The Ministry of energy has developed Energostrategia by 2035, adding to document the stress scenarios, assuming average oil prices of $31 per barrel in 2016 and $53 per barrel in 2022, follows from materials of Department (has a copy). The representative of the Ministry of energy confirmed that the script was developed and included in energostrategia. On Wednesday, Brent crude was traded at the level of $34.5 per barrel.
Energostrategia the previously assumed target and a conservative scenario, based on the data of the socio-economic development of Russia in the long term (completed in June 2015). They assumed that oil prices in 2025 will reach $70-80.
“The scenario with low oil prices included in the materials of the Ministry of energy, due to the fact that this question — what will happen if long-term low oil prices — most often asked when discussing the draft energy strategy to various audiences”, — said the representative of the Ministry of energy. The implementation of the stress scenario, he said, depends on the probability of increasing and the long-term conservation of the imbalance of supply and demand on the world oil market amid lack of regulatory impact on the market by the major players.
The company is ready for $30
To the past January 27, the meeting of the energy Ministry, its head Alexander Novak asked the leaders oil and gas companies to prepare several stress scenarios, including when the price of oil from $30 a barrel. The company coped with this task. In particular, “Gazprom” warned analysts at the investor Day in London in early February that the calculated stress scenario with oil price even $20. The head of LUKOIL Vagit Alekperov in an interview in January at Davos said that the company is preparing a reduction of the investment program somewhere in the us$1.2–1.5 billion at a price of $30 per barrel. Tuesday Alekperov announced that the company’s budget for 2016 includes the costs just $30 per barrel.
The stress scenario the Ministry of energy considers a number of factors: the slowdown in the economies of China and other Asian countries, the growing supply of cheap middle Eastern oil and shale oil and gas from the United States, follows from materials of the Ministry of energy. Among other external conditions, are also identified cost savings in the devaluation of the currencies of oil-producing countries and the growth of oil and gas. The situation is exacerbated by the inability to raise new loans to Russian oil and gas companies with timely service existing debts because of the sanctions the EU and the US.
The budget will suffer, production will fall
If these conditions remain unchanged, capital expenditures in the oil and gas sector will fall by at least 10-15%, says a representative of the Ministry of energy. As a result, “after 2020, it becomes obvious acute crisis of underinvestment in the development of global oil and gas industries”, according to the materials of the Ministry of energy. On his background and begin a smooth growth of prices for oil and gas, and to 2033-2035 years prices will return to a level of $100-102 per barrel, assume in the Ministry.
The persistence of low oil prices will have a negative impact on the filling of state budget and tax payments of the oil sector by 2022 will decrease by 60-65% compared with the conservative scenario, warns the Ministry of energy. In 2016 in the stress scenario, budgetary revenues will decline by approximately 2.5 trillion rubles (compared to the budget, calculated at the price of Urals crude oil to $50 per barrel), estimated chief economist at VYGON Consulting Sergey Ezhov.
Oil production in a negative scenario may be reduced from 534 million tons in 2015, to 460 million tonnes per year in 2020-2025 years, adds the representative of the Ministry of energy. While timely service is taken oil companies loans when unable to attract new will be real only if the two-fold reduction in 2016-2022, the amount of exploration and transition to the tax financial result, adds the representative office.
Senior analyst at UBS Maxim Moshkov calls the stress-energy strategy scenario is too pessimistic. According to the forecast of UBS, the price of Brent crude oil in 2016 will be $42,5, gradually rising from 2017 to 2020 from 55 to $75 per barrel on the background of production decrease of the countries — manufacturers of oil because of underinvestment in the sector.
Maxim Moshkov adds that the scenario does not take into account the Finance Ministry’s initiative to increase the tax burden on oil and gas company, first met. “If the average price of Brent crude oil in 2016 will reach $31 per barrel, against the background of the proposed the Finance Ministry increase the tax burden oil production may fall by 3%, or 16 million tonnes,” he says.
The scenario for gas
In the gas sector the Ministry of energy under a stress scenario expects a reduction of investments of companies in 2018-2025, 7-10%, and tax payments until 2025 — by 20-25%. Gas prices will rise gradually from $155 for 1 thousand in cubic m in 2015 to $175 per 1 thousand cubic meters in 2020 and $183 per 1 thousand cubic meters in 2025. In 2016 the price of Russian gas on the European market falls to $143 per 1 thousand cubic meters
What to do
In materials of the Ministry listed a number of measures to improve the situation in the oil industry. In particular, we are talking about testing the tax on financial result (NFR) on pilot fields to stimulate production growth. When moving to PR to tax will not oil at the time of its production (as in the case of the current mineral extraction tax) as accumulated during the development the profit — the difference between revenues from the sale of oil and the cost of its extraction and delivery to the purchaser for the entire term development of the site.
The Agency also supported the retention of difference of excise rates on different classes of motor fuels, stimulating the development of small fields and marginal wells, as well as the liberalization of access of Russian companies to the shelf.
The way out of the situation is not to raise taxes on the oil and gas sector, to avoid collapse, said Maxim Moshkov. At the end of January, the President of Bashneft Alexander Korsik said that the same was requested by the heads of the oil companies at a meeting with energy Minister Alexander Novak.