Russian Oil and Gas Industry: News #2

Nord Stream 2 Granted a Construction Permit by Denmark

Approved 147-km route stretches south-east of Bornholm in Danish Exclusive Economic Zone

Rosneft is preparing to lead an Arctic oil field development project that will cost an estimated $157 billion (10 trillion rubles).

Reuters quoted Russia’s Deputy Energy Minister Pavel Sorokin as announcing the price tag of the Vostok Oil project to media last week, adding that the Kremlin had already agreed on a tax relief package that would help with the Artic oil and gas push.

The Vostok Oil project will include already producing fields as well as untapped ones, and Rosneft will develop them along with partner Independent Petroleum Company. The tax relief for this project alone could reach some $940 million (60 billion rubles) annually, the chief of the tax department of Russia’s Finance Ministry said.

The tax relief package for the energy industry has been the subject of heated debate in political circles because at the same time that the Kremlin is lending its generous support for oil and gas, it is hiking other taxes, on citizens, and extending the retirement age as part of a delayed and highly unpopular retirement system reform.

Yet the Vostok Oil project could add some 2 million bpd to Russia’s overall oil production, which although not the biggest contributor to federal GDP is still the biggest single contributor to export revenues, at 53.8 percent.

The government’s tax relief would certainly go a long way towards helping Rosneft and its partner develop the Arctic fields, but it will not be enough on its own. To bring the plans to fruition, Rosneft would need foreign partners as well. And it has already found them: Indian and Chinese investors have already agreed to invest in Vostok Oil in exchange for minority stakes in the fields that the project includes. Some of them had put forward as a condition for the investment the agreement of a government support package and now that this has been largely agreed, the project could move forward.

owais.usmani wrote:Finally!

https://www.nord-stream2.com/media-info/news-events/nord-stream-2-granted-a-construction-permit-by-denmark-139/

Nord Stream 2 Granted a Construction Permit by Denmark

Approved 147-km route stretches south-east of Bornholm in Danish Exclusive Economic Zone

KoTeMoRe wrote:

owais.usmani wrote:Finally!

https://www.nord-stream2.com/media-info/news-events/nord-stream-2-granted-a-construction-permit-by-denmark-139/

Nord Stream 2 Granted a Construction Permit by Denmark

Approved 147-km route stretches south-east of Bornholm in Danish Exclusive Economic Zone

The Winter is Coming somewhere between Romania, Poland and Russia. Jump on Maidan to keep warm guys.

JohninMK wrote:......
I think that this decision was related to the announcement this week that Norway and Denmark have agreed to extend their existing gas pipelines across the Baltic to Poland.

JohninMK wrote:

KoTeMoRe wrote:

owais.usmani wrote:Finally!

https://www.nord-stream2.com/media-info/news-events/nord-stream-2-granted-a-construction-permit-by-denmark-139/

Nord Stream 2 Granted a Construction Permit by Denmark

Approved 147-km route stretches south-east of Bornholm in Danish Exclusive Economic Zone

The Winter is Coming somewhere between Romania, Poland and Russia. Jump on Maidan to keep warm guys.

I think that this decision was related to the announcement this week that Norway and Denmark have agreed to extend their existing gas pipelines across the Baltic to Poland.

MOSCOW, November 1. / TASS /. The Ministry of Natural Resources and Ecology sent a report to the Russian Ministry of Energy on the results of an inventory of hydrocarbon deposits whose reserves exceed 5 million tons. The document is being approved, TASS was told in the Ministry of Energy and the Ministry of Natural Resources.

“A report has been prepared to the Government of the Russian Federation“ On the results of an inventory of hydrocarbon reserves for fields of more than 5 million tons of crude oil. ”The draft report was sent for approval to the Ministry of Energy. The document is being approved,” the Ministry of Natural Resources said.

"Documents from the Ministry of Natural Resources were received, we are working closely with this ministry regarding the completion of the inventory process," the Ministry of Energy added.

A TASS source in one of the ministries noted that, according to the document, there are 609 large deposits in Russia (each with reserves above 5 million tons). Their total reserves amount to 17.4 billion tons of oil, of which 11 billion tons are profitable, that is 64% of the total. According to the interlocutor of the agency, these reserves, excluding their reproduction, will be enough for Russia for 33 years.

The highest margins for Russneft and Tatneft were 81%, the lowest for Gazprom (39%) and Surgutneftegaz (41%). Rosneft, the largest in Russia in terms of production, has a 69% profitability, Lukoil 63%, Gazprom Neft 62%.

In late October, Deputy Prime Minister Dmitry Kozak reported that the Ministry of Energy had prepared a draft roadmap for an inventory of oil fields in Russia to stimulate hard-to-recover oil reserves. The first step in this direction, according to him, should be the approval of a unified methodology together with the Ministry of Natural Resources. In the future, on the basis of the inventory, mechanisms of differentiated load and stimulation of oil producers should be worked out.

Natural gas reserves in the Russian Arctic amount to 53.4 trillion cubic meters. <...> Today, Russia produces 725 billion cubic metres, of which 83% is produced in the Arctic zone. That gas is competitive, despite the fact that it is produced in the Arctic, because of the low cost of production, very good quality of natural resources and their occurrence — Alexander Novak, Minister of Energy of the Russian Federation.

The resource base of the Yamal and Gydan Peninsulas is unlimited. <...> Our strategy involves active investment in exploration. <...> We audaciously project that the production capacity will be 70 million tons by 2030 — Lev Feodosyev, First Deputy Chairman of the Management Board, NOVATEK

Bloomberg: The U.S. Dithered Too Long on Nord Stream 2

Washington. Nord Stream 2, the controversial Russian natural-gas pipeline project, has received the last permission it needs to close the distance between the Leningrad Region and the Baltic coast of Germany. It’s now probably too late for the U.S. to prevent Russia from finishing the project by the end of this year, writes Leonid Bershidsky in an article for Bloomberg.

Nord Stream 2 is part of Russian President Vladimir Putin’s plan to send natural gas to Europe without needing to go through Ukraine. The new pipeline will be able to carry 55 billion cubic meters of natural gas, more than half of what Russia now pumps through the Ukrainian system, and would mean for Ukraine a loss of $3 billion a year in gas transit revenues. The U.S. would like to prevent this, and also keep relatively cheap Russian gas from becoming an obstacle to increasing exports of U.S. liquefied natural gas to Europe. President Donald Trump has argued that Germany is too dependent on Russian gas, and has repeatedly threatened European companies involved in the project with sanctions.

Meanwhile, Russia has rushed to lay the pipe. On Oct. 1, Gazprom, the Russian gas export champion, said construction was 83% finished, with 2,042 kilometers (1,270 miles) laid across the bottom of the Baltic Sea. There had been a snag, though: For two years, Denmark put off granting permission for the section that was to pass through its territorial waters. On Wednesday, Denmark finally granted it, allowing the pipeline to take the shortest possible route, and Gazprom says that section can be built in five weeks.

This is a blow to Ukraine, albeit not a surprise. “We expected it this fall,” Andriy Kobolyev, chief executive officer of Naftogaz, the Ukrainian state company that runs the pipeline system, posted on Facebook. “Denmark’s principled position held back the project for some time, but geopolitical weapons cannot be stopped by means that regulate pure trade relations.”

It’s true that Denmark could not have held the fort forever while the U.S. dithered. The recent spat over Trump’s interest in buying Greenland did little to encourage the Danish government to keep dragging its feet.

Kobolyev called for Western sanctions as the next step. And in that, he’s supported by some American legislators. Republican Senator Ted Cruz promised to push his colleagues to pass the bill he has proposed with Democratic Senator Jeanne Shaheen, which would impose sanctions on vessels laying the pipeline.

That bill, however, is unlikely to delay the construction by much. Although Gazprom has used a Swiss-based contractor, Allseas Group SA, to lay the pipe, it can use its own vessel, the Akademik Cherskiy, for the final stretch.

So it’s too late for the U.S. to act. Sanctions against financing the pipeline could have been effective at the stage before European companies — Royal Dutch Shell, Engie, Uniper, OMV and Wintershall — provided what was needed. Sanctions against pipe-laying vehicles could have made a difference before the construction work began. In any case, they could have given Ukraine more time to renegotiate its gas-transit contract with Gazprom, which runs out at the end of this year.

A completed Nord Stream 2 will at least help Germany’s plans to stop using coal to generate power by 2038 — plans that cannot rely entirely on renewable energy, at least not until storage technology advances. (Most of the coal that will be replaced, by the way, is Russian coal.)

Now Ukraine, backed by the EU, wants a 10-year year contract to pump 40-60 billion cubic meters of natural gas. But Russia insists that any long-term agreement should resolve Ukraine’s billion-dollar legal claims on Gazprom, and for now is likely to agree only to a short-term, placeholder deal. Meanwhile it will keep working on bringing both Nord Stream 2 and the Turkish Stream project, meant to supply gas to southern Europe, to full capacity.

Actually Russia’s proven oil reserves are currently worth $6.69 trillion based on a current oil price of $63 a barrel and proven reserves of 106.2 billion barrels (bb) according to the 2019 BP Statistical Review of World Energy. This is 59% bigger than Russia’s GDP of $4.213 trillion in 2018 based on purchasing power parity (PPP).

However, this valuation is a movable one. It varies from time to time according to oil price movement. Were oil prices to surge to $100 a barrel, the valuation of Russian reserves immediately goes up to $10.62 trillion. Vice versa, were prices to drop to $50, the valuation declines to $5.31 trillion.

Annual contribution of Russia’s oil exports to GDP amounted to $180 bn or 4.3% in 2018.

Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London

Russia’s oil major Rosneft said it will start developing a cluster of oil fields in the Arctic region, which is believed to hold some of the world’s largest remaining untapped oil and gas reserves.

According to the head of Rosneft Igor Sechin, preliminary estimates suggest that, starting from 2027 the deposits could annually produce up to 100 million tons of oil.

“The resources of the Russian Arctic (considering only from the above-ground part) are estimated at up to 10 billion tons of oil equivalent. We are embarking on their development,” Sechin said on Thursday at the St. Petersburg International Economic Forum (SPIEF).

He noted that oil reserves at the oilfields which will be developed by Rosneft are estimated at 2.6 billion tons. The Arctic cluster of fields should become the engine of development of the entire Arctic zone, Sechin forecast. He added that the future of energy and economy is linked to the wealth of the Arctic.

Sechin said that the most promising areas are located in the north of the Krasnoyarsk Territory, near the Northern Sea Route. It was confirmed that they have oil reserves which can be considered premium in terms of quality, the head of Rosneft said.

The value of oil reserves reached some 71.7 percent of Russia’s GDP in 2018.