Page 103 - RusRPTNov18

such as to provide its Eastern European clients (Bulgaria, Slovakia, Poland and the Baltics) the ability to revise the contract terms regarding prices (which might now be linked to Western European hubs) and to make gas swaps, if their contracts have a maturity of more than one year.
Russia's second-largest gas producer and global LNG market runner-up Novatek discovered a new gas field , the Severo-Obskoye offshore Arctic gas field, which could become the resource base for company's third LNG project. The field is estimated to have 330bn cubic meters (bcm) of gas, Vedomosti d aily said on October 10 citing the deputy chair of Novatek Leonid Mikhelson.
Novatek’s corporate strategy from 2017 aimed to produce 57mn tons of LNG per year by 2030 . After increasing exploration efforts in the Arctic and discovering the Ob Bay reserves, the company believes it should be able to produce 70mn tons per year by 2021. Novatek currently has one approved project: the Yamal LNG plant with a yearly capacity of 17.5mn tons. Yamal’s gas field, South-Tambeyskoye, has 926bn cubic meters of reserves. Novatek's second project in the region is expected to be Arctic LNG-2 on the Gydan peninsula. On September 18, the company reported that, due to additional exploration, its reserves on Gydan increased by more than 400bn cubic meters to about 2 trillion cubic meters. A final investment decision on the construction of a plant has not yet been made.
Russian Fund for Direct Investment (RDIF), together with Saudi Public Investment Fund (PIF) and Saudi Aramco will buy 30% of Russian oil services company Novomet i n the nearest future, the head of RDIF Kirill Dmitriev told Tass. In the summer of 2016 state nanotechnology agency Rosnano put 30.76% stake in Novoment for sale at a minimum price of RUB7.5bn. Other shareholders include funds Baring Vostok and Russia Partners.
Gazprom Neft is associated with the highest production growth among the Russian oil majors. Now, having passed the peak of its capex cycle, the company is poised to improve operational profitability, which is going to be substantially supplemented by benefits from the upcoming tax changes, in both the upstream and downstream. Our ‘inside out’ approach flags a strong ‘underpriced’ signal. We have updated our Gazprom Neft model with the latest macro, operating and financial data, and also incorporated the tax manoeuvre starting from 2019. We are therefore raising our 12-month Target Price to USD 7.50 and upgrading our recommendation to Buy on the back of the 37% implied ETR. Sizable greenfields growth. Over the last two years, Gazprom Neft has demonstrated a 6% CAGR in crude production amid the production ramp up at its greenfields. We forecast crude output growth slowing to a 4% CAGR in 2018-20F and levelling out at some 55mmt/a. In the downstream sector, we anticipate the company increasing its oil products output 3% in 2018F and another 2.5% in 2019F as a result of modernising the Moscow refinery, while afterwards we expect a flattish production profile. Impact of regulatory changes. Gazprom Neft is to become the major recipient of the upcoming wave of tax amendments, in our view. Currently, the company is suffering a disproportionally large burden in providing motor fuel to the domestic market, but that will be partially alleviated by the floating excise in 2019, we think. In the upstream, the Novoportovskoye field is set to benefit from the shift to the EPT regime, with the Messoyakha and Kuymba fields enjoying increased export duty reliefs.
103 RUSSIA Country Report November 2018 www.intellinews.com