Page 87 - RUSRptSept18

increased 8.5% y/y thanks to the contribution from Yamal LNG (+28.8% MoM) and higher production at Arcticgas (+5.0% y/y), although Novatek’s standalone production declined 2.3% y/y in July.
Russia could increase coal exports in 2018 to over 200mn tonnes and will seek to further boost coal exports by over 50% in the long-term, the Minister of Economic Development Alexander Novak and President Vladimir Putin said on August 27. In 2017 Russia exported 186mn tonnes of coal out of 409mn mined, making it the third largest coal exporter in the world. The target for 2018 coal exports was 187mn-188mn tonnes. Novak reminded that 2017 saw the resumption of global growth of coal consumption and trade and estimated that by 2025-2030 the demand would grow by additional 100mn tonnes. Russia could boost the output to 560mn tonnes in 2025 and 590mn tonnes by 2030 and increase the exports by 50%, on both the Western and Eastern direction, the minister argued. "Current market conditions allow Russia to expand its presence on the global coal market," President Vladimir Putin said, arguing that in order to do so coal producers and the government need to coordinate their efforts with Russian Railways and seaports. According to Novak, Russian Railways is on the same page to increase the rail transportation of coal to 180mn tonnes annually by 2024 and could beat this to 195mn tonnes by 2025 "by using own funds." Analysts surveyed by RBC business portal on the plans believe that Russian Railways could have to pay up to RUB695bn ($10bn) to comply with such expansion, which could hamper the dividend payments on ordinary shares. Overall increasing coal mining and expanding rail infrastructure would require over RUB1.5 trillion in the next six years, according to Novak. RBC warns, however, that betting on coal with such sizable investment is risky as investment in renewable energy sources is growing worldwide, which is likely to make coal the biggest loser on the energy market in the long-term. The largest coal consumer China is also active in this direction and is not constructing coal-based generation capacities anymore.
Transneft may be forced to pay for pipelines The government working on a bill that would require Transneft to pay for pipelines to individual oil fields using its investment funds. Oil companies would no longer need to compensate Transneft for the cost of building pipelines through increased tariffs. Centralizing payments in Transneft's hands would theoretically strengthen its president Nikolai Tokarev's hand in guiding sector investments. But in reality, Rosneft and other companies would be dumping costs onto another state firm's books. They might pay less in tariffs in the short run, but ultimately the cost of building pipelines will have to be borne by oil industry as a whole -- without the accountability created by the current pricing system. This idea has been advanced by Rosneft, but the oil companies do not yet have a single position on the issue. They dislike paying high tariffs to Transneft, but they also recognize that forcing Transneft to pay will make it harder to get new pipelines installed and could decrease the efficiency of the system as a whole. A report from the Institute for the Development of Energy Sector Technology diagnoses the industry’s problem differently: there is no independent expert who sets Transneft tariffs, and oil companies end up paying extra to the pipeline company because they overestimate the amount of oil they will pump through planned pipelines.
87 RUSSIA Country Report September 2018 www.intellinews.com