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Russian oil and gas companies: government to consider offshore projects regulation

According to Kommersant, various government bodies are to consider issues concerning the regulation of offshore projects today. The paper writes that Rosneft and Gazprom are likely to receive 80% of all perspective offshore blocks for ten years, with only 20% of those to be explored. The Ministry of Natural Resources would insist on transferring the remaining part to the undistributed fund to be allocated later to private players. In addition, the Ministry is to suggest reducing the exploration period to 3-5 years. Rosneft and Gazprom oppose the idea, says Kommersant.

We see the potential liberalisation of offshore regulations as positive for non state-owned companies and the sector, were it to materialise. However, given how long the discussion over offshore projects has lasted, the outcome is uncertain at this point. Government-owned oil and gas companies’ opposition to the proposal by the Ministry of Natural Resources to cut the exploration period to 3-5 years is logical.

That would lead to a substantial (and unrealistic) increase in the capital investment program over the next 3-5 years, or to Rosneft and Gazprom pulling out of most licences. However, reallocating the licenses among the sector, including to independent players, would be positive. Overall we do not expect any market reaction to the news, unless some clearer moves towards liberalisation are made. 

Dmitry Loukashov (CFA), Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova, Mikhail Zarkhi
VTB Capital analyst

Russia, oil, gas

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