Main page > Comments > Top events of the month > Top events of October 2016

Top events of October 2016

The National Energy Security Fund introduces top-ten events in the oil and gas industry in October 2016 and is ready to comment on them in detail.

  1. Bashneft privatization story over

    Rosneft buying Bashneft was obviously the most prominent event in October and, perhaps, in the year 2016. The situation was developing rapidly. In September privatization of the company seemed to be postponed until 2017, but Igor Sechin managed to change the situation in his favor and within several days acquired control over Bashneft. It is definitely the major success of the Rosneft head and a huge failure of the so-called government liberals. In all respects the acquisition of Bashneft by Rosneft looks like slap in the face of the prime minister and his team. Everybody understands very well that it is not privatization at all. Everybody understands that the state could have taken the money from Rosneft that is a 70% state company. Certainly, there will be no optimization of the management quality. It is clear from the way the control over Bashneft was intercepted, when the company’s headquarters were in fact seized, all top managers dismissed, the middle management purged, and etc. Bashneft is obviously being prepared for takeover. Its brand name is likely to disappear. The government is unlikely to have planned such an outcome of struggle for Bashneft, because there is neither improvement of corporate governance nor additional revenue in the state budget.

  2. Preparations for Rosneft privatization

    This case also develops unpredictably. Rosneft proposed to buy out a 20% stake from Rosneftegaz. And it is a very serious intrigue, because Igor Sechin will benefit from that; later he may split this stake and sell it quietly. But the government intends to take revenge upon Sechin and suggests other options. Russian president Vladimir Putin has contributed to the intrigue. He is rumored to have met with LUKOIL head Vagit Alekperov and offered participation in buying Rosneft shares. It is evident that LUKOIL does not need it at all. So, the intrigue is very serious, and the case will require our close attention.

  3. EC releases 50% of OPAL capacity from third energy package obligation

    This report has made the headline, because previously the European Commission was not noticed making pro-Gazprom decisions. Besides, there are rumors that the European Commission is allegedly ready to recall its suit from the arbitration court; the EC accused Gazprom of violating several rules, including domination on regional markets and price manipulation. What is the reason for such an affection towards Gazprom on the background of reinforced political confrontation between Russia and the West? We think the explanation is simple: cold weather has come earlier this year, which is testified to by growth in consumption of Russian gas. Ukraine is still an unstable zone; rather small quantities of natural gas have been purchased. In this regard, having blind trust in sheer luck is rather risky and dangerous. There is no alternative to natural gas; there are no additional gas quantities; spot prices were $50 to $60 higher in October than the price of Russian gas imports. Thus, Russian natural gas is the most competitive on this market, while possible difficulties with its delivery through Ukraine, make the EU reason economically, not only politically.

  4. Vladimir Putin visits Istanbul, Turkish Stream agreements signed

    Not prolonging a transit contract with Ukraine seems to be a matter of principle for Vladimir Putin. To make it possible it is necessary, firstly, to lay two lines of the Nord Stream-2 gas pipeline and to solve the problem of gas deliveries to southern states: Turkey, Bulgaria, Greece and Balkan states in particular. This is why there is an increased focus on the Turkish Stream. Our political relations with Ankara were quickly restarted, and the warplane shot down by Turkey was forgotten. As a result, the sides resumed talks on the Turkish Stream project. The main thing is that in October the sides discussed laying two lines – one line is for Turkey, and the other is a transit line to Greece. The intrigue is that the signed intergovernmental agreements do not stipulate the second line. So, we will be watching developments. Gazprom seems to be waiting for some proposals from the European Union, from Bulgaria in particular. Meanwhile, some interesting events are expected in Bulgaria this November. A relatively pro-Russia candidate may win the presidential elections. In this case Boyko Borisov will have to retire, and there will be new parliamentary elections.

  5. Heating season starts in Ukraine

    The problem is that Ukraine entered this heating season with the lowest accumulated natural gas reserves over the past few years. The country did not pump the necessary volume of natural gas into its underground storages in summer. The amount of gas it has may be enough, or it may be not enough. It has been rather cold this October-November, and if the winter is frosty, Ukraine’s gas transmission system may face serious problems. Moreover, Ukraine has chosen the most technologically unfeasible way of administrating its gas transportation assets in winter. Instead of taking natural gas out of underground storages located next to its western border and pumping it to Europe, and importing Russian gas for domestic consumption, first of all, in the east of the country, Kiev pumps natural gas from underground storages to the east and transits Russian gas in the opposite direction. This situation is rather strange, and it creates certain risks. Let’s hope there will be no failures. Yet, the situation is uncomfortable.

  6. Tax regulation

    There was bad news in October. According to the draft budget submitted to the State Duma, the sector will clearly have to pay over 300bn rubles in additional taxes. As far as experiments with the excess profit tax are concerned, we can see that the finance ministry supervises this process, and not all projects will qualify for the excess profit tax introduction. It means the sector will not drift towards a new philosophy of taxation – taxation of profits; it may happen only to some particular projects, greenfields and brownfields with declining output. And these will be pilot projects. The finance ministry obviously tries to make sure that such a practice is accompanied by cancelation of tax preferences. Thus, the process of moving from taxation of revenues to taxation of profits, something that oil producers have been willing to have for a long time, is not good for them so far; the result does not meet their expectations.

  7. Filanovskogo deposit in the Caspian Sea launched

    It is quite a big success. It absolutely fits the logic of production growth in Russia in 2016. It is interesting that it is an offshore deposit launched by a private company. Quite complicated technologies and one of the largest platforms in the world are employed there. It is the example of the sector being alive and capable of launching new projects despite the fiscal burden. The sector is still one of the locomotives driving demand for products of adjacent industries, including transport machinery building. In this regard, one should admit that economic growth cannot resume without the oil and gas sector.

  8. Waiting for OPEC meeting, Iran says not ready for output freeze

    The OPEC meeting is scheduled for late November, but already in October questions were raised whether OPEC members would manage to agree. However, Russia’s position raises more questions, because we claim readiness to freeze production, while the pace of our output growth this year exceeds the average annual figures over the past few years. The advance is likely to be over 2%, which means more than 10m tons. The forecast for the next year is absolutely the same. Capital investments have been already made. It means the machine has begun moving, and even the finance ministry will not be able to stop it. But if the situation develops in the current way, apparently there will be no unity inside OPEC, which will provide us with an opportunity not to take additional obligations.

  9. Russia, Belarus declare disputes on gas and oil contracts settled

    Russia, unfortunately, again had to make concessions and agree to price demands. Belarus will in fact gradually start paying Russia’s domestic prices for natural gas plus additional transportation expenses from the Russia-Belarus border. This is, first of all, the price for our political partnership. Unfortunately, we have not found an effective formula of having normal relations with post-Soviet states. It is possible to press Belarus, but it skillfully blackmails us with drift towards Europe – the Ukrainian scenario scares many officials in Moscow. This is why Russia has to make such economic gifts.

  10. Arrest of Corporation of Development head Oleg Maslov

    One would think how it relates to the sector? The matter is that this Corporation was building a railroad to the port of Sabetta. They were collecting the money in regions and were laying the railroad for the Yamal LNG project. It is very interesting that state resources in Russia are quite actively used to support private initiatives. And, as we can see, such resources are not always used efficiently. It has turned out that the builder of this railroad is a mere thief. The natural question is how efficient state support to such private projects is? So far, unfortunately, few would make such an analysis.



Bookmark and Share

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

Services and Mechanical Engineering for Oil and Gas: Are Industry’s Foundations Secure?
Sanctions against Russian Oil and Gas: Pressure Continued
Arctic: Soviet-type Gigantomania or Breakthrough Project?
State regulation of the oil and gas sector in 2018, prospects for 2019
Gazprom on Path to New Reality

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