Main page > Comments > Top events of the month > Top events of Jule 2010

Top events of Jule 2010

The National Energy Security Fund introduces top-ten events in the oil and gas industry in Jule 2010 and is ready to comment on them in detail.

  1. Finance ministry suggests amending taxation of oil and gas sector

    Taxation of the sector seemed to be gradually becoming liberalized, because the sector needed large investments in new projects. But in July the export duty on the oil from Eastern Siberian deposits was introduced, although it is not so high. This was followed by other rather tough novelties initiated by the finance ministry, including a serious advance in the gas production tax and growth in the oil production tax; the suggested plan is long-term and phased. The gas industry will be affected stronger. The initiatives came unexpected. The gas sector always seemed to be a sacred cow and it looked as if nobody would ever encroach on it. But here two factors seem to coincide: firstly, we have not overcome the crisis yet; secondly, there will be elections next year that will require money. Meanwhile, there is not enough money. So, following an old tradition they decided to turn to the sector that is anyway considered the source of our troubles and that they believe should be additionally taxed. Oil and gas firms are likely to try to compensate the additional expenses. We should be ready for growth in domestic gas prices. Meanwhile, petrol prices are actually already advancing at an amazing pace.

  2. Transneft declares advance in transportation tariffs

    This is the second unpleasant news the oil sector received in July instead of tax preferences it desired. The “small state” model worked in this case: the big state does not have enough money and Transneft (the small state) also does not have enough money. The company implements a huge number of projects that are not always necessary, and these activities are not always efficient. There are a lot of rumors about fraud and distortions flourishing at Transneft. There is a feeling that the epoch of Semyon Vainshtok has come back, who used to head Transneft and even became some kind of a symbol of corruption in the oil and gas industry. The rise in expenses is enormous, which definitely results in additional payments by oil companies. Besides, Transneft certainly has a task to find resources to build ESPO and BPS-2.

  3. State approves tender conditions for Trebs and Titov fields

    Previously the state policy was very simple: important licenses were simply handed over to large companies such as Gazprom and Rosneft on quite comfortable conditions and at affordable prices. However, everything is absolutely different now; the state would like to get quite big money for the Trebs and Titov fields. This may be attributed to the fact that there are few good deposits left in the country, while there are many strong political clans. This is why the interests of many serious companies and their supervisors intersected over the Trebs and Titov fields. Previously it seemed there was enough of everything and everybody would have its stake and be happy, but now it is impossible to satisfy everybody. But whatever paradoxical it may sound, this may be beneficial for the budget – serious companies will have to compete for these deposits and pay a worthy price. The tender for the Trebs and Titov fields should be very enthralling. The state has been making promises to sell them for many years, but if the collision of companies for these assets is very strong, the tender may be postponed. This variant of developments should not be ruled out.

  4. Ukraine’s Rada passes law on splitting Naftogaz

    Ukraine’s new authorities are trying to look as good as possible proving that commitments the Orange revolution authorities undertook will be surely implemented by the new rulers. Kiev intends to fulfill the memorandum signed with the European Union last March. The previous authorities failed to put this document into practice during the whole year, but the new government rushed to do so proving their reliability as the EU’s partner. Kiev realizes that the pressure on Russia is sharply rising now, because Moscow has to solve the problem of safe gas transit to Europe. If Russia starts building South Stream, Ukraine will cease being a transit state. Moscow is trying to convince Kiev to surrender the pipeline, while Ukraine realizing that it is seriously trapped is trying to get out by attempting to play Russia off against Europe. By implementing the EU requirement Ukraine hopes Europe will join a dialogue with Moscow and will keep Moscow off the pipeline. But in reality Europe is quite cautious about its participation in modernization of the Ukrainian gas transportation system. Europe’s position was formulated long ago: the transit problem is a problem of the Russian Federation that should solve it independently with Ukraine. Europe does not want to invest in the GTS. This is why there is no use for Ukraine to draw Europe into this story; it is unlikely to get any dividends from this, but it may again quarrel with Russia.

  5. Gas war against Belarus over, Belarus joins Customs Union

    The gas crisis is overcome but the problem remains. Belarus will soon have elections and the whole July was characterized by the surge in Russian-Belarusian conflicts: the Russian mass media started actively disseminating information about how bad the Belarusian president is. Alexander Lukashenko responded in the same manner. Russia has always thought that Ukraine is a weak link of the transit chain, but it turns out that Belarus should not be shrugged off, especially if Russia chooses to play against Lukashenko during the election campaign. In this case developments may become absolutely unpredictable.

  6. Signing South Stream roadmap with Bulgaria

    We were watching almost a detective movie with Bulgaria’s participation during the whole July. Russian deputy PM Viktor Zubkov was staying there for about a week trying to agree conditions of the South Stream implementation with Bulgaria. As a result, the roadmap was signed but there are still more questions than answers. Bulgaria is clearly trying to keep a foot in both worlds. It realizes economic advantages of South Stream, because it will enable Sofia to collect transit fees from 63bn cu m of gas pumped through Bulgaria instead of the current 17bn cu m per year. On the other side, there is political influence of the EU and the USA. Bulgaria’s new PM Boyko Borisov always highlights the focus on Brussels and Washington. It results in Sofia’s complicated position: the roadmap is signed but a joint venture that is to work out a feasibility study of the Bulgarian section of South Stream has not been established, which is the main thing. Meanwhile, Gazprom already in Q1 2011 needs to submit the end-to-end feasibility study of the whole project. It is not clear who will deal with this. The price of gas and contract conditions have not been fully agreed, although in 2011 contracts on gas supplies to Bulgaria expire. So, there are many questions. The most important point is that after the roadmap was signed Bulgaria signed documents on participation in Nabucco that is viewed as South Stream’s competitor. Bulgaria will cause many unpleasant moments to Gazprom yet.

  7. Gazprom-RWE phone talks on South Stream

    Despite problems of South Stream, Nabucco has even more troubles. The European project lacks the main component – no resource base and no contracts. The gas is not contracted yet because buyers do not understand where this gas will be taken from. No gas, no contracts. No contracts, no pipeline. The gas business algorithm is very simple. The only company that can “carry” Nabucco is Germany’s RWE, because this is the only participant of the consortium that has a developed gas distribution system in Europe. This is why Gazprom understands that if RWE is withdrawn from Nabucco, the European project will collapse. RWE is not a big client of Gazprom, and surely RWE is unlikely to conduct Nabucco’s political funeral; moreover the German company has done a lot to enter Turkmenistan where it positions are quite stable.

  8. Russia’s Constitutional Court refuses to consider Gazprom Neft’s suit

    In the Russian taxation system high export duties on crude oil have always been compensated by a possibility for oil firms to profit on the domestic market where they charge a monopolistic rent. But they government has recently started turning the screw on this segment too. The Federal Antimonopoly Service began actively struggling against oil companies by filing actions to courts and ensuring imposition of fines. Oil producers did not like it and appealed to the Constitutional Court. The CC so far refuses to consider Gazprom Neft’s appeal citing its incorrect formulation. However, in reality the CC has not received instructions from the PM. The situation is absolutely simple. On one side, premier Vladimir Putin understands that there is no money in the country and taxation of oil companies should be increased. On the other side, it is also obvious that oil producers have to make investments and they need to be given an opportunity to generate earnings on the domestic market. But in the election period growth in petrol prices is not something the PM is planning, because it is fraught with the uplift in the social and political tension in the country. This is why Putin cannot make a decision – to fight monopolism on the petrol market or turn a blind eye to this. He probably thinks the CC itself will look into the case and make a Solomonic decision. But the CC has got out of the habit of acting independently.

  9. BP saga continues, prospects of BP sale discussed

    BP cannot stop the oil leak, the situation is very bad. The volume of fines will be tremendous and it is clear that BP will need money. There are several options of developments. Firstly, BP may find a large buyer of a serious block of shares of some 20% to 25% that will agree not to change the company’s management and then probably sell part of this stake. This is called a white knight investor. It is known that BP president Tony Hayward, who is every day rumored to have been sacked, travels around the world from Russia to Saudi Arabia looking for investors; so far he has not succeeded. If this plan is not implemented, there is a second variant. It is already being implemented partially. It was noticeable in July that the company needed to sell profitable assets by piecemeal to quickly get money to pay fines and penalties. BP has quite a number of assets in Russia including 50% in TNK-BP and over 1% in Rosneft. There are possessions in the post-Soviet states, e.g. an about 25% stake in the Shakh Deniz project that is a key one to load Nabucco. So, selling BP assets is a very interesting project that we will be looking forward to see.

  10. Blast at Baksanskaya hydropower plant

    This accident is definitely not of the same scale and importance as the Sayano-Shushenskaya case. The Baksanskaya hydroelectric power plant is 80 years old designed within the Soviet GOELRO plan. It does not have a dam and a water reservoir; the plant uses a natural level difference and nothing can be flooded. This is why there are neither economic nor energy consequences; the facility’s capacity is small. But on the other side, it is clear that if they managed to blow up this plant, you just can imagine what could happen if a more serious facility is exploded. Just imagine an attack at a nuclear power plant. A comprehensive assessment of the situation at hydroelectric power facilities was carried out but only a report on the Sayano-Shushenskaya plant disaster was published, while no information on the general state of things was posted. And it is sad as we cannot understand what the situation is at hydropower facilities in general. The problem of terrorism is urgent not only for hydropower stations. Security is a very important topic and we should make conclusions from the lesson given.


Bookmark and Share

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

State regulation of the oil and gas sector in 2023, 2024 outlook
Gazprom in the period of expulsion from the European market. Possible evolution of the Russian gas market amid impediments to exports
New Logistics of Russian Oil Business
Russia’s New Energy Strategy: on Paper and in Fact
Outlook for Russian LNG Industry

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

Rambler's Top100
About us | Products | Comments | Services | Books | Conferences | Our clients | Price list | Site map | Contacts
Consulting services, political risks assessment on the Fuel & Energy Industry, concern of pilitical and economic Elite within the Oil-and-Gas sector.
National Energy Security Fund © 2007

LiveInternet