Healthy profits for Russian hydrocarbons but no coherent strategy

RUSSIA / FSU POLITICS - In Brief 18 Apr 2019 by Alex Teddy
OPEC + is considering how to handle the market supply balance. Oil prices are reaching USD 70 a barrel. This is good news for Rosneft and other Russian oil companies. Russia has only reduced production by half as much as OPEC asked. OPEC members are considering raising production. Too abrupt a price rise would cause ructions and the US is asking the Saudis to help them out. Saudi Arabia is desperate for US co-operation on Iran. Trump vetoed a US Congress bill to stop supporting the Saudi fight in Yemen.The Russian State Atomic Energy Corporation (Rosatom) is negotiating with the Saudis to build nuclear power plants in Saudi. If these are built it will free more Saudi crude for export. In the long term that is bad for Russia.The Russian Ministry of Finance announced that oil export tax will go up 7.4%: i.e. it will be USD 104.6 per ton as of May 1. There will be a minor tax rise on other fuel exports too.Gazprom will recomemence exporting Turkmen gas to Europe. Gazprom makes a tidy profit on this. Power of Siberia is a lucrative contract Gazprom has with China and it is oil indexed. Turkmenistan is also competing in the Chinese energy market and the Chinese have demanded and received a below market price from them. Turkmenistan exports almost nothing else and could not afford to have China walk away. This allowed Gazprom to drive a hard bargain with President Berdymukhamedov of Turkmenistan.LNG prices will likely stay fairly low in 2020. Europe has only so many LNG fired power stations. Moscow does not seem to have decided whether to be short termist or long termist about maximizing oil revenue.

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