Page 11 - RusRPTMar20

Russian energy minister Alexander Novak confirmed Lukashenko’s comments. The scheme will work as follows: Russian oil companies will reduce the price of the premiums they charge Belarusian oil refineries (compared to domestic refineries) by $2/ton per year. These premiums aren’t fixed at a state level, and are set through contracts between the refineries and oil providers. They range from $6-10/ton depending on the company, so by 2024 they should be nullified per the compensation scheme.
Yet a couple stumbling blocks remain. First, decreasing the premiums will only partially cover Belarus’ losses, providing Minsk with $48mn in compensation (for 24mn tons of oil) in 2020—a far cry from $430mn. Second, not all oil companies have agreed to reduce the premiums. The arrangement reportedly suits Rosneft, but some firms argue that it is unprofitable and the Kremlin has made clear that it will not compensate them for any associated losses.
“On the whole, this seems like a step in the right direction for the two countries, but not a final settlement. Experts note that it is hard to see Belarus accepting the proposal outright given the low overall compensation. But at the end of the day, the scheme proposed by Putin provides much cheaper oil than alternative sources such as Norway, Kazakhstan, and the US, which Lukasheno has been threatening to turn to if Russia doesn't offer compensation,” BMB said in a note.
What’s interesting to note is Moscow’s particular unwillingness to budge. Oil firms can sacrifice some revenue to compensate Minsk, but the federal budget or tax regulations will not be involved.
2.1 ​ ​Russia produced a record amount of oil in 2019
Last year, Russia's crude oil production (including gas condensate) rose by 1% to a new peak in modern Russian history​.
Oil production was $560bn. tonnes (11.3mn barrels per day). Russia was the world's second largest producer of crude oil after the United States, according to the International Energy Agency (IEA).
This year, Russian oil production is expected to remain close to last year's level for most forecasts. Production growth will be curbed by Russia's OPEC agreement, which was last renewed in December.
Russia is also negotiating with OPEC on possible additional production restrictions due to the negative demand effects caused by the coronavirus epidemic.
February IEA and OPEC forecasts for this year's crude oil demand forecast have been lowered due to the coronavirus. However, global oil demand is expected to continue to grow by just under 1%.
Last year, almost half of Russia's crude oil, or about $270bn, was exported or 5.4mn barrels per day.
Exports increased by almost 3%, although contamination of the main Druzhba pipeline for exports in April limited oil supplies for several weeks.
According to the January-September statistics, just over half of Russia's crude oil exports went to EU countries last year and more than a quarter to China.
Exports of crude oil amounted to $120bn last year and exports of petroleum products to $70bn (11% of GDP). In its February forecast update, the Russian finance ministry expects crude oil exports to grow by nearly 2% this year, but to decline thereafter.
11​ RUSSIA Country Report​ March 2020 ​ ​www.intellinews.com