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Russian oil and gas sector under sanctions: main threats to the sector

Russian oil and gas sector under sanctions: main threats to the sector

Political confrontation between Russia and the West is increasing.

There are speculations about economic war. No wonder the Russian oil and gas sector is the main target of Western sanctions. Direct taxes on the oil and gas sector account for half of Russia’s consolidated budget.

“If you want to punish Russia, try hitting the FES” is the action plan of political opponents of Putin.

There should be no illusions – sanctions will not be lifted in the near future but, on the contrary, they will be expanded.

The sector is already facing three types of restrictions: serious hindrances on the way to obtaining credits, marketing problems and, most importantly, the ban on supplies of new technologies to Russia. The latter is the most painful sanction. It questions implementation of LNG projects, plans for developing offshore deposits and launching serious production of tight reserves in Western Siberia.

Key topics of the report:

  • Credit sanctions

    • The situation around the debt burden of Russian companies; how critical it is?
    • Possibilities of obtaining the money from the state budget
    • Prospects of replacing western credits with eastern loans
    • The refusal-to-pay scenario; what may follow the bankruptcy of some companies
  • The problem of investments, variants of state support

    • The oil and gas sector amid reduction in capital expenses
    • Applications of companies for state support
    • Struggle of clans for resources of the National Prosperity Fund: submitted applications, their chances to be fulfilled or cut
  • Low oil prices, devaluation effect

    • Companies generate losses from cheap oil but have a possibility to earn on devaluation
    • Saving on procurement: possibilities and realities
  • Technological sanctions

    • Analysis of restrictions
    • Most acute problems
    • Influence of sanctions on offshore projects
    • Possibilities of import replacement
  • Nonresidents in Russia

    • The first abandoned joint projects: departure of western concerns from the Arctic and Bazhenov formation projects
    • Prospects of independent development of these projects
    • Prospects of privatization, participation of nonresidents in this process
  • Forecast of further developments

Contents of the report:

INTRODUCTION. WILL SANCTIONS STAY LONG? 3
Sanctions Imposed on Russia 5
Sectoral sanctions imposed by the USA and Canada 5
EU sectoral sanctions 11
Chapter 1. RESTRICTED ACCESS TO CAPITAL MARKETS: OUTCOMES FOR RUSSIAN COMPANIES 18
1.1. Debt burden of Rosneft 20
1.2. Debt burden of NOVATEK 22
1.3. Debt burden of Gazprom Neft 24
1.4. Debt burden of LUKOIL 26
1.5. Debt burden of Gazprom 27
1.6. Debt burden of Transneft 29
1.7. Surgutneftegas as unique case in Russian oil and gas sector 30
Chapter 2. YAMAL LNG CASE: WILL SANCTIONS STOP ONE OF RUSSIA'S MOST AMBITIOUS PROJECTS? 33
2.1. Financial sanctions imposed on Yamal LNG 33
2.2. State financing of Yamal LNG 37
2.3. Technological sanctions imposed on Yamal LNG 38
Chapter 3. OFFSHORE PROJECTS AFTER SANCTIONS 41
Chapter 4. TIGHT OIL PROJECTS. ONSHORE COOPERATION WITH NONRESIDENTS. PROBLEMS OF IMPORT SUBSTITUTION IN THE SECTOR, THE FATE OF SERVICES BUSINESS 58
Chapter 5. IS THERE LIFE AFTER SANCTIONS? 71
Date of release: April 20, 2015

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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