Page 11 - FSUOGM Week 45 2021

FSUOGM INVESTMENT FSUOGM

Surgutneftegaz adds $4.5bn to

huge cash pile

RUSSIA RUSSIAN oil company Surgutneftegaz added a BCS GM said.
further $4.5bn to its huge cash pile during the Surgutneftegaz continues to provide its
Surgutneftegaz third quarter, bringing the total to $54bn, Inter- shareholders with a 40% guaranteed payout. The
is renowned fax reported last week. company has a London listing, but its ultimate
for its financial Surgutneftegaz, renowned for its fiscal con- owners are a close-guarded secret.
conservativeness. servativeness, has been steadily accumulating “The stock occasionally earns a super-dividend
substantial cash reserves over the years, even in years in which the ruble weakens against the
while maintaining production and rewarding dollar, generating a larger forex gain on the ‘cash
shareholders with generous dividends. pile’, which is largely held in US dollars,” BCS GM
“The cash jump is extraordinary,” analysts at said. “Because of this, earnings and dividends tend
BCS Global Markets said in a research note on to move counter-cyclically (rising in weak years for
November 8, noting that the cash pile also grew the ruble), making the stock an excellent tool for
$3.5bn in the second quarter. reducing volatility in portfolio returns.”
“Even assuming no addition in Q4 2021, the Surgutneftegaz’s main base of operations is in
$4.5bn added year to date through the first nine the Surgutsky district of Western Siberia. It also
months of the year looks to make 2021e one of controls the Talakan cluster in Eastern Siberia,
the strongest cash addition years in [the compa- providing it access to Asia-Pacific oil markets
ny's] history, behind only 2019’s $5.1bn and on via the Eastern Siberia-Pacific Ocean (ESPO)
a par with the additions seen in 2007 and 2008,” pipeline. ™

ENERGY TRANSITION

Russia approves carbon neutrality by 2060

RUSSIA RUSSIA'S Prime Minister Mikhail Mishustin "inert" scenario.
announced the signing of the 2050 Low Carbon "The approved numbers are less ambitious
The strategy will see Strategy, previously drafted by the Ministry of than those cited in the draft of the strategy in
GHG emissions cut by Economic Development and taking an "inten- terms of reducing emissions by 2050, although
60% by 2050. sive" trajectory that implies carbon neutrality by the country will reach net zero by 2060," Sber-
2060. bank CIB commented.
As followed by bne IntelliNews, in October The target "intensive" scenario will require
the ministry adopted a revised greenhouse gas investments to reduce GHG emissions of about
(GHG) reduction strategy, setting the carbon 1% of GDP in 2022–2030, and up to 1.5-2% of
neutrality deadline at 2060 and choosing an GDP in 2031-2050. The decarbonisation plans
"intensive" scenario as the main proposed policy include adoption of low- and carbon-free tech-
guideline. nologies, encouraging the use of secondary energy
Despite the warnings from the Finance Min- resources, changes in taxation, customs and fiscal
istry that carbon neutrality would lead to a "cata- policies, and development of green finance.
strophic" drop in oil demand, President Vladimir There are also measures to preserve and
Putin has supported a net-zero 2060 goal. increase the absorptive capacity of forests and
The strategy sees cutting GHG emissions other ecosystems, and support technologies for
by 60% by 2050 from the level of 2019 and by capturing, using and utilising GHGs. Previously
80% from the level of 1990, eventually achiev- heavy reliance on natural absorption that has yet
ing carbon neutrality by 2060. Russia's GHG to be recognised internationally was seen as an
emissions would rise 5% from the 2019 level by Achilles' heel of EconMin's GHG strategy.
2030 to reach 1.67 gigatonnes of CO2 equivalent, "The numbers also suggest a more than
before plunging to 0.63 gigatonnes by 2050. The twofold increase in carbon absorption by the
EconMin will present an action plan based on country's natural carbon from current levels,"
the strategy within six months. Sberbank CIB noted.
"The approval of the Low Carbon Strategy The analysts at Sberbank CIB commented
was an awaited development, and it is positive that the numbers indicate that Russia will rely
that carbon neutrality has now not only officially on absorbing carbon at its natural carbon sinks
been announced, but is part of the document," while cutting domestic fossil fuel usage by less
VTB Capital (VTBC) commented, while still than other countries, while seeing no short or
noting that the strategy still contains a slower medium-term implications. ™

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