Page 9 - FSUOGM Week 14 2022

FSUOGM COMMENTARY FSUOGM

(tpy) of LNG by the end of the decade now looks market it is likely that alternative buyers would
doubtful. be found if suitable discounts are offered, as is
“The resources are certainly in place, but the already being seen.”
market for any LNG is now more limited and the However, an increasing share of Russian oil
availability of Western liquefaction technology production is coming from hard-to-recover res-
could certainly undermine development pros- ervoirs, offshore, using enhanced oil recovery
pects, as the domestic Arctic Cascade technol- (EOR) and other difficult sources such as tight
ogy is limited to small trains at present,” the OIES oil and shale, the OIES said.
said. “It is here where production might be at
Prospects for Rosneft’s Far East project look risk in the medium term, as new develop-
bleak, given ExxonMobil’s departure, the OIES ments become more remote and the technol-
said, although it noted that it was already unclear ogy required to develop more complex fields
how much the US major was committed to the is in shorter supply as Western oil companies
project. and, perhaps more importantly, service com-
As for oil production, the impact of the West- panies end new investment and start to exit
ern departures “varies by location and times- the country,” the institute said. “This leads
cale.” Gazprom, Rosneft and others are more to the conclusion that short-term Russian
than capable of maintaining output at traditional oil production is not at risk from a technical
Russian oilfields, the OIES said, and the domes- perspective, but the medium-term prospects
tic service sector has developed the abilities to may be.”
keep production at the current level. The OIES concludes by saying that "collapse
“As a result, the major risk to short-term Rus- in output is not forecast and a short-term decline
sian oil production is a lack of market for Russian will be driven more by market forces than tech-
crude and oil products,” the OIES said. “If import nical issues, but the risk of Russian oil produc-
bans become more widespread and effective tion being markedly lower by 2030 has increased
then oil production could be shut in, although as a result of the reaction to the current war in
it should be borne in mind that in a liquid global Ukraine." ™

INVESTMENT

Glencore rules out Russian divestments

RUSSIA SWISS commodities trading giant Glencore has regarding commodities of Russian origin, unless
ruled out divesting its equity stakes in Russian it is directed to do so by government authorities.
Glencore was scaling oil company Rosneft and Russian aluminium Glencore is a major trader of Russian oil, and it
back in the country and hydropower company En+ in the wake of also trades LNG produced at Novatek’s Yamal
before the invasion Moscow’s invasion of Ukraine. LNG project in Russia’s far north.
began. Glencore has a 10.55% stake in En+ and a Even though an increasing number of the
0.57% interest in Rosneft, acquiring the latter world’s biggest companies have announced plans
investment during the national oil company's par- to leave Russia, commodity trading houses have
tial privatisation in 2017. Announcing the com- quietly continued their business there. These
pletion of a review on March 30, Glencore said it traders have historically been willing to operate
had “concluded that there is no realistic way to exit in the most difficult jurisdictions, and it is only
these stakes in the current environment.” It added Gunvor and Glencore that have said they will not
that it had no board of management representa- pursue new business in the country.
tion at either of the Russian companies. Others like Trafigura have made no such
The fair value of these assets at the end of commitment. However, the company did say on
last year was $789mn and $485mn respectively, March 2 that it was reviewing its shareholding in
Glencore said last month. Rosneft’s Vostok Oil project in the Russian Arc-
The trader’s position is similar to that of tic. Trafigura bought a 10% stake in the cluster
France’s TotalEnergies, whose CEO Patrick of oilfields mostly located in the Krasnoyarsk
Pouyanne recently said that finding a non-Rus- region in January 2021.
sian buyer for its interests in Novatek and its It was expected that Vostok Oil might one day
LNG projects in Russia would not be possible at yield 2mn barrels per day (bpd) of high-quality
this stage, and so such divestments would only Russian oil. But the project is still at the appraisal
serve to “enrich Russia.” phase, and it is unclear how Rosneft will be able
And also like TotalEnergies, Glencore said to find a path forward, as securing the necessary
it will “continue to honour its legal obligations international financing and expertise will now
under pre-existing contracts, subject to meeting be much more difficult.
all applicable sanctions in accordance with our Rosneft sold a further 5% interest in Vostok Oil
sanctions policy and where it is feasible and safe last October to a consortium of traders Vitol and
to perform these contracts.” Mercantile and Maritime. Neither of those compa-
However, the company said it would nies have said they are reconsidering their planned
not enter into any new trading business investments in light of the war in Ukraine. ™

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