Page 81 - RusRPTOct19

Exports and output of Rosneft and Tatneft oil companies suffered the most when this spring oil supplies through Druzhba pipeline and Ust-Luga port were botched by chlorine-contaminated crude. Transneft has sharply rejected Rosneft's proposals, reiterating that it complies will all state requirements for oil quality. The head of the pipeline operator Nikolay Tokarev told Kommersant daily that Rosneft was "bluffing" as it itself would be unable to comply with oil quality parameters it suggests to impose. Rosneft, in turn, claimed that Transneft is single-handedly deciding how to mix the contaminated oil that has been pumped back to Russia with clean crude, without letting the sellers control the quality of oil.
President Vladimir Putin has requested that Gazprom CEO Alexey Miller elaborate on the potential project of constructing a gas pipeline to China through Mongolia, Vedomosti reports. Putin has also asked the company to return to studying the issue of using gas from the Irkutsk and Krasnoyarsk regions, in addition to gas from Yamal, in the new export route, the paper writes. Gazprom has been in talks with China over gas supply to the country through the Western route (previously known as the Altai, or Power of Siberia- 2, project) since 2006 and even signed a Framework Agreement back in 2014. However, negotiations over the new pipeline have basically stalled since then. We believe that the new proposed route might be more convenient for China, given that it is to arrive in the eastern part of the country, which is the key gas consumption centre, instead of the western part, which is sparsely populated and under-industrialised. This route is also shorter (4,800km to Beijing vs. the 5,700km of Power of Siberia-2, on our numbers), and would run across more convenient flat land, so would likely cost less to construct (back in 2010, Gazprom estimated the capex of the gas pipeline via Altai at $14bn). However, we note that the proposed route poses some transit risks, both to Gazprom and China. Overall, we believe that this is a complicated project to negotiate with China, especially given the low gas prices globally due to the abundance of gas and LNG supplies, and the launch of new LNG plants in the coming years so analysts do not expect any material progress in the near term.
The Ministry of Finance has suggested increasing the tax burden on the oil industry as compensation for the tax relief for the Priobskoye field, according to Kommersant. The ministry sees a budget income shortfall of RUB600bn ($9bn) for ten years as a result of the tax relief for the Priobskoye field and is therefore considering increasing the MET for oil and introducing MET for associated petroleum gas. Rosneft and Gazprom Neft might receive tax relief of RUB46bn ($0.7bn) and RUB13.5bn ($0.2bn) for the Priobskoye field annually, respectively, the paper writes. We calculate that, were the tax relief to be compensated for by the introduction of MET for associated petroleum gas (APG) only, it would amount a $8.50/kcm of APG. This would translate into a shortfall of 0.2-1.5% of integrated oil majors’ EBITDA in 2020 under the current oil futures curve, we estimate.
Gazprom Neft is to participate in a tender for the development of the Mansuriya gas field in Iraq, with total reserves of 130bcm and designed capacity above 3bcm, Kommersant reports. According to the Oil Minister of Iraq, the country wants to hold a 51% stake in the project and distribute the rest among partners. Gazprom Neft has not decided yet whether to bid for the whole 49% stake or to participate as part of a consortium of investors.
81 RUSSIA Country Report October 2019 ww.intellinews.com