Page 14 - FSUOGM Week 12

FSUOGM
NEWS IN BRIEF
FSUOGM
RUSSIA
Russian oil firms to slash capex by 10-20%
Russian oil companies will have to reduce investments by 10–20% amid the current extremely low oil prices, Dmitry Marinchenko, senior director at Fitch Ratings, told Russian media on March 26.
“Russian companies are better protected from the risk of falling oil prices due to the peculiarities of taxation, a flexible ruble exchange rate and relatively low costs,
but with ultra-low oil prices, as they are today, they will also have to revise capital investment programs,” Marinchenko said.
“Most likely, Russian companies will have to reduce capital investment programs by at least 10–20% this year in order to balance cash flows if prices remain low,” Marinchenko said.
Rosneft CEO expects $60 oil by 2021
Oil prices will rise to $60 per barrel by the end of 2020, Russian oil producer Rosneft CEO Igor Sechin told reporters on March 20.
“I think that they can rise and return to the level of $60 by the end of the year. If the processes continue, shale oil will quit the market,” Sechin said.
“Information that some shale oil producing assets quit the market has appeared. This process has begun. The current price does not allow us to produce shale oil efficiently. So
the market will adjust, I think, we will see the changes towards a more stable, better trend, in half a year,” the CEO said.
He told channel Rossiya 24 that the
oil market is in crisis due to the spread of coronavirus, political and sanctions factors. “The fluctuations to such a low level bring
no great joy but they are not something to be overdramatized about,” he said and added that Rosneft was ready for such a slump.
The operating expenditures of Rosneft are comparable with those of Saudi Aramco’s but Rosneft is not involved in dumping. “Our [operating expenditure] ia $3.1 per barrel of produced oil, they have about $2.5–2.8. So
we can work calmly, efficiently. Besides we
are not dumping unlike them, that’s why our efficiency could be higher than theirs,” he said.
According to Sechin, the OPEC+ agreement has lost the importance and other factors are affecting the oil market balance,
but Russia needs to keep in contact with OPEC, while receiving mutual benefits in the current conditions. Russia’s goal is to retain its market share, “If you cede your share, you will never get it back. This is the point,” he said.
Russian oil producers ready: Moscow says
Oil companies managed to accumulate large reserves before the oil price collapse and have a big margin of safety, so there is no concern for the sector, Russian Finance Minister Anton Siluanov told Rossiya 24 television channel on March 20.
“Oil companies have recently accumulated a large safety cushion. This is the first. Second, oil companies have a good margin of safety, and we don’t feel any concern for lowering energy prices for this sector,” he said.
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 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.
Russia settles oil dispute
with Belarus as Moscow
seeks to boost oil sales
A months-long oil supply dispute with Belarus has been settled, according to reports, although there has not been a an official confirmation.
Russian Prime Minister Mikhail Mishustin spoke with his Belarusian counterpart Syarhey Rumas about oil deliveries over the weekend after which reports appeared that the dispute over duties had been settled in principle, although no details have been released.
Three industry sources told Reuters on march 23 that the two sides have resolved the three-month price dispute as Moscow seeks as many buyers as possible in a fight for market share after a landmark cooperation agreement with Saudi Arabia fell apart and oil prices collapsed.
Minsk and Moscow have been at odds since the start of the year, when they failed to agree on terms for oil deliveries in 2020. Some Russian oil companies suspended oil shipments to Belarus.
Russia had been supplying crude oil to Belarus with no export fee under a trade deal between the two countries. But following the so-called tax manoeuvre the de facto subsidy to Minsk has been removed that will cost
the Belarusian budget billions of dollars a year. Russia amended its Tax Code in 2019, which has and damaged the profitability of Belarusian refineries..
Moody’s: Russia seen as resilient to external shocks
Russia is more resilient to external shocks than most oil exporters given its flexible exchange rate regime and large foreign exchange reserves, Moody’s Investors Service wrote on March 24 in a special report of the effect of lower oil prices on the credit profiles of oil-exporting sovereigns.
As reported by bne IntelliNews, other reports saw Russia as well-braced for the oil price war that has started after the collapse of OPEC+ oil output cuts agreement.
“While we expect a deterioration in the current account, shifting to a small deficit of
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Week 12 26•March•2020