Page 13 - FSUOGM Week 25

FSUOGM INVESTMENT FSUOGM

Ukrainian oil and gas firms reach

out to financiers

UKRAINE UKRAINIAN energy companies have reached double the number of farming customers it sup-
out to financiers to fund new investments in plies with fuel and fertilisers to 200, improve
State-owned UGV production. logistics infrastructure and extend and modern-
has lagged behind Ukrgazdobuvannya (UGV), the gas extrac- ise seven oil depots and about 100 filling stations.
production targets. tion arm of state-owned Naftogaz, has opened Some of these stations will be equipped with
a three-year credit line worth $30mn with Alfa- electric charging stations.
Bank Ukraine, the bank reported. The funding, The IFC had been invited to provide a loan of
which UGV can access in hryvnias, US dollars $70mn, covering total project costs of $135mn. A
and euros, will help the company replenish its week earlier, the European Bank for Reconstruc-
capital reserves. tion and Development (EBRD) approved $35mn
UGV has lagged behind government-set tar- in project financing for Galnaftogaz. The bank is
gets to ramp up production, as part of efforts to a minority shareholder in the company.
make Ukraine self-sufficient in gas. Its goal had Galnaftogaz’ 400-strong chain of filling sta-
been to produce 20bn cubic metres of gas in tions is branded as OKKO. The company was
2020, but it lifted only 13.62 bcm last year and founded in 2001 by a merger of Ivanofrankivsk-
has conceded that it expects output to reach only naftoprodukt, Zakarpatnaftoprodukt-Uzhho-
14.6 bcm this year. rod and Zakarpatnaftoprodukt-Khust. It is the
Meanwhile, the International Finance Corpo- third-largest filling station network in Ukraine,
ration (IFC) has agreed to provide its Ukrainian with a market share of over 17%.
customer Galnaftogaz with a $35mn corporate Capital investments will include new stations
loan for capital expenses in 2020-2022, and to under the OKKO brand, a new liquefied gas stor-
replenish its working capital, the financier said age (LPG) in Brovary and two storage facilities
on June 22. for gasoline and diesel in Kherson on the river
Galnaftogaz is expected to use the funds to and the railway. ™
PERFORMANCE
Russia cuts gasoline output to 15-year low

RUSSIA RUSSIAN oil refineries slashed their gasoline propping up prices.
output to a 15-year low in May, Reuters reported The mechanism has led to an unwelcome
The demand recovery on June 18. increase in oil companies’ tax burden, at a time
has caught some Production slumped to 2.477mn tonnes, when their earnings are much lower because
suppliers unaware. as a result of coronavirus (COVID-19) related of the oil price crash. It also resulted in Russia
lockdowns and OPEC+-agreed cuts to crude oil importing gasoline until a temporary ban was
supply. Earlier the energy ministry reported that imposed in late May.
gasoline output in April was 21.2% lower year on While pump prices have remained stable,
year at around 2.5mn tonnes. Travel restrictions the rebound in fuel demand since Moscow
and other lockdown measures were first intro- ended its lockdown earlier this month has
duced in Russia in late March. led to sky-high wholesale prices. Russian pre-
Primary oil-processing volumes also mium unleaded 95 RON gasoline climbed to
declined to a seven-year low last month of 21mn a record high of RUB58,000 ($836) per tonne
tonnes, marking a 7.2% decline on a daily basis on the St Petersburg exchange on June 18,
from April, Reuters reported, citing energy min- according to S&P Global Platts. The previous
istry data and its own calculations. Operations record of under RUB57,000 per tonne was set
were also impaired by seasonal maintenance at in 2018.
refineries. The speed at which fuel demand collapsed in
Despite the recent collapse in motor fuel Russia has been matched by how quickly it has
demand in recent months in Russia, pump recovered, catching suppliers unaware. At the
prices have remained relatively unchanged. This start of June, Russia’s energy ministry called on
is because of a so-called “damper mechanism” producers to cut gasoline exports and send more
within Russian oil taxation. fuel to the domestic market.
This mechanism was introduced last year to According to the ministry, gasoline demand
prevent price spikes. It compensates producers is predicted to be down 10% y/y in June, from
for selling fuel domestically when oil prices are 50% lower in mid-April. Consumption has
high, but when prices are low, as they are now, already risen beyond the pre-coronavirus
producers must pay extra tax on domestic sales, levels.™

Week 25 24•June•2020 www. NEWSBASE .com P13