RUS | ENG | All
Enter the email or login, that you used for registration.
If you do not remember your password, simply leave this field blank and you will receive a new, along with a link to activate.

Not registered yet?
Welcome!

2014-10-17 20:55:00

ROSNEFT & GAZPROM: PRICE WILL RISE

ROSNEFT & GAZPROM: PRICE WILL RISE

Oil companies in Russia, the world's biggest producer which has budgeted for $100 crude, played down the oil price drop, saying it would not last and would not damage long term projects.

Rosneft, the world's top listed oil company by output, and Gazprom Neft, Russia's fourth largest producer by output, said on Friday there was no need to panic.

"The fall in global oil prices is not critical for the company... There are no reasons for concern... The company's projects remain economically viable at prices much lower than current levels," Rosneft said in e-mailed comments.

Rosneft's capital expenditure stood at around 700 billion roubles ($17 billion) for this year under an oil price of below $100 per barrel, according to its senior official.

World benchmark Brent crude has lost more than 20 percent of its value since June, dropping sharply under $100, and this week hit its lowest for four years, hitting the value of the rouble. On Friday it was trading around $87.

Accounting for around 40 percent of Russia's total oil output, Rosneft is under Western sanctions for Moscow's role in the Ukraine crisis that have limited its access to western funding and technologies.

Gazprom Neft, the oil wing of state gas company Gazprom , also hit by sanctions, said that its current investment projects envisage an oil price of $95 per barrel while any drop is compensated for by movements in the value of the rouble.

"For those whose currency is not pegged to the U.S. dollar, recent price drops have been partly offset by swings in foreign exchange rates: thus Russia's nominal export revenues in roubles inched up lately even as they plunged in dollar terms," the International Energy Agency said in a report this week.

Gazprom Neft said in emailed comments to Reuters that weaker prices would not last. "The price will return to the level of $95-110 per barrel," it said, but did not give a time frame.

Russia, with daily average oil output at around 10.5 million barrels, plans to spend around $150 billion a year over the next 10 years to bring onstream new fields and raise output at mature ones, according to Energy Minister Alexander Novak.

"The current oil price fall is, in a large part, of a speculative nature. It is hard to tell when this speculative factor will fizzle out," Novak was quoted as saying by Russian news agencies on Thursday.

Russia's Energy Ministry did not yet reply to Reuters request seeking comment. Before the Western sanctions, Russia was betting on foreign companies to help it with hard-to-reach deposits, including those in the Arctic, deep water or shale oil.

ExxonMobil had to wind down cooperation with Rosneft in Arctic while Royal Dutch Shell had suspended development of shale oil in Russia's Bazhenov formation with Gazprom Neft.

BUDGET IN TROUBLE

Russia's 2015-2017 budget is based on an average oil price of $100 per barrel. President Vladimir Putin said this week he cannot rule out revisions to the recently adopted budget to limit spending in light of falling oil prices.

With Western sanctions already prompting Russia to tap its rainy-day fund to support its companies and banks, a long-term fall in oil price could hit economic prospects, already at the brink of recession, further.

According to some economists, including Sergei Aleksashenko, a former deputy central bank governor, a $10 drop in oil prices would strip 700 billion roubles, or 5 percent, from Russian budget revenues per year.

That translates to about 1 percent of GDP. Local economists estimate that a $10 price drop could rob Russia of 3 to 4 percent in GDP growth.

The International Monetary Fund halved its forecast for Russia's 2015 gross domestic product growth to 0.5 percent this month, saying that international tensions had created downside risks to its estimates.

reuters.com

Tags: OIL, RUSSIA, ROSNEFT, GAZPROM, PRICE, BRENT,