Page 124 - RusRPTMay21

sides argued over the contract price of gas. The recent introduction of Mongolia as a possible transit country may prove the key to finally getting the two sides to agree, we think, as it moves the delivery point much closer to Beijing and China’s major demand centers, while providing the most direct route for Russian gas from West Siberia. Still a long, expensive pipeline, but likely economic, and strategically important. Strategically, the Western Route would doubtlessly bring benefits to Gazprom, giving it the option to send gas from its key Yamal Peninsula fields either west to Europe or east to China. However, with so many parameters of the project as yet undetermined – especially the capital required and the export price, and not to mention that a contract has yet to be signed – we consider this news neutral for the stock.
The Ministry of Energy has signed investment agreements with 14 refineries: Rosneft's Novokuybyshev, Syzran, Tuapse and Komsomolsk refineries, Gazprom Neft's Moscow and Omsk refineries, Lukoil's Nizhny Novgorod refinery, Tatneft's TANECO, Gazprom’s Salavat Neftekhim as well as with the Afipsky, Orsky, Ilsky, Novoshakhtinsk and Antipinsky refineries. They are now obliged to invest a combined RUB 800bn in 2019-26 into 30 production units that make it possible to increase Euro-5 gasoline production in Russia more than 3.6mnt and Euro-5 diesel production more than 25mnt. In exchange for these investments, the refineries will be entitled to receive an investment addition to the negative excise. MinEnergo also expects to sign a number of similar agreements with oil companies in 2021. We estimate that the negative excise additions from the new investment agreements might add USD 146mn, USD 109mn, USD 62mn and USD 45mn to Rosneft's, Gazprom Neft's, Tatneft's and Lukoil’s 2021F EBITDA, respectively (+0.7%, 1.2%, 2.3% and 0.3%, respectively
Deputy Minister of Finance Alexey Sazanov touched on several oil and gas tax matters while talking to journalists April 13:
· The damper mechanism update (the lower threshold internal price of gasoline) is likely to be finalised this week. As guided before, it is to apply from 1 May (although the amending law might come later than that date). The government has not yet reached a final decision as to how the lower threshold price (and, hence, higher damper subsidies) will be compensated for in the MET formula.
· There are no plans to introduce an export duty on Europe-bound LNG.
· MinFin did not receive requests from Lukoil to introduce EPT for highly viscous oil before 2024. Such a step would entail a shortfall in government revenues.
· The damper for synthetic rubber is being developed, but there is no consensus among company representatives on the appropriate formula.
Russian state-run energy giant Gazprom increased shipments of natural gas to Europe by 30.7% in the first quarter of the current year, preliminary
124 RUSSIA Country Report May 2021 www.intellinews.com