Page 5 - FSUOGM Week 29 2019

FSUOGM COMMENTARY FSUOGM
regulations for tax breaks will itself be subject to in uence by vested interests. And even if a clear and e ective set of rules is introduced, there is no guarantee that exceptions may be granted in the future to projects judged as having strategic national importance.
e impact of the short-term moratorium on producers is anticipated to be negligible.
“We expected a limited impact on Russian oil producers’ results, as the moratorium will only be enacted until end-2019 and existing tax ben- e ts will not be removed,” BCS Global Markets commented on July 23.
“A er its long-awaited analysis on the e - ciency of existing tax breaks, it seems the nance ministry has managed to put off discussion of most additional tax incentives to next year,” Sberbank CIB said, anticipating the “news ow about taxes to be quiet for the rest of the year, with the only exception being discussion of tax breaks for the Priobskoye eld.”
Priobskoye, a giant Soviet-era oilfield in Western Siberia, has been made exempt from the moratorium, according to the Kremlin’s instructions. e deposit is shared between state producers Gazprom Ne and Rosne .
Last December, Rosne head and in uen- tial Putin ally Igor Sechin reportedly called for a lower rate of mineral extraction tax (MET) to be applied at Priobskoye, citing the high water content of the field’s reservoirs. The finance ministry opposed the reduction, arguing that it would cause the budget to lose out on more than RUB460bn ($7bn) in revenues over a 10-year period. It is believed that Gazprom Ne then asked for similar relief in April.
e Kremlin has also instructed the energy and nance ministries to specify economic jus- ti cations for providing Rosne with extra tax breaks.
“The finance ministry is against them,” a ministry source told Reuters on July 21. “ e oil- eld’s output is growing, and it already receives a deduction for working with hard-to-recover reserves. It doesn’t need additional support.”
e moratorium also poses an obstacle to Rosne ’s alleged attempts to seek more tax relief in the Russian Arctic. According to Vedomosti, Sechin recently asked for $41bn in tax relief as well as support for infrastructure construction at a group of oil elds in the far north of Krasno- yarsk region.™
PIPELINES & TRANSPORT
Russia approves Murmansk transhipment
RUSSIA
The terminal will facilitate exports from Novatek’s Arctic LNG projects.
RUSSIAN Prime Minister Dmitry Medvedev has approved Novatek’s plans for a transhipment facility in Murmansk, according to a report from the country’s TASS agency. e plant would have up to 20mn tonnes per year (tpy) of capacity, the report continued.
e Russian gas company is making plans for two such terminals, one at Murmansk and another in Kamchatka. e idea would be that this would allow it to move LNG from its Arctic projects more easily, via the Northern Sea Route (NSR).
LNG will be moved from Yamal LNG – and, assuming it is approved, Arctic LNG 2 – to the transhipment facilities on ice-breaking vessels. e gas will then be transferred to conventional LNG carriers (LNGCs).
e Murmansk terminal may cost $1.1bn, while Kamchatka has been estimated at $1.6bn. In 2018, when the plan was rst set out, VTB analysts said this might save $0.2 per mmBtu in transportation costs.
Expansion plans
In related news, Novatek has announced the closing of the sale of stakes in Arctic LNG 2 to Asian customers, readying the project for a final investment decision (FID). Buying in were China National Petroleum Corp. (CNPC),
CNOOC Ltd and the Japan Arctic LNG consor- tium, which includes Mitsui and Japan Oil, Gas and Metals National Corp. (JOGMEC), the Rus- sian gas company said on July 22.
e sale and purchase agreement (SPA) was signed by the Japanese companies on June 29. is also provided for LNG o ake of 2mn tpy. e Chinese companies signed deals on June 7.
Novatek now has 60%, while the other part- ners – also including Total – each have 10%. Arc- tic LNG 2 involves three trains on gravity-based structure (GBS) platforms. Each will be capable of producing 6.6mn tpy.
The company’s chairman, Leonid Mik- helson, said these sales had put in place the structure needed for progress. “ e target level of Novatek’s participation has been reached, allowing us to make the [FID] and optimally use the company’s cash ow to nance our new projects”.™
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