Page 99 - RusRPTDec20

9.1.1b​ Oil and gas sector news
Russia’s energy giant Rosneft is developing a multibillion-dollar Vostok Oil project ​which is expected to bolster the country's presence in the Arctic region and to boost the economy. Rosneft’s CEO Igor Sechin, who has met with President Vladimir Putin this week, has pledged that Vostok Oil will deliver up to 30 million tons of oil via the Northern Sea Route by 2024. In total, the project will ensure the production, transportation and transshipment of up to 50 million tons of oil per year at the initial stage, and up to 100 million tons when the second stage is completed, Sechin said. Putin has called the project “huge and promising,” saying earlier that it “will increase the country's GDP as a whole, boost freight traffic along the Northern Sea Route, and, of course, strengthen Russia's position in the Arctic.” Vostok Oil is aimed at developing oil and gas fields and energy infrastructure in Russia’s remote northern regions. The initiative, which includes construction of a 770-kilometer pipeline, port complex, and two airfields, will create tens of thousands of new jobs.
Russian oil companies would lose about RUB650bn ($8.4bn) in 2021-2015 due to the oil and gas sector taxation reform, ​Vygon Consulting estimates in an​ ​industry report​. As reported by​ ​bne IntelliNews,​ ​ ​Russian lawmakers have approved a major overhaul of oil industry taxation​, aimed at extracting more budget revenues from the sector and simplifying the fiscal landscape. Producers have been stripped of breaks on mineral extraction tax (MET) and export duty under the reforms, and the government is encouraging them to transfer affected fields to a uniform excess profit tax (EPT) system instead. Vygon estimates that oil companies would lose about RUB1.15 trillion of cash flow as a result, with about RUB500bn of netbacks and tax breaks making a total loss of RUB650bn. The analysts warn that the federal budget would not automatically cash in all of the extra revenues, as clipped cash flows would revise the investment programmes downwards and eventually hurt output, synergies and spillovers to other industries. Vygon believes that fiscal guarantees for investment projects with 7- to 20-year horizon are necessary to soften the negative impact on the oil sector from the tax reform. The analysts remind that MET and export duties have been revised in Russia over 30 times in the period of 2002-2018, with the tax burden rising from 39% to 61% of the cost of a barrel in 2018.
Nord Stream-2 is restarting construction on a small section. ​The consortium is starting with a small, 2.6km section wholly in German water and using Gazprom assets to do so. The resumption of construction of Nord Stream-2 is positive for Gazprom sentiment, even if activity looks limited for the time being. Full completion of the project will still face significant sanctions-related hurdles. Activity limited still, but positive for sentiment. After so many months of negative news on the project – construction was stopped this time last year by US sanctions, which have been broadened in the ensuing
99 ​RUSSIA Country Report​ December 2020 www.intellinews.com