State Regulation of the Oil and Gas Sector in 2009 and Outlooks for 2010

The National Energy Security Fund traditionally sums up the year results with a concluding report evaluating main tendencies and events in the oil and gas sector.

The year 2009 was quite eventful. The situation with production made the executive power change priorities in the taxation policy. There were desperate battles for export routes of hydrocarbons. Wars for property and licenses continued. Preparations for a new wave of privatization began. Non-residents were again actively invited to invest in upstream.

There was a complicated situation: problems with production were becoming more and more obvious but main players were focused on disputes between clans rather than on solving the problems.

The following issues will be elaborated on in the report:

• Production results of the year

  • Stagnation in the production sector amid rising costs
  • Revision of development strategies of companies with decline in forecast parameters
  • Main production and marketing risks

• Export route wars

  • The European and Chinese ways of Russia’s fuel and energy sector development
  • Baltic Pipeline System-2 vs. East Siberia-Pacific Ocean pipeline
  • Active promotion of a gas pipeline to China and political motives behind exports of hydrocarbons to the PRC

• Fiscal and customs policies

  • Tax benefits in 2009 and their influence on the sector
  • Main beneficiaries of a new taxation policy. Prospects of a “tax haven” in Yamal
  • “Eastern allowances”
  • Dividend policies of companies
  • Raising profits instead of greenfield investments

• New laws, e.g. “On Energy Efficiency” and “On Oil”, as instruments of administrative confrontation

• Struggle for geology

  • Battles for a resource base between clans
  • Prospects of reforms in the geological prospecting sector and creation of a Rosgeologia state corporation

• Changes in policies towards non-residents

  • Transferring investment risks and the necessity of finding technical solutions onto foreign firms
  • Shtokman: basic precedent or local solution?
  • The Kamchatka case – non-residents as victims of inter-clan wars

• Forecast of the sector’s development in 2010

  • Economic possibilities and political threats

   

  The contents of the report:

  Introduction.	2
  Chapter 1.Preliminary Results of Production in 2009	3
  Chapter 2.Struggle for Export Routes	15
  Chapter 3.Non-residents: New “Romantic Period”	30
  Chapter 4.Struggle of Clans for Resource Base	35
  Chapter 5.Tax Novelties in the Sector	51
  Forecast of the Sector Development in 2010	60

  Date of issue	January 13th, 2010