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

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:

INTRODUCTION 3
CHAPTER 1. LOOKING FOR NEW OIL. THE STATE RELIES ON TERMINATION OF OLD PROJECTS IN FAVOR OF NEW OIL VENTURES 5
1.1. COVID-19, collapsing prices and a new OPEC+ deal: the perfect storm for the Russian oil production industry 5
1.2. Observance of output reduction by companies 9
1.3. Influence of OPEC+ deal on fiscal changes in the Russian oil industry 18
CHAPTER 2. WHAT SHOULD OIL PRODUCERS ECONOMIZE ON: CAN PRODUCTION COSTS DROP LOWER? 24
CHAPTER 3. RESTRUCTURING THE STATE SYSTEM OF FES REGULATION 33
3.1. Bureaucratic rollercoaster of A. Novak and new Minister of Energy 33
3.2. General logic of government update and its influence to the oil and gas sector 38
CHAPTER 4. THE STATE KEEPS SUPPORTING LNG PRODUCTION 45
CHAPTER 5. THE ARCTIC AS AN EXAMPLE OF STATE CHOICE IN FAVOR OF NEW OIL 51
CHAPTER 6. PRODUCTION AND EXPORTS OF RUSSIAN HYDROCARBONS AMID NEW AND OLD SANCTIONS 59
6.1 In spite of sanctions: revival of the shelf 59
6.2. Will Bazhenov formations have a second chance? 62
6.3. Nord Stream 2: the main sanctions story of the year 64
CHAPTER 7. DISPUTES ABOUT ENERGY TRANSITION. THE GREEN AGENDA IN RUSSIA AND ITS PRESSURE ON HYDROCARBONS 66
7.1. Two camps of the climate agenda, Putin’s position 66
7.2. Actions of climate regulators in 2020 69
7.3. Fascination with renewables and hydrogen 70
DEVELOPMENT OUTLOOK 73
Date of release: January 31, 2021

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

State Regulation of Oil and Gas Sector in 2021 and Prospects 2022
Gazprom: Life after Major Construction Projects
The Arctic: a new state priority
Tax Treatment of Oil and Gas Sector: Choosing Priorities
Import Substitution in Oil and Gas Industry: Myths and Reality

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

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