Russian Oil and Gas Industry: News #4

Pakistan signs long-term oil purchase agreement with Russia

Significant progress has been reported in the purchase of cheap oil from Russia, as Pakistan has signed a long-term oil purchase agreement with Moscow.

Under the agreement signed on a commercial basis, local refineries will buy oil directly from Russia and the country will deliver the oil to Pakistan at the port.

Under the agreement, the price of the oil will be $60 per barrel, and the first cargo carrying 100,000 metric tonnes of crude oil will reach Pakistan in December.

According to sources in the Ministry of Petroleum, there will be an agreement at the government level after normal supply. The commercial agreement will take into account the G7 price ceiling for Russian oil.

The Russian crude is $10 per barrel cheaper than the general market even after removing the rent premium.

On the first test cargo also, Pakistan had saved $400 million.

11 Oct 2023
Novatek will build pipeline to Murmansk for LNG and gasification - CEO

MOSCOW. Oct 11 (Interfax) - Novatek will build the gas pipeline to Murmansk, which will supply the Murmansk LNG plant as well as the regions through which the pipeline passes, the company's CEO Leonid Mikhelson told reporters on the sidelines of Russian Energy Week.

"Novatek's building it," he said.

Mikhelson said the decision was reached by the country's leadership based on the several discussions.

He said that during those discussions it had been decided to increase the future pipeline's capacity from 30 billion to 40 billion cubic meters to not only supply the plant but also the regions with gas.

"The pipeline's capacity for Murmansk LNG is 30 bcm. The government's decision was to review that decision. We reviewed it and it will be built for 40 bcm, which means it can meet all the needs for gas supply on north Karelia and in the Murmansk region," Mikhelson said.

Later, Russian President Vladimir Putin, during a plenary session of Russian Energy Week, confirmed that up to 10 bcm of gas using the future pipeline will go to the needs of the population and enterprises in Karelia and the Murmansk region.

"The Murmansk region and Karelia will receive gas from the Volkhov - Murmansk - Belokamenka gas pipeline. The pipeline will be laid for a project for the production of liquefied gas on the Kola Peninsula, but part of its capacity, namely up to 10 bcm per year, will be used to supply enterprises and social facilities, and residential buildings in Karelia and the Murmansk region for the development of environmentally friendly power generation," Putin said.

Novatek presented the Murmansk LNG project this summer. Its advantages, according to the authors of the project, include an ice-free port and the availability of cheap electricity from the Kola Nuclear Power Plant. The company plans to use compressors with electric drives to produce liquefied natural gas.

The plant is expected to use Novatek's Arctic Mix technology, with which it is possible to build liquefaction trains with capacity of up to 7 million tonnes of LNG per year.

https://interfax.com/newsroom/top-stories/95333/

Gazprom brought production into the black
26.10.2023

The company increases production for the second month in a row

Gas production in the Russian Federation is growing relative to last year’s figures for the second month in a row. Thus, in September, production growth amounted to 2.5%, to 47.83 billion cubic meters, while according to the results of three quarters, production fell by 5.7%, to 474 billion cubic meters. Gazprom increased production in September by 4% year-on-year, to 29 billion cubic meters. Analysts explain the positive dynamics by increased production at Gazprom’s Kovyktinskoye field and within the Sakhalin-1 project. In addition, over the past two months, production dynamics have been increasingly influenced by the low base of last year.

In January-September 2023, gas production in the Russian Federation decreased by 5.7% compared to the same period last year, to 474.375 billion cubic meters (data given taking into account gas flared), sources familiar with Ministry of Energy statistics told Kommersant. . However, in September, production increased by 2.5% year-on-year, to 47.83 billion cubic meters (data are provided excluding gas flared). In January-August, gas production, according to Kommersant, decreased by 10.2%, to 409.6 billion cubic meters; in August, gas production in the Russian Federation increased by 2.7% year-on-year, to 47.4 billion cubic meters (excluding gas flared).
The production volume of “other subsoil users,” which almost exactly reflects Gazprom’s now undisclosed indicators, decreased by 13.75% year-on-year over the nine months, to 289.3 billion cubic meters.
In September, production by “other subsoil users” increased by 4%, to 29 billion cubic meters of gas, after in August it showed annual growth for the first time in the last 16 months (by 3.3% by August 2022).
Gazprom has been reducing production for a long time due to a decrease in exports to Europe: the Russian Federation, which was the largest gas supplier to Europe before the start of hostilities in Ukraine, is losing its share on the continent with growing demand for LNG in EU countries. Currently, supplies of Russian pipeline gas go to Europe in relatively small volumes in transit through Ukraine and through the Turkish Stream. Gazprom did not comment on production statistics.

In January-September, Gazprom Neft reduced gas production by 12.7% year-on-year, to 21.5 billion cubic meters; in September, the company produced 16.8% less than a year earlier, about 2 billion cubic meters.
The largest independent gas producer NOVATEK in January-September reduced production by 2% compared to last year, to 58.6 billion cubic meters. In September, the company's production remained approximately at the level of last year - 6.47 billion cubic meters.
In nine months, Rosneft increased production by 59%, to 57.9 billion cubic meters, by increasing the capacity of Rospan and the Kharampur field. But already in September, production dynamics slowed down - growth amounted to 3.7%, to 5.3 billion cubic meters, due to the leveling off of the base effect, since the increase in production at Rospan and Kharampur occurred in the fall of last year. This year Rospan should reach a production plateau of 21 billion cubic meters per year.
LUKOIL and Surgutneftegaz reduced production in September, likely due to restrictions on oil production (and, accordingly, associated gas) under the OPEC+ agreement.
Among the oil companies, Slavneft has the largest growth - 2.2 times year on year - due to the multiple increase in production by Slavneft-Krasnoyarskneftegaz, however, due to small production volumes, this does not have a significant impact on the all-Russian dynamics.
Sergei Kondratyev from the Institute of Energy and Finance believes that gas production in September increased mainly due to increased production by Gazprom (probably due to increased production at the Kovyktinskoye field for supplies to China via the Power of Siberia) and due to the restoration of oil production and associated gas at the Sakhalin-1 project of Rosneft.

At the same time, the dynamics of production in August-September is influenced by the effect of the low base of last year - in August-September 2022, Nord Stream 1 was no longer working, and on September 26, sabotage was committed on the gas pipeline, Mr. Kondratiev recalls. “As a result, gas exports in September 2022 were low, and the results of September 2023, taking into account the increase in supplies through the Power of Siberia, turned out to be better than last year,” he believes. Weak domestic demand due to warm weather in the European part of the Russian Federation did not have a significant impact on September production. According to the System Operator (energy system dispatcher), in September 2023 the average temperature was 13.6°C (+2.9°C compared to last year), which led to a reduction in supplies to the domestic market: for example, gas consumption in Moscow in September it fell by 12% year-on-year, in St. Petersburg by 26%. Perhaps Gazprom has increased injection into underground gas storage facilities, the analyst believes. The head of the company, Alexey Miller, indirectly confirmed this on October 25, announcing a record gas reserve in storage facilities - 72.84 billion cubic meters.

https://www.kommersant.ru/doc/6298036

Russia’s Oil and Gas Revenue Hit 18-Month High in October
November 3, 2023

* Budget proceeds from the fuels jumped 28% on annual basis
* Urals crude has soared above price cap set by G-7 countries

Russia’s oil and gas revenue soared in October to the highest since April 2022 due to high oil prices and a pause in government subsidies to refiners.
Budget proceeds from taxes on oil and gas rose by almost 28% last month from a year ago, to 1.63 trillion rubles ($17.6 billion), the Finance Ministry said Friday. Levies on crude and petroleum products — which accounted for almost 91% of total hydrocarbon revenues last month — more than doubled.
Russia’s oil and gas industries provide a key source of revenue for the nation’s coffers amid rising military spending to finance the Kremlin’s war in Ukraine and payments to public-sector workers ahead of presidential elections planned for March.
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The nation’s main oil export blend, Urals, exceeded the G-7 price cap for a fourth consecutive month in October, trading at $81.52 a barrel with a discount to Brent at $9.57, according to the Finance Ministry.
Russia last month didn’t pay subsidies to domestic refiners for fuel supplies in September, a move that also contributed to the spike in budget proceeds. Such payouts, which usually dent oil revenues, partially compensate refiners for the gap between the base domestic price of car-fuel and prices abroad.
In September fuel prices at the domestic exchange exceeded the threshold set in the payout formula, allowing the government to keep funds in the budget. To compare, subsidies for August supplies of diesel and gasoline reached 298.7 billion rubles.
The government planned to halve refiner subsidies in an effort to rein in spending. However, after criticism from President Vladimir Putin, it plans to restore them in full and is weighing different options for their financing.

https://www.bloomberg.com/news/articles/2023-11-03/russia-s-oil-and-gas-revenue-surge-to-18-month-high-in-october

China and Russia step up work on new gas route – CNPC
6 Nov, 2023

The Far Eastern project is estimated to have an annual capacity of 10 billion cubic meters

Russian energy company Gazprom is cooperating with China to accelerate the launch of gas supplies via the Far Eastern route, China National Petroleum Corporation (CNPC) Vice President Xie Jun has revealed.

The Far Eastern route envisages supplies of Russian natural gas to China from the shelf off Sakhalin Island.

While addressing the plenary session at the St. Petersburg International Gas Forum, Xie Jun reportedly said: “Our company and Gazprom are striving to build a closer energy partnership and are systematically accelerating the implementation of the gas supply project along the Far Eastern route.”

In February, Moscow and Beijing sealed an agreement for additional natural gas supplies to China via the Far Eastern route. The project involves the construction of a cross-border section across the Ussuri River between the already operational Russian pipeline and the Chinese city of Hulin. After reaching full capacity, the route will allow for the delivery of 10 billion cubic meters of Russian pipeline gas to China annually.

Russia currently supplies gas to China via the Power of Siberia pipeline, a section of the so-called Eastern Route, under a bilateral 30-year agreement. Deliveries started in 2019, and the pipeline is expected to reach its full operational capacity of 38 billion cubic meters of natural gas annually by 2025.

Gazprom has also been assessing the possibility of supplying gas to China via the Power of Siberia 2 pipeline through Mongolia. The conduit is expected to allow for the delivery of up to 50 billion cubic meters of gas annually, and its construction is scheduled to start in 2024. Once all the pipelines are fully operational, the volume of Russian gas supplies to China could reach nearly 100 billion cubic meters annually.

https://www.rt.com/business/586361-russia-china-gas-route/