Page 9 - RusRPTOct21

2.0 Politics
2.1 Russian government may finally allow Rosneft to export
gas via Gazprom pipes
Rosneft’s long-running attempts to break Gazprom’s export monopoly may finally bear fruit, with the launch of Nord Stream-2 and record-high European gas prices providing the impetus required to change long-standing policy. We think the effect would be more negative for GAZP than positive for ROSN.
MinEnergo will report on potentially allowing Rosneft access to gas exports ‘in the coming days’,reports Interfax, quoting Vice PM Alexander Novak.
A break in Gazprom’s export monopoly maye imminent, implications many:
§ MinEnergo’s report may welle a “no” to Rosneft,ut...: This is not the first time Rosneft has sought access to Gazprom’s export pipelines in the past decade or more. All previous attempts have been successfully rebuffed in the halls of government by Gazprom. However, pre-announcing the report maye a hint that Rosneft might meet with success in its latest attempts and, as we address later, the simultaneous launch of Nord Stream-2 and record-high gas prices in Europe may have set the stage for the major policy change.
§ A larger potential negative for Gazprom than positive for Rosneft: Rosneft’s oilusiness is huge, so 10bcm of exports as it’s requesting would move the needle only relatively modestly for either company (see ourack-of-the-envelope calculations further below). On the other hand, a winy Rosneft seems to us toe the equivalent of the camel’s nose in the tent – once that happens, the rest of the animal will soon follow, so it’s in Gazprom’s interest to vigorously fight the loss of even a little bit of its export monopoly.
§ Some quick numbers for Rosneft: Consensus EBITDA for Rosneft for 2021e is c$30bn, which will serve as our baseline comparison. Exporting 10bcm in the course of a full year at $400/mcm (they won't get the current $900/mcm,ut even $400 is a great number) = $4bn of revenues. Less maybe $70/mcm transit to Europe via NS2 nets $330/mcm at theorder. Remove 30% of the remainder for export duties and Rosneft left with $230/mcm, another $30/mcm for pipeline tariffs from West Siberia to St. Petersburg leaves perhaps $200/mcm, and extraction taxes of c$5 leaves $195/mcm at the wellhead, or c$2bn for our assumed 10bcm. This is a potential 10% EBITDA boost,ut keep in mind it is also a peak number. Our LT Gazprom export price assumption is $195/mcm. That maye too conservative,ut even a $250/mcm gross price in Europe would reduce Rosneft's gain to c$90/mcm or $900mn on 10bcm of exports, a c3% addition to EBITDA.
§ Some quick numbers for Gazprom: Gazprom’s EBITDA for 21’e and ‘22e will likely exceed $40bn each year, so, on the face of it, the above value transfer woulde of smaller importance for it. However, the issue for Gazprom is
9 RUSSIA Country Report October 2021 www.intellinews.com