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State regulation of the oil and gas sector in 2015, prospects for 2016

State regulation of the oil and gas sector in 2015, prospects for 2016

The traditional series of NESF reports is concluded with the final analysis of main events in the Russian oil and gas sector in 2015.

Oil prices kept falling, which affected the sector negatively and made the government again raise taxes on FES players.

Amid the growing state budget deficit and decreasing export revenues the Russian finance ministry again paid its fiscal attention to oil and gas companies. Meanwhile, the oil industry set another post-Soviet production record. The question is whether we will see recurrence of the situation observed in the late 1980s when a record high oil output was followed by its collapse.

The report elaborates on the following issues:

Production results of the year
- The analysis of the situation at Russia’s leading oil and gas companies
- Results of production of oil, natural gas and oil products
- Stagnation in the oil industry as reflection of investment problems; decline in the natural gas output as a result of marketing difficulties
The influence of sanctions and low prices on prospects of the sector development
- Termination of the Arctic direction
- The situation around offshore development
- Problems with development of tight reserves in Western Siberia
- Chinese and Indian companies in eastern projects – a new hope?
- Saving on the future – reduction in investments in prospecting
Tax battles
- Results of the tax maneuver
- The finance ministry is looking for the devaluation margin
- Repressive decisions at the end of the year: freezing the oil export duty rate and preserving the planned rise in the oil production tax; advance in the natural gas and condensate production taxes
- The finance ministry is torpedoing the sector’s transfer to the financial result taxation
Activities of state regulators
- The role of relevant ministries.
- Main administrative battles: gas market reforms, offshore development, regulation of the oil services segment
Export policies
- The turn towards the East continues
Prospects of developments

Contents of the report:

Introduction	3
Chapter 1. 2015 PRODUCTION RESULTS	5
Chapter 2. STRUGGLE FOR THE TAX REGIME	25
Chapter 3. RUSSIA’S OIL AND GAS SECTOR IN THE CHANGING WORLD CONJUNCTURE	45
Chapter 4. TRANSFORMATION OF EXPORT STRATEGY	58
Chapter 5. STATE REGULATION OF THE OIL AND GAS SECTOR	67
FORECAST OF DEVELOPMENTS	80

Date of release:	January 18, 2016

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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