Page 6 - FSUOGM Week 01 2021

FSUOGM COMMENTARY FSUOGM

Moscow would likely embrace such action, as offtake arrangements it needs to take Vostok Oil
Russian President Vladimir Putin has expressed forward, however.
clearly that he recognises the value of OPEC+ Asian oil buyers are among the likely candi-
co-operation. dates for investment in Vostok Oil, and Rosneft
On the other hand, recognition that Omicron has confirmed holding talks with companies
and other new strains yet to emerge are likely less from China, India and Japan. Indian oil com-
life-threatening than previous versions of the panies are considered the favourite among the
virus may well spell a quicker end to COVID- suitors, as they are already involved in the devel-
19 restrictions, and this could result in a bullish opment of several of the oilfields that comprise
recovery in oil prices this year. If that happens, Vostok Oil. Rosneft could also reach out to its
it can be assumed that OPEC+ will end its quo- close partner and minority shareholder BP for
tas on schedule, although the alliance will likely the necessary funding and, more importantly,
continue to debate policy closely for some time technical expertise.
to come.
An end to OPEC+ restraints will allow Ros- Decarbonisation
neft and Russia’s other leading oil producers to It has been said that the energy transition poses
push ahead with large-scale projects that have an existential threat to Russia if it cannot adapt
been on hold for years. But following sweeping to the changes in the global energy system over
changes to Russian oil taxation that were intro- the coming decades. Yet it is clear that oil and gas
duced last year, some of these investments may will remain parts of the energy mix even as the
not be as profitable as they once were. roles of renewables and other low-carbon energy
sources such as hydrogen potentially undergo a
Russia’s next big oil play rapid expansion.
2022 could also prove a critical year for Vostok This said, importers of Russian goods par-
Oil, Rosneft’s flagship new oil project that has ticularly in Europe but also in Asia are increas-
been compared in significance to the develop- ingly scrutinising the climate footprint of those
ment of the Western Siberian petroleum basin in goods, and Russia will need to address its emis-
the 1960s and the Bakken shale in the US in the sions to avoid losing out in the global market
2010s. Consisting of a cluster of large oilfields in to competitors that offer cleaner products.
Russia’s far north, it is estimated that Vostok Oil Critically, there is the cross-border carbon tax
could one day yield more than 2mn barrels per that the EU plans to impose in 2026, which
day (bpd) of oil and up to 50mn tonnes per year will impose levies on various Russian goods
of LNG. based on the emissions associated with their
Rosneft has already succeeded in bring- production. Russia will need to employ tech-
ing on board several investors at the project nologies such as hydrogen and carbon capture
– in December 2020 it divested a 10% stake in and storage (CCS) to make products such as
Vostok Oil to commodities trader Trafigura, steel sufficiently clean to avoid these fees. This
and in October last year it sold a further 5% to a presents opportunities for Russia’s oil and gas
consortium of Vitol and Mercantile & Maritime industry, which has technical know-how that
Energy. It is expected that the company will need can be employed in hydrogen and CCS devel-
additional partners to provide the financing and opment. ™

P6 www. NEWSBASE .com Week 01 05•January•2022