Page 10 - RusRPTDec21

● Deliberations over the new Soyuz Vostok gas pipeline through Mongolia to China are continuing at the same time as gas supply contract negotiations with China. Shulginov said there was mutual interest in the new contract.
● Gazprom is discussing with Turkish customers the renewal of 8bcm/a contracts that expire at YE21.
● There has been no final decision on how the gas from Gazprom’s Tambeyskoye group of fields will be used. Shulginov said there might be a need to monetise gas reserves faster than Gazprom envisages.
● MinEnergo is against an export duty on LNG, as that would hinder progress towards the 140mnt/a output goal by 2035.
● The government is discussing tax support for depleted and hard-to-recover gas fields in the Nadym-Pur-Taz region. No specific parameters exist at this point.
● The regulations for CCS are being developed with the Russian Subsoil Agency. MinEnergo targets less than three years to get this done.
● Hydrogen use is going to require a lot of technical studies, but it is clear that involvement in hydrogen is necessary.
● The source of LNG for the gasification of Kamchatka and the tariff have not been determined. Gazprom’s LNG could be used for this purpose. Fuel oil could be used as an alternative. How to gasify Murmansk (pipeline vs. LNG) is also being discussed.
● MinEnergo sees liquids production in 2023-24 at 560mnt/a. It supports the stabilisation of output.
● Tax support for highly viscous oil is being discussed in the government and State Duma committee. The baseline scenario envisages a shift to EPT.
● Adjustments to the damper mechanism are not being discussed. MinEnergo is paying attention to gasoline prices and is discussing pricing and supply volumes with companies.
● Rosneft continues to cooperate with the government as usual, despite the state ownership going below 50%.
● All necessary tax breaks for Rosneft’s Vostok Oil project have been provided.
We think that providing Rosneft with gas export rights would be mostly negative for Gazprom, in terms of both sentiment and finances. There have previously been discussions about 10bcm/a as a potential export volume for Rosneft (see our Morning Comment of 21 September). Were that to materialise in 2022, that could mean Gazprom’s EBITDA being 2.4% lower than our forecast, and Rosneft’s EBITDA being some 4.5% higher (subject to the agent agreement payment with Gazprom). While gas prices remain high, investors might underestimate the negative general effect on Gazprom’s sentiment from this potential development, we believe.
To recap, the government generally supports giving Rosneft access to export as an experiment, although Gazprom is opposed.
As concerns climate-friendly initiatives (CCH, hydrogen, etc.) we agree with MinEnergo’s statement that Russia needs to be involved in these developments.
Regarding the Tambeyskoye field, Gazprom sees it as part of the joint venture with Rusgasdobycha, with pipeline transport to the west of Russia, while Novatek has asked to buy the asset for LNG production. Gazprom and Novatek would be the key beneficiaries of any new tax reliefs for the Nadym-Pur-Taz gas fields, we believe.
We see liquids output in Russia at 563-564mnt in 2023-24F, which is close to MinEnergo’s outlook. We also note that, based on the current OPEC+ agreement (with Russia’s oil output growing 100kbb/d until April 2022), total liquids output in Russia might theoretically reach 562mnt in 2022, we calculate
10 RUSSIA Country Report December 2021 www.intellinews.com