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State regulation of the oil and gas sector in 2018, prospects for 2019

State regulation of the oil and gas sector in 2018, prospects for 2019

NESF traditionally concludes the year with its final report that sums up main events and tendencies of 2018. The year was rich in events in the political and production spheres.

A new government was formed in Russia in May. Oil prices were either rising or falling, which led practically to termination of the OPEC+ deal and then to feverish attempts to reformat it.

Gazprom set another record in gas exports and completed construction of two lines of the TurkStream, while NOVATEK launched three trains of its LNG plant in Yamal. It was happening on the background of the Europeans’ desperate struggle against the Nord Stream 2 and threats to import LNG from America.

The deal on selling a stake in Rosneft to Chinese investors failed, which was a heavy blow to the state company. This, however, did not hinder Rosneft from participating in corporate battles throughout the year.

The year 2018 was marked by a new tax system for oil producers; it includes acceleration of the tax maneuver, introduction of the excess profit tax (EPT) as an experiment, as well as negative and dampening excises for producers of petroleum products.

Growth in domestic fuel prices and ways to counter it were actively debated throughout the year. It is a general scene of the year 2018.

You can find out details in the NESF report that elaborates on the following topics:

  • The new system administrating the oil and gas sector in action

    • The first results of work of a new Deputy PM responsible for the sector
    • “Privatization” of the Ministry of Natural Resources and consequences of it
    • Attempts to restart the Presidential Commission on the Strategy for the Development of the Fuel and Energy Sector and Environmental Safety
    • The new role of the Ministry of Energy
  • Another package of tax novelties

    • The tax regime in the oil sector was again revised in 2018. It was decided to speed up cancelation of export duties and simultaneously increase the minerals production tax (NDPI).
    • As compensation, the sector is finally allowed to test a new tax regime – the excess profit tax. However, the situation around the EPT is not simple, while acceleration of the tax maneuver is fraught with growth in domestic fuel prices. The Cabinet was struggling with this problem the whole autumn. Is the found solution reasonable?
  • The Arctic was the top topic in 2018

    • The state again brought back the Arctic issue onto the agenda. A new system of state administration of this region is being created; there are quite serious battles between main clans.
    • The Arctic is the zone of keen interest of many oil and gas companies; this is why, they cannot fail to take part in these battles.
  • Production and financial results of 2018

    • How does the OPEC+ deal influence the oil output level?
    • How does the level of exports and domestic demand for natural gas in Russia define the gas output level?
    • Investment activity and profitability of companies.
  • Corporate wars in 2018

  • What should be expected in 2019?

    • Political, production, financial and fiscal expectations from the new yea

Contents of the report:

Introduction 3
New system of checks and balances in the Russian FES 5
Maintaining the growth: production results of the year in the oil industry 9
Russia's gas sector: production and exports amid growing demand in the world 22
The challenging road to offshore projects 33
Tax policies 40
Acceleration of the oil and gas market repartition: new challenges of independents 52
Medium-term forecast of developments 55
Date of release: January 14, 2019

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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