Page 103 - RusRPTFeb22

Gazprom’s increasing and record exports to China may be fully expected, but investors should appreciate that additional export contracts could well be signed in the course of 2022.
Gazprom Neft intends to increase production faster than other oil companies in the coming years and reach 130mntoe of hydrocarbon production in 2025, Kommersant reports, referring to statements by Gazprom Neft CEO Alexander Dyukov. In 2021, the company expects to increase production at least 10% YoY, and 5% in 2023 and 2024 under favourable market conditions. The company might overtake Lukoil in hydrocarbon production in 2023, according to the paper. In 9mo21, Gazprom Neft produced 74.06mntoe of hydrocarbons and we expect it to have produced around 100mntoe in 2021F. In 2021, Lukoil produced 89mntoe of hydrocarbons in Russia and at least 105mntoe globally. Gazprom Neft’s gas production is set to grow faster than Lukoil’s thanks to its active development of gas fields in the Arctic. Taking into account Gazprom Neft's plans (in the absence of limiting external factors), the company’s hydrocarbon production (jointly in Russia and abroad) might exceed Lukoil’s figures as early as in 2023 (117mnt vs. 113mnt). We note that the profitability margin on gas sales in Russia is less than on oil and condensate sales. We expect Lukoil's oil and condensate production to amount to 80mnt in 2022F, and Gazprom Neft’s (with JVs) at 63mnt.
● Rosneft
Rosneft has signed a contract with Maire Tecnimont for the construction of a 2.2mnt VGO hydrocracking unit at Ryazan refinery for EUR 1.1bn (USD 1.2bn), Interfax reports. The start and end of construction have not been announced.
The plans for the hydrocracking unit at Ryazan refinery became known in 2021, when Rosneft signed a preliminary agreement with Maire Tecnimont. Such a unit could raise the output of light and middle products 2mnt, including 0.5mnt of gasoline, on our numbers. Ryazan refinery’s capacity is some 18mnt/a of oil, but in 2021 it processed around 13.2mnt of oil. As an indication, the new unit might raise the refining margin from USD 21/t to USD 38/t (under our 2024F macro forecast, with an oil price of USD 67/bbl, on average), we calculate.
This project is not incorporated into our model, so we see upside risks to our capex forecasts for the company in the coming years. However, we note that the current regulatory environment (with a negative crude excise and damper) provides notable support to the profitability of the downstream. Still, we treat the news as not market moving for Rosneft’s shares, as the market is not fully trading on fundamentals at the moment.
103 RUSSIA Country Report February 2022 www.intellinews.com