State Regulation of Oil and Gas Sector in 2021 and Prospects 2022

The year 2020 was bitter trials to the whole world economy and especially to the oil and gas industry. Russia was not an exception in this regard.

The struggle between camps supporting the OPEC+ deal and a price war ended in spring when Moscow withdrew from the agreement and Saudi Arabia, in response, sharply increased its oil exports. At the same time, the progressing COVID-19 pandemic significantly reduced demand for oil, and these two factors led to a real price catastrophe.

Russia rushed to join OPEC+ again but on much tougher conditions, which resulted in 8.6% decrease in the annual oil output. However, the situation concerning exports is much worse, as the Russian oil industry faces strategic risks of losing its essential markets.

The Cabinet was not lenient to the industry thinking that in the past few years oil producers accumulated sufficient reserves and even cheated the state having failed to invest the money spared on taxes.

The package of fiscal amendments passed in autumn 2020 looked evidently confiscatory. And it was an important element of the concept of new oil that becomes the foundation of the current state policy on the oil industry. It means that old fields are declared unpromising, and the stake is made on greenfields that should create new jobs and demand for products of relative industries. However, the state avoids thinking about real costs of production of hydrocarbons at new projects.

Before the oil industry, the breakthrough project was production of LNG in the Arctic. And in 2020 it became evident that Russian liquefied natural gas, practically not contributing to state budget revenues, competed with Russian piped gas supplies on the European market. In the meantime, despite the tough sanctions war, Russia keeps laying new gas pipelines to Europe. All these factors question expediency of the energy policy of Russia.

Meanwhile, voices of lobbyists of the green agenda sound more and more energetically, as they suggest radically restructuring our energy sector. And this is another challenge to the Russian oil and gas industry.

The NESF report wrapping up 2020 elaborates on the following questions:

• Will Russia withdraw from the OPEC+ deal?
• How did the OPEC+ deal influence autumn reshuffle in the government?
• What is the new system of state regulation of the oil and gas sector?
• How did Russian companies fulfill oil outputDid the government support the oil services business?
• Will we manage to develop offshore and tight reserves amid sanctions?
• Will the state continue to subsidize LNG production?
• Why does Rosneft aggressively promote its Vostok Oil project?
• How did Rosneft cease being a state company?
• How did the Cabinet explain autumn changes in taxation of oil companies?
• What risks does the green policy pose to Russian oil and gas companies and what Putin thinks about the energy transition?

Contents of the report: