Page 14 - FSUOGM Week 16

FSUOGM POLICY FSUOGM
Russian oil companies to cut output on pro-rata basis
RUSSIA
This is the most reasonable and fair approach, Sberbank CIB says.
THEMinistryofEnergysuggestedthatRussian oil companies cut crude oil output under the new OPEC+ agreement on a pro-rata basis that would include all producers and PSA (produc- tion-sharing agreement) operators into the deal, RBC business portal reported on April 20 citing unnamed industry sources.
As reported by bne IntelliNews, outlooks on Russian oil names have already been revised downwards after the extension of the OPEC+ deal, while the market continues to sink to all- time lows and some Russian oil producers have started to cancel dividends.
Sberbank CIB believes that “a pro-rata production cut would be the most reasona- ble and fair approach and should be relatively manageable.”
Russian state pipeline operator Transneft, whose CEO was reappointed this week, could help with ensuring compliance, Sberbank believes. The oil companies are thought to need to reduce output by 16-17% in May-June and by 11-12% in 2H20 versus 1Q20 output.
“The total oil production cut is supposed to be 8% for Russia this year, followed by an increase in output from that lower base of 2% in
2021and5%in2022,”SberbankCIBestimates. The analysts see natural gas and LNG pro- ducer Novatek as the main beneficiary from the deal as it fully consolidates its key oil project, Yar- geo, while owning a 51% share in it (the effective decrease in Novatek’s output is thus anticipated
to be only a few per cent).
Lukoil CEO Vagit Alekperov previously
confirmed that the company’s planned pro- duction cut was 40,000 tonnes per day, which is close to a proportional cut. Tatneft CEO Nail Maganov has also confirmed that his company is ready to cut in line with the deal, according to Interfax.
Sberbank CIB notes that it is important to cut output in such a way that it can be recovered in 1-2 years, as the preparations for this are a time-consuming process at brownfields.
“Meanwhile, the spot market remains very challenging: the Urals price is trading [at] around $15 per barrel, while the companies are currently having to pay a $7 per barrel export duty because of a lag in the calculation,” the bank’s analysts write, suggesting that the spot market volatility could lead to an acceleration of the preparations to cut output in Russia. ™
PROJECTS & COMPANIES
Novatek acquires new Arctic gas tract
RUSSIA
Novatek paid $38mn for the asset.
RUSSIA’S Novatek has received rights to the Bukharinsky oil and gas block on the Gydan Pen- insula, after the Russian government approved the result of a subsoil auction held last December.
Novatek now has a 27-year exploration and production licence for the block, held through its wholly owned subsidiary Arctic LNG-1. The area spans 2,447 square km of Gydan and the Taz and Ob bays, and is estimated to contain up to 1.19 trillion cubic metres of gas and 74mn tonnes of liquids in place.
Novatek paid RUB2.35bn ($38mn) for the licence, up from an initial asking price of RUB2.13bn. Bukharinsky borders Novatek’s Solet- sko-Khanaveyskoye field and its Trekhbugorny licence area. Soletsk-Khanaveyskoye is expected to serve as the main resource base for the compa-
ny’s Arctic LNG-1 export project.
Arctic LNG-1 is predicted to produce up
to 20mn tonnes per year (tpy) of super-cooled gas at full capacity. But the project is still at the
design phase, and Novatek is yet to say when it expects to take a final investment decision (FID). Arctic LNG-1’s trains are to be built at the Utrenny terminal Novatek is constructing on Gydan. Utrenny will also house the trains of the 19.8mn tpy Arctic LNG-2 project, due to come on stream in 2020. The government has report- edly just approved plans to expand Utrenny’s size
to accommodate both projects.
Novatek is also building a new shipyard for its
Arctic LNG projects at Murmansk. According to recent reports, the area has become a hotspot for coronavirus (COVID-19) cases. The number of confirmed cases at the Novatek site reached 290 on April 20, according to the Murmansk government.
Earlier, Russia’s Novaya Gazeta newspaper reported that a state of emergency had been declared at the site. And the local government is understood to have deployed a mobile hospital to Belokamenka to handle the outbreak. ™
P14
w w w . N E W S B A S E . c o m
Week 16 23•April•2020