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European M&A activity FSU: Rosneft projects take shape
Premier Oil is in financing talks with its rival Russia’s Finance Ministry has submitted several
Chrysaor, potentially leading to a merger bills to the State Duma that would radically over-
between two of the UK’s biggest oil and gas haul the country’s oil taxation system, largely at a
producers. cost to producers.
Bloomberg reported on September 15 that The ministry has proposed changes to the
the company, saddled with just under $2bn of excess profits tax (EPT) regime introduced last
net debt, had held initial talks with Chrysaor on year, which it previously said had caused a loss of
an all-or-partial merger of the two businesses. over $3bn to the budget. It has also called for the
Premier has confirmed these talks, but said its removal of tax breaks at specific projects, moving
preference was to follow through with a prelim- some of those fields to the EPT regime instead.
inary deal reached with creditors in late August As analysts note, the changes appear to go
to refinance over 45% of its debt. further than simply increasing oil industry tax
However, talks with Chrysaor and others on revenue. Rather, they seem aimed at streamlin- Rosneft will
alternative financing solutions will nevertheless ing Russia’s excessively complex oil tax regime.
continue, Premier said. High debt levels were a Generally, though, the impact will be nega- fare relatively
concern of Premier’s creditors even before the tive for oil producers, while gas producers are
pandemic struck. But this has not stopped the unaffected. Gazprom Neft will be hit hardest, well from the
company from pursuing a takeover of BP assets losing up to 21% of its EBITDA if the ministry’s many changes
in the North Sea. proposals are adopted. Tatneft might lose 20%,
Meanwhile, PGNiG has continued its Norwe- while Lukoil’s earnings could lose 8%. to be made in
gian buying spree, announcing a deal this week However, Russia’s biggest oil producer Ros-
to acquire small stakes in two producing fields neft will fare relatively well from the many the Russian tax
from Royal Dutch Shell for an undisclosed sum. changes. Not only this; while the ministry’s pro-
PGNiG has been building up its position on posals are generally aimed at increasing the tax regime
the Norwegian shelf in recent years, obtaining burden, it has also called for greater tax breaks to
resources to fill its 10bn cubic metre per year Bal- be provided to Rosneft’s Priobskoye and Vankor
tic Pipe project to Poland. The pipeline is due to oilfields. The latter will play a key role in the
start flowing gas in October 2022 company’s Vostok Oil megaproject in the Rus-
In a statement on September 21, PGNiG sian Arctic.
said it had agreed to take a 6.45% interest in the
Kvitebjorn field and a 3.225% interest in the adja- If you’d like to read more about the key events shaping
cent Valemon field. It will also gain interests in the former Soviet Union’s oil and gas sector then
the infrastructure used to transport the fields’ please click here for NewsBase’s FSU Monitor .
output.
Production at both fields is in decline. Even More talk of carbon-neutral LNG
so, PGNiG says the transaction will enable it to The idea of carbon-neutral LNG is being talked
boost its output in Norway by 45% to 0.9 bcm about with increasingly frequency, although
in 2021 versus the level last year. It expects to it accounts for only a miniscule fraction of the
net 0.2 bcm in annual gas supply from the fields LNG market to date.
between 2023 and 2028.. Six cargoes of LNG that can be described as
carbon-neutral have been traded to date. Four of
If you’d like to read more about the key events shaping these were cargoes sold by Royal Dutch Shell that
Europe’s oil and gas sector then please click here for involved full-lifecycle carbon offsets, while one
NewsBase’s EurOil Monitor. was a partial offset by Japan’s JERA.

P8 www. NEWSBASE .com Week 38 23•September•2020