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Oil and Gas Sector Regulation in 2022 and Prospects for 2023

Oil and Gas Sector Regulation in 2022 and Prospects for 2023

2022 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.

The oil industry even managed to increase annual production and find options for redirection of crude oil exports to other markets. On the other side, there was a serious drop in exports of pipeline gas, though in financial terms, this decrease was fully compensated by the rise in gas prices, which even allowed the government to collect additional taxes from Gazprom. In the meantime, LNG production and exports grew significantly.

Nevertheless, the industry is entering the year 2023 with anxiety. An embargo on petroleum products is being prepared.

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.

There was a tough debate in Russia throughout the year about priorities of the state energy policy: whether it should focus on maintaining national revenues, which implies supporting national oil and gas exports, or it should inflict the maximal tangible damage on opponents, including the EU.

The latter option implied fast termination of hydrocarbon supplies to Europe. After the price cap was introduced, the discussion revived and focused on the question of how Russia should properly react to this step.

Another question is about the green agenda, because regulators assumed earlier that Russia should be within this global trend that was actually formed by the Europeans. Thus, it is a big question whether it is reasonable to keep insisting on accelerated energy transition in Russia.

The report elaborates on the following topics:

Preliminary production results in 2022

  • Domestic production of crude oil, natural gas and LNG

The reaction of the oil industry to the toughest sanctions. Exports of Russian oil and petroleum products in 2022

  • Adjustment to the EU embargo and price cap
  • New customers, new logistics
  • Expectations of exports of diesel and other petroleum products in 2023

Economic pragmatism vs. mobilization

  • Decisions of Russian regulators to support the oil and gas sector
  • Political decisions on counter-sanctions; their influence on the sector

The state fiscal policy

  • The government’s disinclination to sacrifice budget revenues for current support to the oil and gas industry

The green agenda after February 24

  • Development of the climate topic, promotion of carbon regulation, and the current status of the hydrogen hype

Prospects of developments

Contents of the report:

The struggle of economic pragmatism against the temptation of mobilization 20
Tax policy of the state. The role of hydrocarbons in budget revenues 24
The climate topic stays on the agenda 35
Transfer to ESG principles 37
Carbon regulation 40
Development of hydrogen energy 43
Date of release: February 1, 2023

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

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