Page 140 - RusRPTDec21

out of oil, gas and coal.
Hydro and renewable power are fraught with problems as well as fossil fuel generation. There are issues of waste and environmental impact.
The climate agenda leads to lower investment in the O&G sector, which negatively affects reserve replacement, raising energy prices.
Court decisions similar to the ruling that prescribes Shell to do more for climate change could appear, affecting other O&G companies, banks and investors into the sector.
The sale of upstream assets with high GHG intensity by majors to smaller companies does not solve the emissions problem, but lowers transparency.
It is a common point for Russian O&G companies and government officials to call for a cautious and reasoned approach to the phasing out use of hydrocarbons and support for the O&G industry. Thus, Sechin’s statements are in line with this view. We welcome the news that the new company’s strategy will include more references to the energy transition, as this is what investors appreciate.
Rosneft has notified Shell of its decision to acquire 37.5% in the PCK refinery in Schwedt, Germany as part of the implementation of the pre-emptive right of redemption, the Russian oil company said in a statement (reported by Vedomosti). The transaction is to be closed after regulatory approval. The deal value has not been disclosed. The capacity of the PCK Refinery is 11.6 mnt/a; the current share of Rosneft in the plant's capacity is 6.3 mnt/a, which might go up to 10.6 mnt/a if the transaction goes through. The refinery is relatively advanced, with a Nelson Index of 9.8. The price of the deal is central here. We note that despite some recovery in the refining margins post-COVID, the profitability of refineries in Europe is suffering from CO2 price increases (up 91% YTD to $76/t). In addition, Rosneft’s CEO said that the company planned to start implementing low-carbon projects at the plant, which would mean additional capex. Thus, in general we deem the news to be neutral to slightly negative, albeit while waiting for more details on the deal value as well as modernisation plans.
● Novatek
State-owned oil companies in India are considering the possibility of participating in Rosneft’s Vostok Oil project, Kommersant reports, referring to sources from the Indian newspaper Mint. The latter suggests that these companies might include ONGC Videsh Ltd, Indian Oil Corp Ltd and Oil India Ltd. Rosneft confirmed negotiations with a consortium of Indian companies, without specifying their names. The potential negotiations are at a preliminary stage. India also intends to buy a stake from Novatek in the Arctic LNG 2 project, Kommersant writes. To recap, in December 2020, Rosneft sold 10% in Vostok Oil for EUR 7bn to Trafigura and in October 2021 sold a 5% stake to Vitol and Mercantile & Maritime Energy . At the moment, Novatek has a 60% stake in Arctic LNG 2. Theoretically, it might sell up to 10% of the stake, if the company plans to maintain a controlling stake.
140 RUSSIA Country Report December 2021 www.intellinews.com