Transcript Слайд 1 - The European Geopolitical Forum

Russian Oil & Gas Strategy:
What does it mean for the
global oil markets?
Tatiana Mitrova, Ph. D.
Center for International Energy Markets Studies
Energy Research Institute of the RAS
17th MIDDLE EAST PETROLEUM & GAS CONFERENCE
21 April 2009, Dubai, UAE
Russia in the world oil & gas balance
12000
10000
8000
6000
4000
2000
0
1999
2000
2001
Saudi Arabia
2002
2003
Russian Federation
2004
2005
US
Iran
2006
Russian Oil Production and Export in 19992009, bln.t.
Production
Export
Source: Rosstat
Short-term effects of the crises

Sharp oil price decline and export duty lag led to upstream losses in 4Q2008, independents
were mostly affected

Ruble devaluation, decrease in costs and MET reduction allowed Russian oil companies to
generate profits in 2009 even in 40 $/bbl environment as major part of their costs is in Roubles

Optimization of the investment programs started

Considerable decrease in tax burden

Oil and gas companies (especially state-controlled) can count on the support from the
government. Moreover, the largest projects could be viewed as infrastructure ones, creating
additional employment opportunities (similar to Roosevelt’s New Deal)

Legislative changes as of 01/01/2009 are a substantial but still insufficient relief for oil
companies
Export customs duty
Source: Ministry of Natural Resources and Ecology of RF
Source: Rosstat
New incentives needed
Source: Rosneft
Regulatory Changes
Short-term oil production trend
Source: CDU TEK, Troika.
Prospects of Russian oil production, mln. t
Source: ERI RAS “Crises scenario”
Major oil export projects: additional flexibility
Baltic Pipeline System-2
Caspian Pipeline Consortium
BALTIC PIPELINE SYSTEM (BPS-II)
Leningrad region
Estonia
Novgorod
region
Pskov region
Latvia
Tver’
region
MOSCOW
Smolensk
region
Lithuania
Belarus
Kaluga region
Tula
region
Bryansk
region
Russia: Crude Oil Exports vs. Export Capacity
(Base Case)
Burgas-Alexandroupolis
500
Constant
sa
BULGARIA
GREEC
E
Alexandrupol
is
Burga
s
BLACK
SEA
million metric tons
450
ROMANIA
400
350
300
250
200
150
100
50
AEGEAN
SEA
0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029
Capacity: East Asia
Capacity: Barents Sea
Capacity: Southern Druzhba
Capacity: Northern Druzhba
Capacity: Other
Capacity: Primorsk
Capacity: Butinge
Capacity: Ventspils
Capacity: Odessa
Capacity: Tuapse
Capacity: Novorossiysk
Non-FSU Crude Exports
Eastern Siberia development and ESPO

High geological risks

The government’s plans on petroleum licensing in the
region lag far behind plans

Delays in infrastructure development

High capital and operational costs

High uncertainty of ESPO tariff

Construction of the first phase of the ESPO pipeline
to Skovorodino is well advanced and will likely be
completed as planned in late 2009

Transneft and China have also finalized the details of
construction of a branch from ESPO to China. .

The challenge to fill the pipeline

Transneft proposal for a single network pipeline rate
of some $4.4/bbl starting in 2010 to effectively
equalize costs of exporting crude to the East or West
Prospects of Russian gas production, bcm
Source: ERI RAS “Crises scenario”.
Yamal – the main growth driver

Gazprom became extremely focused on
Yamal project and spent some $4 bln. last
year on Bovanenkovskoye field. This year
the figure is to spike to $6.5 bln.

Last year Gazprom began laying the
Ukhta-Bovanenkovskoye gas pipeline,
completed half of the Baidaratskaya Bay
72 km long crossing, drilled the first
production well and did much
infrastructural work

It is planned to produce the first 7.9 bcm
in 2011. According to the General
Scheme of Gas sector the Yamal output
was slated to spike to 135-175 in 2020,
thus offsetting falling production in NPT

Shtokman project
Phase one - 23.7 bcm annual output

The Shtokman Development
Company has approved the project`s
first $800 mln. budget for 2008-2009
and will make a final investment
decision this year
 In June 2008 construction of the first
semi-submersible drilling platform
started at the Vyborg Shipbuilding
Plant

The decision will hinge upon oil and
gas price forecasts and the
government`s willingness to provide
support for the project

With a slowing economy in the
intended European and US markets,
Shtokman project could now be less a
priority
Gas production in Eastern Siberia and Far East
Source: General Scheme of Gas Sector Development until 2030.

Refuse from Altai project
in General Gas Scheme

In the medium-term China
will receive gas from
Central Asia

Most attractive markets –
Japan and S.Korea – are
LNG-focused

Sakhalin transforms in a
major gas-producing
region with “Sachalin-2”
starting LNG supply in
several weeks
Market-oriented flexible approach in gas
production
Source: General Scheme of Gas Sector Development until 2030.
New Gas Pipelines
YamalUkhta
VidyaevoVolkhov
YamalYamburg
SRTOTorjok
Nord Stream
Yamal-Europe
PochinkiIzobilnoe
CAC
CAC-3
South Stream
Blue Stream II
Russia and OPEC
 Broad cooperation with OPEC is one of Russia’s
political priorities
 On October 22, 2008 there was held an
unprecedented meeting of President of Russia Dmitry
Medvedev and Secretary General of OPEC Abdullah
Salem Al-Badri
 In September, December 2008 and March 2009
Russian delegation, headed by Vice Prime minister Igor
Sechin who is in charge of fuel and energy sector, was
present at OPEC oil ministers meeting. Russia affirmed
its intention to cooperate with OPEC with possibility to
become an observer without joining the Organization
 Russian government took the lead to arrange a
regular energy dialog between Russia and OPEC, aimed
at contributing to long-term stability of oil market to the
benefit of oil market participants
Russian proposals






To reduce the role of traders in favor of direct contracts between oil
producers and consumers
To develop new oil trading system with switching to long-term supply
contracts; setting new trading floors in the producing countries;
increasing the number of markers in the oil market
To set up inventories in producing countries
To coordinate investment process in gas industry in order to avoid
oversupply
To coordinate tax policy (harmonizing the fiscal burden on oil-producing
companies)
To increase the role of producers by involving significant non-OPEC
producers in the effort to stabilize markets – such as Kazakhstan,
Azerbaijan, Norway, and Brazil