In 2013-2018 oil industry in the Russian Federation is focused on sustenance of the oil production level, improvement of oil refining and transportation infrastructure. Meanwhile natural gas industry is mainly influenced by growing investment activity of Rosneft JSC and NOVATEK JSC. Appearance of the second government-owned player, formed through acquisition of ITERA and TNK-BP Holding by Rosneft JSC, challenges existing leaders NOVATEK and Gazprom on domestic market, while forthcoming liberalisation of LNG
(liquefied natural gas) export low will stimulate growth of competition on the world market. The main problems of mid- and long-term development of oil and gas companies are wasteful subsurface resources management, imbalance between conditions and indicators of replacement of the mineral reserves base and objectives of the industry’s development, as well as specific features of taxation, which do not ensure sufficient stimuli for advanced processing of raw materials, geological exploration, implementation of modern technologies of oil production and refining, investments into R&D.
In the process of preparation of the "Oil and gas industry of Russia in 2013-2018. Investment projects and ratings of companies" research the key trends that define directions for the development of oil and gas production and refining industries of Russia were identified. A positive tendency of the oil industry is formation of new oil producing centres in the Western and Eastern Siberia, Republic of Sakha (Yakutia), at Sakhalin’s shelf, in the Caspian Sea. However, commissioning of new capacities in 2013-2018 does not compensate for production decline at depleted fields. Furthermore, commissioning of new oil deposits requires corresponding development of systems for associated petroleum gas reclamation, reclamation of condensate and other hydrocarbon materials, since their extraction volumes exceed the existing production capacities of petrochemistry enterprises, as well as capacities of pipeline transportation systems. The main restraining factors on the world natural gas market for Russian players are excess supply of natural and regasified liquefied gas, stagnation of Europe’s economy and active policy of import diversification conducted by the EU countries, as well as insufficient development of gas transportation system in the Eastern export direction. Although Russian leadership on European gas market is affected by “shale revolution” in the USA and potential growth of export volume from alternative places, active economic growth in APR countries creates new opportunities for LNG export. However there is a risk that by 2020 the share of Russia on the international LNG market will be reduced from 4.5 to 2%.
Growing energy consumption necessitates implication of non-conventional types of oil and gas reserves, especially hard-to-recover ones (high viscosity oil, oil in hardly permeable underground reservoirs, reserves of shelf deposits). The act on stimulation of hard-to-recover reserves development provides differentiated tax rates; the approach to taxation of the natural gas industry is to be changed radically – from fixed prices to a formula that depends on the natural gas and condensate prices. Tax incentives for hard-to-recover reserves, among other things, will allow Rosneft JSC to exploit about 1.4 billion tonnes of oil reserves and achieve by 2020 the additional volume of oil production amounting to about 7.3 million tonnes annually with potential growth to 13.5 million tonnes annually by 2030 with a stable oil rate-plateau.
The potential of extensive growth in the oil industry of Russia has been practically exhausted. In this regard the stability of Russian oil industry’s development and development of Russian economy, as a whole, for the period till 2018 is determined by the following interrelated factors:
Moderate demand for oil on the world market and slowing prices growth
Prerequisites for decline of the home demand for oil for refining, connected with the home oil prices growth, reduction of export duties, improvement of oil refining efficiency and, ultimately, saturation of the motor fuel home market
Deterioration of Russian oil reserves structure and low efficiency indicators of production and refining projects
Exploitation of reserves in remote regions and at the shelf with corresponding processing of associated hydrocarbon materials
Misbalance of oil derivatives production structure together with inefficient regulation of their production and export
Necessity to accelerate modernization projects in the oil refining segment.
The core gas deposits of Western Siberia have been depleted by 65-75%. While Gazprom experienced problems with natural gas sales, the independent players of the industry and Rosneft JSC became the leaders of the natural gas production growth. They create new natural gas production centres in remote regions, which require efficient processing of multicomponent raw materials through development of fractionation and transportation capacities. As it is envisioned by the plan for development of petrochemical industry till 2030, in the process of its implementation six petrochemical clusters are to be formed, two of them are in the process of active construction, new capacities are being put into operation.
In 2014-2018 the growth of GDP will come to 3%-4%, industrial production growth – on the average to 2.16% annually. In this way the decisions taken by the Government in the 4th quarter of 2013 put emphasis on optimisation of costs of natural monopolies in FEC, and this will negatively affect realisation of their investment programs.
"Oil and gas industry of Russia in 2013-2018. Investment projects and ratings of companies" research presents the results of independent monitoring and appraisal of the market development tendencies and the key factors of investment activity in the oil and gas industry of Russia. According to the forecast of INFOLine, the overall volume of investments into both oil and gas industries in 2013 will amount to about 90 billion US dollars, and during the period till 2018 – to more than 550 billion US dollars. At the same time the oil and gas industry remains one of the most attractive ones in Russia for investors. In 2007-2013 the structure of investments by the segments of economy shows growth in the oil and gas segment: in the majority of processing activities investments remain significantly lower than in 2007, while they considerably exceed the pre-crisis level only in activities connected with production and infrastructure (mineral production, oil refining, electrical energy industry and transport, in the first place, pipelines). In order to increase the competitiveness of the industrial sector of the economy the Government had to restrain the planned growth of tariffs for industrial consumers on the part of natural monopolies (including Transneft JSC).
In 2012 the oil and gas industry accounted for 47.3% of the federal budget receipts and 57.8% of Russia’s export. Without considering the oil and gas revenues and foreign loans the budget deficit will come to 9.5% of GDP in 2013. It will continue to decrease against the background of the reduction of the federal budget expenditures, but by 2017-2018 it will amount to no less than 7% of GDP. Furthermore, in 2014-2015 the dynamics of the fuel and power resources export from Russia will become negative – in comparison with previous year it is expected to decrease by 0.2% in 2014 and by 0.5% – in 2015. The uncertainty of the world energy resources market situation, instability and low efficiency of the government regulation of the oil and gas industry in Russia obstruct the inflow of investments; there is no transparent system of tax incentives for projects, the system of differentiated approach to facilities of subsurface resources management that have different quality has not been completed, the result from growth stimulation activities on FEC is limited due to contradictory decisions of the regulator and growth of government presence on the market.
In order to be able to forecast the annual volume of investments for the period till 2018 the specialists of INFOLine prepared a detailed database of investment projects in the oil and natural gas industry, both being implemented and potentially promising, which contains more than 100 design and engineering enterprises specialising in oil and gas industry projects in Russia. The projects are structured by the industry segments, geographic regions, investment volumes, planned periods of realisation, and contain explicit data on the stages, facilities, capacity of installations and other technical specifications.
The report contains an introduction, describing the objectives, tasks and structure of the report, main prerequisites and results of the product’s development, as well as the following main sections:
Section I. Condition of Russian oil and gas industry and world market includes description of the current situation and trends of mineral resources base development in Russia (proved reserves, oil and gas production and refining volumes in the world and in Russia), dynamics of prices on the world and home markets, analysis of the main indicators of production infrastructure development in extraction and refining segments, volumes of liquefied gas production, analysis of industry’s demand for investments and special features of the government regulation.
Section II. Benchmarking of activities of the largest companies includes ratings of companies by their main operational and financial indicators, as well as investment activity indicators.
Section III. Analysis of the production infrastructure of the oil and gas industry describes main production and refining facilities of oil and gas industry by indicators of production capacity, amortisation and others.
Section IV. Investment project and forecast for development of oil and gas industries of Russia, which describes the investment activity and its key focus, forecast for investments volume, including implementation of investment projects and detailed description of the main projects. The section contains a structured description of major investment projects, which determine the key development trends of production, transportation and refining capacities in the oil and gas industry of Russia in 2013-2018. This description includes detailed contact information about all announced project’s participants (investors, prime contractors, design engineers, suppliers), planning investment volumes, geographical region of the project’s implementation, technical specifications of production capacities under construction, condition of the project at the moment of the update, deadline of reaching the design capacity, deadlines of completion of project’s separate stages and completion of the project as a whole. Investment activity in the oil industry has been analysed and presented by segments.
The most important features of the research are as follows:
Detailed and structured description of major investment projects, which involve more than 100 design and construction organisations
Up-to-date forecast of investments into oil and gas industry during 2013-2018, structured by industry segments and largest companies
Integral description of the oil production, transportation and refining infrastructure, characteristics of the key development trends of facilities in each segment
Forecast for growth of capacities for oil production, transportation and processing, taking into account the conditions of currently operating facilities and investment projects being implemented in the industry
Comparative analysis and ratings of operational, financial and investment indicators of the major market players