Page 11 - GLNGl Week 24

GLNG COMMENTARY GLNG

of a second pipeline to China, but whether it is the ES-2035 forecasts. The strategy sees tax
economically feasible is another matter. The reform playing a key role in keeping output close
cost of Power of Siberia and details of the supply to the present level. The government currently
contract that underpinned its construction are uses a revenue-based tax system, but wants to
shrouded in secrecy, making it difficult to say increase the use of profit-based levies. It hopes
whether the project had sound logic. A recent that this will provide greater incentives for oper-
Russian media investigation even claims Russia ators to invest in new greenfield projects, as well
may struggle to deliver on its supply deal after as more costly enhanced recovery techniques.
overestimating the production capacity of its Special attention is also paid in ES-2035 to
source fields. Russia’s offshore resources and onshore Arctic
reserves. Technological innovations and reced-
Oil ing Arctic ice have made remote fields in these
Russian oil and condensate production has been northern regions more viable, but low prices rep-
on a faster growth trajectory than gas over the resent a challenge. A number of major discov- Russia’s largest
last 20 years, rising from about 6mn barrels per eries have been made in Russia’s Arctic waters,
day in 1999 to more than 11.25mn bpd last year. but the government does not expect any new independent gas
But while gas extraction is predicted to con- offshore production in the region to start up producer Novatek
tinue rising, the best-case scenario for oil is that until 2035.
it remains at the current level. Output is seen Sanctions which bar foreign companies from is developing
ranging between 555mn and 560mn tpy (11.15- providing technology, financing and expertise to
11.25mn) between 2020 and 2024, falling to offshore Arctic projects in Russia have also held a raft of new
between 490mn to 550mn (9.84-11.05mn bpd) back progress.
between 2025 and 2035. With oil production stagnating, Russia’s focus liquefaction
The strategy notably does not take into is also shifting towards adding value to its crude projects.
account Russia’s commitments under the lat- by refining it at home and exporting the finished
est OPEC+ deal, which requires it to lower oil products. Under ES-2035, Russian gasoline
output, excluding condensate, to just 8.5mn bpd exports are projected to reach 8.4-9.2mn tpy by
during May, June and July – its lowest level in 2025, up from 4.2mn tonnes in 2018. By 2035,
over a decade. Condensate typically accounts they are expected to come to 17.9-19.9mn tpy.
for another 7-8% of overall Russian liquids out- Russian refiners have been modernising their
put. The supply limit will rise to just under 9mn plants in recent years, resulting in an increased
bpd from August to December, and 9.5mn bpd share of lighter fuels such as gasoline on their
between January 2021 and April 2022. product slate. This growth in gasoline output
Assuming Russia does not pull out of the will outpace the rise in domestic consumption,
OPEC+ agreement, production will lag behind leading to higher exports.™

Week 24 19•June•2020 www. NEWSBASE .com P11