Page 5 - FSUOGM Week 42 2021

FSUOGM COMMENTARY FSUOGM

Gazprom's
Bovanenkovskoye
field, located within
the Russian Arctic
Circle, accounts for a
sizeable share of EU
gas imports. Source:
Gazprom.

volatility, [Russia’s economy] wouldn’t suffer that partners to bring Vostok Oil to development,
much,” he said at an energy conference in Mos- having already brought on board commodity
cow. “That’s because we will reduce production, traders Trafigura, Vitol and Mercantile & Mar-
but will get the prices we wanted.” itime as minority shareholders with a combined
However, the Arctic is seen as the new fron- 15% interest. The risk of a ban could undermine
tier for oil and gas development in Russia, and is the search for additional partners, however.
estimated to contain billions of barrels of oil and Other potentially affected projects include
many trillions of cubic metres of gas. Russian the series of new LNG terminals that Novatek
producers are moving into the region as once- plans to build on the Yamal and Gydan penin-
large Soviet fields further south reach maturity sulas. Europe already takes gas from Novatek’s
and eventually depletion. Development could be 17mn tpy Yamal LNG plant, and will obtain
significantly undermined if Russia cannot count additional volumes from its 20mn tpy Arctic
on EU buyers to purchase some of these reserves. LNG-2 terminal that is due to start up in 2023.
The largest up and coming project in the Further down the line Novatek wants to develop
Russian Arctic is Vostok Oil, managed by state- the Arctic LNG-1 and Arctic LNG-3 terminals,
owned Rosneft. Comprising a cluster of large oil which will both also have 20mn tpy capacities.
and gas fields located mostly on the Taymyr Pen- Gazprom's Kharasaveyskoye field would also
insula, analysts have likened Vostok Oil’s scope be hit by the ban. The field is due online in 2023
to that of the exploration of Western Siberia in and is due to supply 32bn cubic metres per year
the 1970s and the US Bakken oil play over the of gas, likely to the European market. Gazprom
past decade. Rosneft estimates that the project Neft and the Achimov oil layers it is targeting in
will yield 1mn barrels per day of oil by 2027 and the Russian Arctic would also be affected.
possibly up to 2mn bpd at a later stage. It is also Despite the ban's significance, analysts at BCS
expected to produce up to 50mn tonnes per year Global Markets do not view the news as negative
(tpy) of LNG. for oil and gas share prices in Russia, as it would
While the primary destination for Vostok be impossible to implement in the near future.
Oil’s production is expected to be energy mar- "However, if this development expands, we
kets in Asia, the project’s relatively close prox- believe that oil and gas shares might see some
imity to European consumers also makes them pressure from institutional investors' approach
potential recipients – but not if the EU’s pro- to their stock investment decisions on the back
posed ban comes into force. of the ongoing increase in climate-related prac-
Rosneft is currently searching for investment tices," the analysts said. ™

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