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Top events of October 2013

The National Energy Security Fund introduces top-ten events in the oil and gas industry in October 2013 and is ready to comment on them in detail.

  1. Rosneft signs new contract with China

    An accord on supplies of 100m tons in a ten year period was signed with Sinopec. During peak years supplies will obviously exceed 50m tons. Thus, Rosneft will not have sufficient production capacities in the east, and it will have to take away the required volume of oil from the western direction. Moreover, China is ready to buy oil in Black Sea and Baltic Sea ports, i.e. reorientation of our policy towards the Chinese market is unquestionable.

  2. NOVATEK agrees details of gas deal with China

    This is an interesting agreement: the price is linked to Japan’s JCC, which is the most beneficial price link for the seller. The PRC was demanding linking prices to the US Henry Hub from Gazprom for a long time, but it signed a contract with NOVATEK linking prices to JCC. This shows that the Chinese gas balance is not even, and the PRC has to look for very expensive gas on the market. Although a contract with Gazprom was not signed in October, nevertheless the Russian company has every reason not to hurry and to hope to secure a beneficial pricing formula from China.

  3. Igor Sechin suggests establishing international gas exchange

    The Rosneft head predicted soon emergence of the world gas market. His idea is understandable: we should not be afraid of liberalization of gas exports in Russia, as there will be an absolutely unified gas market. “Allow us to export gas, as this is not dangerous, because soon there will be no regional gas markets in the world,” Igor Sechin as if offers us. Gazprom would like to retain its monopoly on supplies to the European market. In this regard Sechin is more holy than the Pope, as he in fact voices theses proposed by the European Union. The theses are very disputable, nothing has proved them worth. Sechin’s personal ambitions are often above Russia’s interests, because creation of the common gas market is not beneficial for the country in general. Meanwhile, Sechin suggests accepting this as a given.

  4. Bill on LNG exports liberalization finally approved

    On October 15 Vladimir Putin signed a decree on authorizing the energy ministry to issue licenses of liquefied natural gas exports. The situation is quite interesting: the bill has not been adopted yet, but Putin has already issued a document explaining how things will be done. The energy ministry will be responsible for issuing permits for LNG exports. LNG exports indeed will be liberalized soon. The other thing is that we will have only two such projects in the foreseeable future: Yamal LNG that has a unique contract with Gazprom Export that enables Yamal LNG to sell its gas on the world market, and the Sakhalin-1 project that actually was not covered by the law on gas exports as PSA project. Thus, in general nothing is going to change in this sphere so far.

  5. Gazprom launches Kirinskoe gas condensate deposit

    This is another breakthrough for Gazprom. Besides, this is the first large offshore deposit launched by a Russian company without foreign partners. For instance, Sakhalin-2 was put into operation by foreigners, and later Gazprom acquired its controlling stake. In terms of exports, the layout of forces in the east may look slightly different. Although even peak production at Kirinskoe will hardly exceed 5bn cu m, there is the Yuzhno-Kirinskoe deposit nearby where exploratory drilling is finishing, and we are looking forward to the results. It may have substantial gas and condensate reserves and, probably, oil reserves.

  6. Greenpeace vs. Prirazlomnaya

    This is the breaking news of this autumn that should be obviously included into our rating. Many observers perceive this as covert struggle for the Arctic. We look at it as ecological hooliganism that actually does not bring us closer to solving environmental problems in the sphere of oil production. But the funniest thing is that Greenpeace fights against oil production in the Arctic by attacking the Prirazlomnaya platform once a year, while this rig has not even started producing oil. And there is a paradox: such actions just remind the public of Prirazlomnaya that was to start production several years ago.

  7. Moscow-Kiev gas dialogue sharpens

    In late October Gazprom CEO Alexey Miller declared that Ukraine had to pay off several billion dollars in debts, otherwise the advance payment principle would be introduced. Everybody understands that at the EU Eastern Partnership Summit in Vilnius that will take place on November 28 Ukraine may sign an economic partnership agreement with the EU. Thus, Russia is trying to put forward all arguments to prevent Kiev from signing. However, it seems to us that Ukraine is unlikely to be stopped, as it is determined to commit this economic suicide.

  8. European Commission unveils list of 250 energy infrastructure projects

    This is amazing obstinacy, because Europe again intends to build pipelines and interconnectors not realizing that if there is not enough gas at the entry, the system will not operate actually. NESF has prepared a report on this issue that will be posted on November 13. Everybody is invited to discuss it.

  9. Intrigue around Novorossiysk port sharpens

    A minority stake was bought by some mysterious investor; later it turned out that Transneft was behind that deal. In late October Rosneft head Igor Sechin wrote a letter requesting a state block of shares be transferred to his company. Actually we know that Transneft and Summa Capital are fighting for the Novorossiysk port; and Sechin may join this struggle, which means three bears in one lair will be biting each other.

  10. Beginning of oil exports from Trebs and Titov deposits

    The project was launched and oil exports began due to the port of Varandei. The Bashneft-LUKOIL partnership has turned out to be very efficient. By the way, at the end of the month Bashneft reported record-high dividends, which again triggered avalanche of rumors about its soon sale – LUKOIL is among potential buyers as partner in the Trebs and Titov project. But the outcome of this intrigue will be known only next year.


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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

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