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Oil companies – FAS might open new investigations over growth in gasoline retail prices

 
10.12.2014

Last week, the Federal Anti- Monopoly Service (FAS) told Russian oil majors to revise retail oil product prices, Vedomosti reports. In addition, President Vladimir Putin said yesterday that it was not reasonable to have a situation in which retail gasoline prices had increased 1% over the last three months (to RUB 43,494/t) while the wholesale price had dropped 15% over the same period (to RUB 34,204/t).

We continue to think that the gasoline market in Russia is driven by (still strong) demand and (limited) supply, which means that netback pricing is not applicable. We calculate that the internal market premium (over the export alternative) is now USc 0.18/l, which has pushed gasoline producers to sell domestically. As a result, any drastic interference in the regulatory regime might in our view lead to a gasoline deficit on the domestic market. We expect gasoline retail prices to grow approximately 10% in RUB terms next year. If the price stays at the current level in 2015, we estimate that the sector might lose up to USD 2bn of EBITDA (or 3.6%).

The track record suggests that potential fines are relatively immaterial (they are calculated as 1-15% of total revenues for the period). To recap, the FAS has already opened an investigation into Rosneft, Lukoil and Bashneft related to gasoline price manipulation on the St Petersburg International Mercantile Exchange. It has also issued a warning to Gazprom Neft and Rosneft about limiting gasoline supply to independent retailers.

Dmitry Loukashov (CFA), Ekaterina Rodina, Alexander Donskoy, Kirill Komarov
VTB Capital analyst

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