Page 8 - FSUOGM Week 50 2019
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FSUOGM INVESTMENT FSUOGM
Ukraine to repeat offshore PSA tender
UKRAINE
The deadline for bids is February 4 2020.
UKRAINE plans to repeat a tender for explora- tion rights to more than 9,500 square km of the Black Sea, after a contest last year failed to attract any major international investors.
The tender for a 50-year production-shar- ing agreement (PSA) covering the offshore Dolphin block will be held in March next year, the head of Ukraine’s state geological service, Roman Opimakh, said on December 18. He was addressing investors at an event in Lon- don, aimed at promoting a further three PSAs for onshore blocks.
Authorities in Kyiv held a tender for Dolphin back in April. But instead of the anticipated large international oil companies (IOCs), the only bids came from local firm Ukrnaftoburinnya, and two little-known foreign companies, Lon- don-based Trident Resources and Texas-based Frontera Resources.
Trident, a company founded and led by former Russian opposition politician Ilya Ponomarev, won the contest, but the govern- ment later cancelled the award after questioning its financial and technical capability. Trident was only formed last year and does not have any oil
and gas operations.
Ukraine has offered a total of 43 blocks to
investors over the past year as part of a push to revive gas exploration and boost its output (See FSU OGM Week 49). But only 28 have been awarded and only four to international compa- nies, amid tepid interest from operators.
The new onshore PSAs cover three blocks in the prolific Dnipro-Donetsk Basin in Ukraine’s east, known as Grunivska, Okhtyrska and Ich- nyanska. The deadline for bids was originally last month, but has been extended to February 4, 2020.
“We have vast resources and we are moving in the direction of being able to cover domestic consumption and then even to export gas,” Opi- makh said at the event.
Ukraine had hoped to become self-sufficient in gas by 2020 but Naftogaz last year admitted that this goal would not be reached. New tar- gets for national production in 2025 will be introduced, according to Opimakh, adding that as well as the four onshore and offshore PSAs, Ukraine would offer a further 23 concessions at auction in 2020.
Gazprom slashes investment for second year in a row
RUSSIA
Shareholders could still see returns shrink, given revenue pressure in Europe.
THE management committee of Russia’s Gaz- prom has approved a 16.5% cut in investments next year, marking the second annual reduc- tion in a row, the state gas exporter reported on December 12.
Gazprom’s 2020 capital expenditure plan is set at RUB1.1 trillion ($18bn), pending approval by the company’s board of directors, down from a projected spend of RUB1.32 trillion for this year and a record RUB1.8 trillion in 2018.
Gazprom has gained notoriety for its high levels of spending in recent years, with the bulk of investment going towards the development of its three major export projects: Power of Siberia, TurkStream and Nord Stream 2. Work on these projects is now winding down, freeing up some capital.
The $55bn Power of Siberia pipeline began pumping gas to China earlier this month, while the $8bn TurkStream to Turkey is targeted for launch in January.
The $11bn Nord Stream 2 is also nearing completion, but is not expected to start up until mid-2020 because of earlier permitting delays in Denmark.
Signalling its greater focus on capital disci- pline, Gazprom’s management earlier this year pledged to increase dividends to 50% of net prof- its by 2021, triggering a rally in the company’s share price. They endorsed a plan on December 12 to increase dividends to 30% of income in 2019, following by 40% in 2020 and 50% in 2021 and beyond.
Shareholders still risk seeing their returns shrink, however, as Gazprom struggles to defend its market share in Europe from soaring LNG imports.
The company saw net profits slump 45% y/y in the quarter ending September 30 to RUB212bn ($3.3bn), after European gas prices fell to their lowest level in 15 years. Gazprom’s shipments to Europe fell to 171.4 bcm in the first nine months of 2019, from 185.4 bcm a year earlier, while average prices dipped to $222 per 1,000 cubic metres, from $233.
The company’s 2020 investment pro- gramme comprises RUB933bn in capital invest- ments, RUB90bn in acquisition spending and RUB81.3bn on long-term financial investments. It plans to borrow RUB558bn during the year.
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w w w . N E W S B A S E . c o m Week 50 18•December•2019
