Page 18 - RusRPTFeb22

While many foreign software solutions now have a domestic analogues, “the transition will be brutal and problematic for organizations that have not yet started replacing foreign solutions,” Irina Zinovkina, Consulting Director at InfoWatch, said to Kommersant.
In particular, she explained, data transfer will be required when replacing systems — and this will inevitably affect business processes.
Alexey Smirnov, another industry insider, believes Western suppliers themselves will lobby against sanctions. “SAP, Oracle and alike have a pretty large number of customers in Russia in both the private and public sectors. Leaving Russia will be a substantial loss for them,” he told Kommersant.
2.8 Russia, China do new gas deal
Gazprom and China’s CNPC have signed a 30yr, 10bcmpa gas contract for deliveries from Russia’s Far East via the Sakhalin-Khabarovsk-Vladivostok pipeline, per an announcement by President Putin, who is visiting China (Reuters). Contract deliveries are reportedly to begin in 2-3 years with plateau contract volumes to be achieved around 2026. Delivering gas to China’s northeastern tip makes this project strategically attractive for China, as the only real alternative supply would be more expensive LNG.
Long-awaited contract gives a c4-5% bump to long-term volumes at world prices: In terms of volumes, the 10bcm is material vs. the c190bcm Gazprom exported to the ‘Far Abroad’ (Europe including Turkey plus China) last year. Looking forward, we currently model Gazprom exporting c200bcm to Europe and another 38bcm to China under the Power of Siberia-1 contract, so the expansion would be on the order of 4%. Regarding pricing, sources have told Reuters the contract will be analogous to the Power of Siberia-1 contract, which is oil-linked with, we estimate, an 8.5%-9% ‘slope’ to oil delivered at the Sino-Russian border. The global gas market is very much a seller’s market today, so we expect Gazprom got pricing that is somewhat superior to that, perhaps between 9%-10%. To turn that into gas prices, note that if the slope is 9.5%, this implies that in a $90/bbl oil environment the gas will price at $90 x 9.5% = $8.6/mcf or c$300/mcm. Keep in mind there are no transit countries as with European deliveries, which usually requires c$2/mcf or $70/mcm in transit charges. Therefore, the netbacks to Gazprom are quite competitive to typical European prices.
One contract done, two to go – Power of Siberia-2 by year-end?: The Far East contract is one of three that have been under on-again, off-again negotiation for several years. The others are: (1) A 6bcm+ expansion to the existing Power of Siberia-1 contract, which would take its current 38bcm annual plateau level to 44bcm or more; and (2) The 50bcmpa Power of Siberia-2 pipeline, which now appears likely to run via Mongolia. Of these three new contracts, the latter would obviously be the most important, not only due to the large volume, but also because it would deliver gas not from isolated fields in East Siberia or Russia’s Far East, but from Gazprom’s core production region in the northern part of West Siberia, which would give the company strategic options for that
18 RUSSIA Country Report February 2022 www.intellinews.com