After February 24th the global energy outlook changed. The Russian Energy Minister announced on April 20th that in September 2022 a new document will be released covering the Russian Energy Strategy to 2050.
The implementation of decarbonization policy over the next 20 years may shift the focus of Russia’s geological exploration industry from the search for oil deposits to the search for gas deposits, although the Energy Strategy (ES-2035) has yet to factor in an increased role for gas.
The Energy Strategy 2035 highlights the crucial challenge for the Russian oil sector: to increase oil production in Eastern Siberia, the Far East, and the Arctic zone to compensate for declining production in Western Siberia.
Strong price rally. The price of Brent has more than doubled since the start of November and is up almost 20% year-to-date. The last time Brent traded at this level (January 2020) the ruble-dollar rate was at RUB61.5/US$. The reason it is not back at that level is at least partly because of continuing sanctions concerns.
In this review, we look at the development of Russia’s most important oil and gas corporations from an ownership, business management and political relationship perspective. We consider what have been the most important events and factors that have shaped their respective histories and explain how each company, and their key managers/owners are positioned today.
The price of Brent rallied 121% from the April 24th low to the June 8th high. The key drivers of that rally include optimism that the demand loss in 2020 will be less than feared and the positive actions and statements from the OPEC+ members. The agreement to extend the period of deepest cuts for an extra month shows a firm commitment by the major producers to maintaining the OPEC+ structure.
Major economies moving towards an easing of the lockdown has raised hope that oil demand destruction will be less and will recover more quickly. The OPEC+ deal started May 1st with strong political commitment from the major producers.
Brent crude has rallied by over 60% from the low set in late April. The price is still over 50% down since the start of the year. The reason for the rally is because of optimism that demand destruction will be less than feared, as more countries announce the start of lockdown easing, and also because of the start of the new OPEC+ and G20 supply cut agreement.
Moscow and Riyadh have resolved the dispute that threatened to kill OPEC+. Both sides reached a compromise regarding base production and future cuts that allowed the OPEC+ Group to agree an aggregate cut of 9.7 million barrels, starting May 1st. These cuts will be scaled back with an agreed timetable and will end in December 2022. But the members have agreed to a review on June 10th.
The members of OPEC+, a group which includes Russia and whose failure to agree a deal on March 6th led directly to the oil price collapse, will hold a video link meeting tomorrow afternoon (Thursday April 9th) to discuss a new production cut deal.
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All Rights Reserved
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All Rights Reserved
