Page 14 - FSUOGM Week 13

FSUOGM PROJECTS & COMPANIES FSUOGM
Regal Petroleum expands resource base with Arkona purchase
UKRAINE
UKRAINIAN oil and gas company Regal Petro- leum has acquired smaller peer Arkona for a total consideration of up to $8.63mn, of which $4.32mn is a first tranche and the rest is contin- gent on certain conditions.
Arkona possesses a 20-year exploration licence for the Svystunivsko-Chervonolutskyi (SC) field, located 15 km from Regal’s existing SV field, Regal said in a statement on March 24.
The SC licence has hydrocarbon reserves of 38mn barrels of oil equivalent (boe) (C1 and C2 under the Ukrainian classification). Arkona purchased the SC licence for UAH3.8mn ($0.15mn) in May 2017, according to a report by the RFE/RL, published on March 25. Arkona was
controlled at the time by people from the inner circle of then-president Petro Poroshenko, the report alleged.
Alexander Paraschiy at Kyiv-based brokerage Concorde Capital wrote in a note on March 26
that with the acquisition of its SC licence, Regal is significantly going to expand its resource base in Ukraine from the current 50mn boe of 2P reserves.
“It is likely that most of the declared C1+C2 reserves under Ukrainian classification, con- trolled by Arkona, will be confirmed as 2P reserves under international classification. The acquisition will also improve the usage efficiency of Regal’s assets. As of end-1H19, 49% of its total assets, or $67.8mn, was cash,” he added.™
RUSSIA
Gazprom expecting the lowest gas prices in 15 years on the European market in 2020
Gazprom Export is expecting the lowest gas prices in 15 years on the European market this year, due to the fall in demand from the various crises.
Spot prices have fallen to the level of $100 per 1,000 cubic meter, while oil- related prices are approaching that level. Gas supplies to Central Russia are more profitable now than exports to Europe. For example, in the Leningrad Region, the wholesale gas price at the current ruble exchange rate is $57.7 per 1,000 cubic meters, report RAPSI.
On the other hand, the export netback value for Nord Stream supplies to Germany at current prices at the German NCG hub of $101 per 1,000 cubic meters is about $48 (taking into account the export duty of 30% and transportation fees of about $22 per 1,000 cubic meters).
A Gazprom source told Kommersant that the company had received no reports of force majeure circumstances on long- term supply contracts to Europe and had
NEWS IN BRIEF
no plans to suspend gas purchases from Central Asia or change the deadlines for implementing its investment projects.
Elena Burmistrova, Deputy Chairperson of the Gazprom Management Committee, says the company expects an average level of $175-185 per 1,000 cubic meters this year. Other analysts estimate the average export price for Gazprom will be below $150 per 1,000 cubic meters.
Russian budget deficit
seen at 3-4% in 2020, CA
shielded by reserves
As the price for Russian Urals blend oil could average $36 per barrel in 2020, Russia could post a budget deficit of 3-4% of GDP in 2020, Reuters reported on March 30 citing analysts from ING. As reported by bne IntelliNews, Urals has been trading at below $20 per barrel, going as low as $16 on March 30, and triggering a downward revision of macro outlooks.
Still, ING believes that ruble is currently undervalued, and expects stabilisation of both the oil prices and the national currency at $36 per barrel and RUB70-RUB75 per US dollar.
Previously, Finance Minister Anton
Siluanov had expected a budget deficit of 0.9% of GDP in 2020, to be financed by
a RUB600bn injection from the National Welfare Fund (NWF), but the official macro projections are still being revised.
ING currently expects Russian GDP to contract by 2-3%, in line with a recent analyst survey by RBC business portal and the forecasts of BCS Global Markets. Currently the fiscal support against the coronavirus (COVID-19) epidemic in Russia is seen at a modest 2% of GDP (versus 10% in the US and 10-15% in EU).
In a separate report Reuters wrote that Gazprombank analysts expect Russia’s current balance of payments account to drop 3.5-fold due to lower oil prices and COVID-19, but it is still believed to remain in surplus.
The bank estimates that $25 per barrel
oil prices would result in an average ruble to US dollar rate at RUB80, and the CA surplus would register $20bn, or 1.8% of GDP, versus $70.6bn seen in 2019. The trade balance, as well as exports of services, would be hardest hit, but the weaker ruble would also curb imports, Gazprombank believes.
Net capital outflow is forecasted to increase to $40bn from $26.7bn in 2019, to be neutralised by about $20bn worth of currency interventions by the Central Bank of Russia. “Even given extremely low oil prices of $10 per barrel, [the CBR] has sufficient reserves to finance the CA deficit and capital outflow,” the bank argues, as cited by Reuters.
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Week 13 01•April•2020