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State regulation of oil and gas sector in 2012, prospects for 2013

State regulation of oil and gas sector in 2012, prospects for 2013

This is a traditional report by NESF that sums up main results of the year in the sector and outlines the agenda of the next year. Production results in the oil and gas industry, main novelties in the sphere of state regulation, changes in taxation policies and struggle for assets are the issues addressed in our final report this year.

The report elaborates on the following issues:

New system of state management of the sector, analysis of its efficiency
- In May 2012 the executive power was seriously reconfigured. This definitely affected the oil and gas sector. However, thoroughly analyzing the first six months of work of the new system one can find many very familiar features in it. Putin reshuffled the pack but he did not alter key principles of organization of the power vertical. Major clans were regrouped but they kept fighting for powers with Putin being supreme arbiter.
Preparation for the big Putin privatization
- Experts were speculating about strengthening of the state capitalism paradigm during the whole year. In reality new acquisitions of state companies are simply preparation for their privatization. Putin honestly acknowledged this in his address at the end of the year.
- Privatization will be the main trend in the next few years. And it is important to understand what clans may become its main beneficiaries.
Taxation policies
- On one side, a lot of decisions important for the sector were made in 2012. On the other side, state authorities did not venture to revise the fundamental approach to taxation in the sector. The economic situation in the country does not provide for the opportunity to make breakthrough decisions. This lays the foundations of new problems in the upstream segment.
Export policies
- Heated debates on prospects of the turn to the East continued throughout the whole year. Gazprom made a final investment decision on developing Chayandinskoe and is ready to begin construction of a gas pipeline from Yakutia to Vladivostok where a new liquefied natural gas producing plant is to be built.
- At the end of the year the second phase of ESPO was launched. However, one simple question remains – how to increase supplies to Asia and simultaneously to preserve the share on the European market without serious growth in production.
Medium-term forecast of developments

The contents of the report:

Introduction. Main trends of 2012	3
Chapter 1. New configuration of power: efficiency of state management of the sector	5
Chapter 2. Struggle for property: main intrigue of Vladimir Putin’s new presidential term	16
Chapter 3. Production results: current success and anxious expectation	30
Chapter 4. Taxation procedures in the sector: cautious changes	47
Chapter 5. Drive towards the East: strategic choice or wish-wash?	58
Conclusion. Medium-term forecast of developments	65

Date of release:	January 17, 2013

If you are interested to obtain please contact » Elena Kim

Other issues:

Special report:

Nord Stream 2 and Ukraine: Costs Should Decide

There has been much discussion about how Russia – Europe’s biggest gas supplier – can continue to supply gas to Europe over the coming decades in the most secure and cost efficient way. Gazprom and its European partners have decided that building two additional pipelines through the Baltic Sea (Nord Stream 2) is the best commercial solution to secure future gas supplies for the EU, where gas production continues to decline and demand is expected to grow.

Shale Revolution: Myths and Realities

The boom in shale gas production in the US and its wide-ranging influence on markets rocked the gas world. Liquefied gas deliveries were redirected, altering the already fragile balance of demand and supply in traditional markets for pipeline gas in Europe.

Liquefied Natural Gas Outlook: Expectations and Reality

World market has shown interest to liquefied gas. Russia has so far been aside of it. However, producers have announced several large LNG projects. The new study will help investigate this delicate subject and understand what is in store for LNG production and export in the nearest years.

Analytical series “The Fuel and Energy Complex of Russia”:

Outlook for Russian LNG Industry

European sanctions and Brussels’ policy of abandoning Russian energy resources plus the destroyed Baltic gas pipelines have shut in Russia a respectable volume of pipeline gas that cannot promptly be sent to alternative markets. This would seem a strong argument in favour of developing LNG production in Russia. The new NESF report must give the answer to the question about what part of the plans for dramatic increase in LNG production in Russia can be considered realistic.

Russian Energy and West One Year after Ukraine Conflict Began: Are There Connections Still?

Global politics are the framework for energy relations. However, energy projects are developed and deals are made immediately at the corporate level. It is companies that form the threads that tie nations in the energy business. It is therefore important to analyse relations between Russian and Western corporations. As long as companies from the “collective West” stay in Russia, there are still options for continuing co-operation. The latter still brings Russia fiscal revenue and markets.

Green Agenda in Russia during Bitter Conflict with West

After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.

Oil and Gas Sector Regulation in 2022 and Prospects for 2023

The year 2022 was very tough for the Russian oil and gas industry. After February 24, the industry was subjected to the most severe sanctions. However, their influence was quite different. Nevertheless, the industry is entering the year 2023 with anxiety. The EU intends to continue to reduce purchases of Russian gas, which will inevitably affect Russian revenues. The launch of new LNG plants is in question due to technological sanctions. Another question is about the green agenda. Thus, it is a big question whether it is reasonable to keep insisting on accelerated energy transition in Russia.

Gazprom at the Forefront of Economic and Political Battles with Europe

Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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