ROSNEFT: STABILITY & GROWTH
According to Platts, Russia's biggest oil producer Rosneft sees its position in the European market stable despite concerns on growing competition from Middle East crude producers for market share, while it pushes more actively for a greater role in new Asian markets where the competition is much higher.
The company continues to show solid operational and financial results despite the tough economic situation and is aiming at strengthening its positions on the markets, Rosneft CEO Igor Sechin said in an interview with the state-run Russia 24 TV network broadcast Wednesday.
He estimated the crude price was likely to remain volatile in the near future, although growing to around $50-$55/b by the end of this year and possibly to $65/b by end-2017.
"We are glad that we've managed to maintain our positions on traditional markets, primarily in Europe," Sechin said pointing out to recent agreements with PKN Orlen to increase deliveries to Poland and the Czech Republic.
"Despite some concerns, we consider our positions [in Europe] quite stable because we've linked with the consumers by the infrastructure, including southern and northern branches of the Druzhba pipeline, which provide a competitive advantage for us," he added.
Some Russian officials raised concerns late last year over maintaining market share as low oil prices and rising production by some key competitors was threatening Russian supplies to Europe. Sechin said then Saudi Arabia was actively dumping to win new markets in Europe.
PKN's refineries primarily refine sour Russian Urals crude, which is delivered through the Druzhba pipeline, but the Polish company recently started looking more actively for alternative grades, including from Saudi Arabia and Iraq.
In May, PKN Orlen signed a deal with Saudi Aramco to receive 200,000 mt/month of crude oil through December 31 this year, saying this was "the first direct long-term contract with a supplier from the Gulf region in the history of our company" which demonstrated the company's efforts to diversify its energy sources.
But Rosneft also signed a number of new deals in late 2015 and early this year with European refineries to send additional volumes to Germany, Poland and the Czech Republic in 2016 and 2017.
Due to those deals, Rosneft estimated in March its oil deliveries to European consumers via the Druzhba pipeline would rise by 3-5% from 2015 up to about 28.7 million-29.0 million mt -- 574,784 b/d-580,790 b/d on average.
Rosneft and PKN Orlen agreed last week to extend a contract on crude supplies for a period of three years to June 30, 2019.
Competition for Asian markets, which are relatively new for Rosneft, is much tougher and the company is working actively to expand its presence in the region, Sechin said, praising new contracts his company signed during the St Petersburg International Economic Forum last week.
While a number of important contracts was signed recently with Asian companies, including upstream cooperation deals with India's companies in East Siberia, an agreement on crude supply to Vietnam and the construction of a refinery in Indonesia, Russia's plans to sell a 19.5% stake in Rosneft itself might further strengthen Rosneft's approach towards the Asian markets.
China's CNPC, a well-established strategic partner of Rosneft, as well as Indian companies are interested in taking part in the privatization, should the authorities go ahead with the plan, Platts reported earlier.
While the authorities are yet to decide on the key parameters and terms for the deal, Sechin said he believes a sale would be inefficient given the current economic difficulties and markets' volatility.
"We need to speak about a strategic investor who...will secure an additional synergy to the company," he said.
But he said he had not received any instructions from the company's key owner, the government, to hold talks on a potential sale.
Russia's President Vladimir Putin is visiting China next week, and the issue of potential purchase of a stake by Chinese companies is expected to be on the agenda, among other cooperation deals.
During last week's forum, the key focus was on India, with which Rosneft had reached a number of new agreements as Russia is determined to strengthen energy ties with the rapidly growing market.
"We shall speak about plans outlined by Russia's President Vladimir Putin and India's Prime Minister Narendra Modi [during the latter's visit to Moscow in December] to build up an energy bridge between our countries, which include upstream, transportation, downstream and oil products marketing," Sechin said, outlining the company's plans for the region.
Rosneft and a consortium comprising Oil India Limited, Indian Oil Corporation and Bharat PetroResources Limited signed an agreement Friday to buy a 23.9% stake in Vankor, the biggest producing oil project in East Siberia, brining India's total shareholding in the company to 38.9%.
The deal, worth over $2 billion, is to allow Rosneft to go ahead with plans to expand development of the Vankor cluster, Sechin said, providing a rationale for selling a significant stake in one of its best and most promising assets during low oil prices.
In May, India's ONGC completed a deal to buy a 15% stake in Vankor for $1.27 billion, with managing director Narendra Verma saying his company would like to further increase its share in the asset.
Rosneft plans to maintain a controlling 51% stake in the 442,000 b/d Vankor project in the Krasnoyarsk region, which is a key source for eastbound deliveries of ESPO crude blend via the trunk East Siberia-Pacific Ocean pipeline.
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AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.