Russian Oil and Gas Industry: News #3

There is interestingly no correlation between dependency on Russian gas and dovishness towards Russia

JohninMK wrote:Yesterday, in Oban's visit with Putin, a 5 hour meeting, Hungary increased the volume of gas they can buy on their contract to 2036 at a price that is currently between 20-25% of the spot price.

I expect this to allow Hungary to max out their fertiliser production to the detriment of other EU producers. Single market Brussels will go spare at this. As this is targeted to be coming via TurkStream that pipeline must be heading towards capacity.

Putin and Xi are also expected to sign a deal to increase capacity of the Power of Siberia, a 2,485-mile pipeline that transfers gas from eastern Russia to China.

(Bloomberg) -- The U.S. is drawing more diesel from Russia this month than it has in at least three years as cold weather envelops the Northeast, driving up demand for the fuel used for heating and power generation.

About 1.55 million barrels of diesel is en route from Russia to the U.S. for February arrival, the highest record in data going back three years, according to oil data provider Vortexa.

The Russian cargoes are arriving as East Coast inventories drop to the lowest seasonally since 2014 and demand for the fuel is at a three-year high. The growing proportion of Russian imports is another illustration of the nation’s critical role in supplying the world with oil. Geopolitical tensions have markets on edge as the U.S. has said it will respond with sanctions if Russia invades Ukraine, a move Russia has said it isn’t planning to make.

The U.S. East Coast is especially reliant on imported diesel because refining capacity has shrunk in recent years due to poor margins and an explosion. The Northeast is using the most fuel for power generation since 2018 as cold weather drove up natural gas prices.

The other main suppliers to the U.S. are facing problems of their own - Europe is grappling with its energy shortage and refinery outages while Canada was forced to shut an east coast refinery early in the pandemic.

The budget of the Russian Federation was made up on the basis of Urals oil at $44, and it is already more expensive than 93


Oil prices update the highs of recent years. A barrel of Brent oil, having stepped over the psychological mark of $90, continues to grow. According to the "demand-supply" combination, the price level is already more than 91,5 dollars per barrel of oil of this brand.

Even more impressive growth is shown by Urals oil, which is often called “Russian”. For the first time in 7 years, a barrel of oil of this brand showed an increase in price to $93. But the growth didn't stop there. The price rushed higher - to the level of $94 per barrel, which is the highest since 2014.

It should be noted that the Russian budget in terms of the revenue from the sale of "black gold" is drawn up based on a price of about $44 per barrel of Urals oil. Thus, already in the first months of 2022, oil prices more than doubled the cautious forecasts of the economic bloc of the Russian government. Accordingly, from the sale of oil, Russian companies and, accordingly, the state came to excess profits. At the same time, the main question that is usually discussed in such a situation is how correctly the economic bloc of the government will be able to dispose of such super-profits. It should also be ordered taking into account the fact that $44 per barrel is the average annual forecast, and the year has only just begun.

Experts attribute the growth of oil price positions to the assessment of “free” reserves. Recently, a report was published that for the rhythmic recovery and growth of the world economy, "free" oil resources on the market are not enough. Requires at least 15% of what is currently on the market. At the same time, in some regions of the world, for example, in Southeast Asia, the shortage exceeds the value of 27%. This spurs the rise in prices for oil of various grades.

https://en.topwar.ru/191908-bjudzhet-rf-verstali-na-osnovanii-nefti-urals-po-44-dollara-a-ona-uzhe-dorozhe-93-h.html

calripson wrote:The economic block are fifth columnist neoliberals weaned on monetarist theories. Their overly pessimistic budgetary values have a real cost in under-investment in critical areas including demographics and defense. Only in Russia could "super profits" be seen as a problem.

Arkanghelsk wrote:https://www.reuters.com/world/asia-pacific/exclusive-russia-china-agree-30-year-gas-deal-using-new-pipeline-source-2022-02-04/

Russia’s Gazprom and the China National Petroleum Corporation (CNPC) signed a second long-term contract on Friday for the supply of 10 billion cubic meters (bcm) of natural gas from the Russian Far East. The agreement comes as Russian President Vladimir Putin is in China on an official visit.

Rosneft and CNPC signed an agreement on the supply of 100 million tons of oil to China.
Moscow. February 4. INTERFAX.Rosneft and the China National Oil and Gas Corporation (CNPC) have signed an agreement on the supply of 100 million tons of oil for refineries in northwest China, the press service of the Russian company reported.

Oil will be supplied through Kazakhstan within 10 years.

The talks between Rosneft and CNPC took place during the visit of a delegation led by Russian President Vladimir Putin to Beijing.

In addition, as reported on the Kremlin's website, during negotiations with partners from China, Rosneft signed a memorandum of cooperation with CNPC in the field of low-carbon development, as well as an agreement on cooperation with Huawei technology company in the field of informatization and digitalization for the period up to 2027.

According to Rosneft's press release, in accordance with the agreement, the Russian NC and CNPC "will work out the prospects for cooperation in a number of areas of low-carbon development, in particular: reducing greenhouse gas emissions, including methane, energy efficiency technologies, as well as CO2 capture and storage (CCS)."

"The parties will also consider other areas of potential cooperation in the field of low-carbon development. The low-carbon technologies developed by the companies, including smart and digital solutions, can be applied in the future as part of large-scale joint oil and gas projects in Russia or China," Rosneft said in a statement.

According to Rosneft, since 2005, the company has supplied a total of 442 million tons of oil to China. In addition, since 2009, the company has exported about 41 million tons of petroleum products to China.

Arkanghelsk wrote:

Russia’s Gazprom and the China National Petroleum Corporation (CNPC) signed a second long-term contract on Friday for the supply of 10 billion cubic meters (bcm) of natural gas from the Russian Far East. The agreement comes as Russian President Vladimir Putin is in China on an official visit.

caveat emptor wrote:

Arkanghelsk wrote:

Russia’s Gazprom and the China National Petroleum Corporation (CNPC) signed a second long-term contract on Friday for the supply of 10 billion cubic meters (bcm) of natural gas from the Russian Far East. The agreement comes as Russian President Vladimir Putin is in China on an official visit.

What i don't like about these deals is that China made them always when Russia was under pressure. Of course, nobody can blame China, but i will blame Ru gov for not being able to negotiate from position of strength. I hope that SS2 will not be signed in the event of eventual Western sanctions against Russia. To illustrate better this situation, average price for Russian gas via SS for 2020 and 2021 are $163 and $159, respectively. There is a lag of 9 months, since formula is tied takes price of fuel oil into calculation (which is north of $90 now) and price for gas deliveries will rise in second half of 2022.
Obviously, considering that China is paying LNG imports much higher, i would like to see Russia getting better prices for their gas.
Best situation for Russia, financially, would be to get SS2 built while gas is flowing normally to EU and in that way pit China against EU to get best possible price.

Hole wrote:Russia is in the stronger position. China needs gas. ASAP. There were regions with blackouts just a few weeks ago.

Scorpius wrote:

This is exactly what you get with long-term contracts. Lower price in exchange for guaranteed loading for the supplier.

caveat emptor wrote:

Scorpius wrote:

This is exactly what you get with long-term contracts. Lower price in exchange for guaranteed loading for the supplier.

Yes i know that. My point was that base price, for China, is too low. China is importing gas from Kaz and Turk, but that's already maxxed out. Other alternative is much more expensive LNG. In general, Asian markets command higher market price.
For example, they were paying gas from Turkmenistan about $200 this summer.

kvs wrote:Russia has built some of the biggest processing plants on the planet to scrub all the useful content (e.g. Helium) out of the natural gas it exports.  

(Bloomberg) -- Russia’s budget could get more than $65 billion in extra revenue this year thanks to the rally in prices for oil, its main export, adding to the Kremlin’s financial strength as it faces threats of possible sanctions from the U.S. and Europe.

Prices would have to stay around current levels of $90 a barrel this year boost revenues that much, according to economists’ estimates. With oil at $100, which some forecasters say may not be the limit, the total would be closer to $73 billion, bringing the dollar value of Russia’s total earnings close to peaks last seen about a decade ago. Bloomberg Economics forecasts the windfall could reach as much as $80 billion at $100 oil.

In ruble terms, the windfall could be even greater, since the currency has weakened against the dollar amid fears of new sanctions over the Ukraine crisis. Russia had been expecting a bumper year for oil-and-gas revenue this year in rubles anyway, with 9.5 trillion budgeted, assuming oil prices at $62. Higher natural gas prices thanks to continuing tensions in Europe, Russia’s main export market, could further add to the windfall.

Putin’s Financial Fortress Blunts Impact of Threatened Sanctions

“Russia’s fiscal position is so super-stable that even with more modest oil prices, it’s hard to compromise it in the current situation,” said Sofya Donets, economist at Renaissance Capital in Moscow.


What Bloomberg Economics says....

“This year’s energy windfall looks set to be staggeringly large. That’s swelling Russia’s fiscal reserves at just the right time for the Kremlin, providing a bigger buffer against crisis in the event of sanctions. Geopolitics aside, it also means more flexibility to boost spending and invest in the economy.”

-- Scott Johnson, Russia economist

Oil’s turnaround is a dramatic swing from just two years ago, when prices crashed at the start of the Covid pandemic. Prices for Russia’s main export blend in the last few weeks have reached levels last seen in 2014, when the U.S. and its allies first imposed sweeping economic sanctions to punish Moscow for its annexation of Crimea from Ukraine. Now, the West is threatening to impose new restrictions if Russia invades its southern neighbor, something the Kremlin says it doesn’t intend to do.

By law, the bulk of the windfall will go to the National Wellbeing Fund, most of which is held in gold and foreign currency by the central bank as part of its reserves. But some of the money can be used for infrastructure and investment projects to help sustain growth even as sanctions pressure cuts off investment inflows. The government is currently planning to spend about 2.5 trillion rubles from the fund on projects over the next several years.

“Higher oil means first of all more intensive talk about spending the National Wellbeing Fund, it’s a cushion,” said Donets. Even at $85 oil, the fund’s balance would rise 50% this year from $183 billion on Jan. 1, she said.

Since the first waves of western sanctions, Russia has moved to reduce its dependence on revenue from oil and gas. This year’s budget targets 38% of revenue from those sources, down from more than 50% a decade ago. Any windfall from higher prices could raise the share.