“Daughter” of Gazprom is increasing the production of blue fuel

According to this indicator, the company has overtaken all participants in the raw materials industry in Russia. Gazprom Neft has become the Russian leader in terms of growth in gas production. According to the Vedomosti newspaper, over the 10 months of this year, the company increased its own production of blue fuel by more than 37%, overtaking not only all other industry participants, but even the parent holding in this indicator.

In the future, Gazprom Neft enterprises promise to further increase this segment of their activities. However, this is not strange. “Gazprom” specifically gives the “daughter” a number of mining projects in order to save on taxes.

Since the beginning of the year, the volume of blue fuel production by Gazprom Neft enterprises has amounted to 27.5 billion cubic meters, and, taking into account the shares in joint ventures, it has reached the level of 43 billion cubic meters. In October alone, the company increased the production of this type of hydrocarbon by 700 million cubic meters. According to the managing director of the National Rating Agency, Sergei Grishunin, to whose assessment Vedomosti refers, a significant role in the growth was played by long-term risky operator agreements with Gazprom at Pestsovoye, En-Yakhinskoye, Zapadno-Tarkosalinsky, Chayandinskoye, Yamburgsky, Orenburgsky, Urengoysky, Kharasaveyskoye and Bovanenkovo ​​deposits.

A significant contribution to the increase in the company’s gas production is also made by Yamal projects. According to the Ministry of Energy, during the reporting period, Gazpromneft-Yamal showed an increase of almost 76% compared to the same period last year, and production at the fields of Meretoyakhaneftegaz more than tripled to 3.6 billion cubic meters.

As Vladimir Putin noted a year ago, “The Yamal gas production center is key to the development of the Russian gas industry in the 21st century. Gas production here will be carried out for more than a decade. 100 years, maybe more. The President instructed Gazprom to develop a comprehensive program for the development of Russia’s richest gas province in 2002. And already 10 years later, which, by the standards of the raw materials industry, is a fairly short timeframe, the development of the Bovanenkovskoye field, one of the largest in the world and the first within the framework of the new Yamal megaproject, began. In 2020, Gazprom Neft received the right to develop the Yamal fields (Bovanenkovskoye and Kharasaveyskoye fields), as well as the Achimov deposits and a number of other fields in the YaNAO. This happened on the basis of long-term risky operator agreements (DROG) signed with Gazprom. These agreements allow Gazprom Neft to operate on the assets of Gazprom on terms similar to its own ownership of a license, to consolidate reserves, production and financial results from field development.

Gazprom Neft is not going to stop there and in the future promises to accelerate the pace of production of a non-core type of raw material for itself. As Vadim Yakovlev, Deputy Chairman of the Board of the Company, stated in June 2021, the share of the gas business in production is already 37-38%, and after the launch of Bovanenkovo, Kharasavey, Urengoy, it will reach approximately 45%. “We are moving further and further to the north of Yamal, and this reflects geological trends. There is more gas and gas condensate there,” the manager of the oil company emphasized at the time.

On the one hand, Gazprom Neft’s current successes and outlined prospects cannot but rejoice – other domestic commodity companies, including Gazprom, have recently shown a drop in production results. Between 2012 and 2021, Gazprom Neft’s blue fuel production, taking into account its stakes in joint ventures, quadrupled, while the production of the parent concern increased by only 2%.

At the same time, as Rustam Tankaev, an expert of the Union of Oil and Gas Producers of Russia, notes, it is worth noting that for several years now the monopoly has been farming out production at a number of major fields to its “daughter”, since a reduced severance tax rate applies to independent gas producers. “The transformation of Gazprom Neft into a gas structure causes “anxiety and bewilderment” among other market participants. The word “oil” in the name of the company is gradually losing its relevance,” Tankaev sneers in an article in Vedomosti.

According to Dmitry Polokhin, an expert of the Chamber of Commerce and Industry of the Russian Federation, whose point of view is also cited by Vedomosti, Gazprom Neft, which enjoys the benefits of independent producers, cannot be called a full-fledged company independent of Gazprom, because the monopoly owns 95.68% of the shares of its “daughter” . “The absence of state regulation of gas prices and the reduced MET rate allow significant savings on production, especially given the growing volumes. At the same time, the company also has certain preferences as a subsidiary of Gazprom, for example, unhindered access to the gas transmission system. This allows Gazprom Neft to declare gas volumes for delivery virtually without restrictions, while other market participants are forced to coordinate with Gazprom the necessary volumes and directions,” explains Polokhin.

Moreover, Gazprom Neft enjoys other support as well. In particular, about a year ago, the Ministry of Finance prepared a bill to provide the company with a tax deduction for the severance tax in 2023-2028. We are talking about financing the construction of additional infrastructure for the transportation of liquid hydrocarbons produced at the Bovanenkovskoye and Kharasaveyskoye fields. The amount of the deduction will be 1.1 billion rubles per month, or 79.9 billion rubles for the entire period. The deduction, of course, will be refundable: Gazprom Neft will have to return the funds received in 2029-2034, but the indexation will be relatively small – only 9%.

“In fact, Gazprom Neft is sitting on two chairs, gaining an unreasonable competitive advantage and ousting other participants from the market,” Vedomosti quoted Tankaev as saying.