Page 11 - FSUOGM Week 08 2020

FSUOGM POLICY FSUOGM
Belarus, Russia makes progress in oil supply row
BELARUS
Russia’s tax reforms cost Belarus $330mn in 2019.
RUSSIA has said it is prepared to compensate Belarus partially for recent tax changes, raising hopes the pair will be able to end a two-month stand-off over oil supplies.
Moscow amended its tax code last year, set- ting out to increase the mineral extraction tax (MET) gradually that oil producers pay, while reducing oil export duties. Belarus currently receives export duty-free Russian oil, and so the changes have driven up the price it pays.
The dispute meant the two countries were unable to agree a supply contract for this year, resulting in Russia terminating shipments on January 1. Since then Belarus has been relying on small volumes of Russian oil supplied by private producer Safmar to keep its refineries running, as well as costly imports from other countries.
Russian Energy Minister Alexander Novak said on February 21 that proposals by Russian companies for a price formula mechanism for supplies to Belarus had been sent to Minsk, according to Vedomosti. Belarusian President Alexander Lukashenko also claimed that year that his Russian counterpart Vladimir Putin
had offered to pay Minsk $300mn for tax-related losses incurred in 2019. He added that Russia was prepared to ship oil to Belarus in 2020 on the same terms as last year.
Lukashenko described Putin’s proposal as “unexpected.”
Russia’s tax reforms cost Belarus $330mn in 2019, Minsk estimates, with its state budget losing $130mn and its two refineries $200mn. These losses will only widen as Russia steadily increases MET between now and 2024, while cutting export duty to zero. They will total $420- 430mn in 2020 alone, according to Lukashenko, assuming Russia delivers 24mn tonnes (480,000 barrels per day) of oil that year.
Belarus depends on cheap Russian oil to pro- duce low-cost petroleum fuels, which it then exports to its other neighbours. These fuel sup- plies typically account for around a third of Bela- rus’ total export revenues.
Belarus and Russia had also been in dispute over gas prices, but Russia’s Gazprom signed a protocol with Minsk on February 14 setting a pricing mechanism for 2020. ™
Ukraine to offer two offshore oil and gas blocks to investors
UKRAINE
Ukraine held an unsuccessful offshore tender last year.
UKRAINE is seeking investors to develop two oil and gas blocks in the Black Sea, the head of its state geological service, Roman Opimakh, told reporters on February 24.
The country has opened up vast swathes of onshore acreage for gas exploration over the past year, under an ambitious plan to become gas self-sufficient by ramping up production. In April last year, authorities also launched a tender for a 50-year production-sharing agreement for the 9,500-square km Dolphin block in the Black Sea.
The contest attracted several bids from local and small-sized companies – not the major international oil companies (IOCs) that the government had been hoping for. In the end the PSA was awarded to Trident Resources, a Lon- don-registered company owned by former Rus- sian opposition politician Ilya Ponomarev. The government then stripped Trident of the award, claiming that the tender had been mismanaged
and investors had not been given enough time to review the project properly.
The new plan is to award two blocks known as North Dolphin and South Dolphin and cov- ering a combined 15,800 square km of offshore acreage, Opimakh explained at a conference in Kyiv. The decision was taken based on discus- sions with geologists and potential investors, he said.
Conditions for the tender are due to be approved by the government in March, after which a commission will have two months to prepare and initiate the contest.
“We proposed that the level of investment for each site be at least $60mn, that is, these are the minimum obligations, but this is still in the pro- cess of discussion,” Opimakh said.
Ukraine will also invite bids for three onshore PSAs in March, according to Opimakh. As many as two dozen PSAs and concessions are due to be auctioned off this year. ™
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