain a foothold on this market? This issue hinders development of a gas dialogue with China. Meanwhile, existing oil contracts raise questions of efficiency of such a dialogue for the country.

4. Managing oil and gas sector: decision-making

(August 2014)

Confusion in the Russian energy policy leaves many questions regarding the decision-making system in the Russian oil and gas industry.

It is important to examine the real role of official institutions: commissions for the fuel and energy sector, corresponding ministries and agencies.

The report contains assessment of the administrative weight of heads and shareholders of major companies against state supervisors of the sector; the way the most crucial decisions for the sector are made is revealed.

5. Central Asia and Caspian Sea region: struggle continues

(September 2014)

The Caspian Sea region and Central Asia remain promising in terms of oil and natural gas production. The interest in this region is not declining. On the contrary, for the EU this is one of few options of gaining new suppliers of mainly natural gas to European markets.

However, China is gradually replacing Russia, which is a traditional competitor of the EU in the region. Assessing changes in this region has long been one of the priorities of the NESF.

6. State companies vs. private firms: two projects for the sector

(November 2014)

After Rosneft acquired TNK-BP many observes started speaking about nationalization in the oil industry. The country is haunted by expectations of creation of an “oil ministry”. Many experts expect a unified concern to be established in the country.

Rosneft’s aggressive policy adds confidence to them. However, it does not mean that president Vladimir Putin has the same opinion. The question is not only about economic efficiency – the question is about political expediency of such nationalization. Strengthening of some state companies can be viewed only as preparation for their privatization.

7. Gazprom: is there breakout strategy?

(December 2014)

Gazprom is having a rough time. The Europeans are not losing their grip and, falling into the same trap, keep believing in efficiency of their policy on restricting Gazprom’s presence in the EU. It is quite difficult to cut through a pipeline window to Asia.

On the domestic market, in addition to NOVATEK, there is aggressively growing Rosneft with plans of producing 100bn cu m of natural gas by 2020. Moreover, Gazprom has to learn to operate under the growing minerals production tax and frozen gas tariffs; meanwhile, the task of encouraging the country’s economic development through a trillion ruble investment program has not been canceled. Yet, Gazprom is used to difficulties.

The company has been under serious pressure over the past few years. The reason is clear – splitting Gazprom will enable some influential players to have some serious gains. However, Vladimir Putin has not ventured to launch restructuring of the company. This fact encourages Gazprom to build a strategy of defense and counter-offensive.

8. State regulation of oil and gas sector in 2014, prospects for 2015

(December 2014)

NESF traditionally concludes the year with a traditional report that sums up main events and tendencies of the year. The report contains analyses of production results of the year, main novelties in the sphere of state regulation of the sector, struggle for assets by leading clans as well as a traditional forecast of the sector’s development in the medium-term perspective.

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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