21 Sep 2021 10:00

Russian govt prepared to let Rosneft into European gas market through agreement with Gazprom "as experiment" - paper

MOSCOW. Sept 21 (Interfax) - The Russian government is generally prepared to allow Rosneft to export 10 billion cubic meters of gas to Europe per year through an agent agreement with Gazprom "as an experiment," national daily Kommersant reported on Tuesday, citing a draft report from Deputy Prime Minister Alexander Novak to the president.

Novak proposed that the Energy Ministry explore this option and also work with the Finance Ministry to analyze the possibility of amending the Tax Code as regards linking the mineral extraction tax (MET) on the gas Rosneft would export to spot prices in Europe.

Since Gazprom and Rosneft have diametrically opposing positions on this issue, the final decision, according to the report, will be made by President Vladimir Putin.

Kommersant reported earlier that Rosneft CEO Igor Sechin had again asked Putin to allow the company to export gas. He said gas prices in Europe have reached record levels, but current budget revenues from gas exports "do not fully reflect the favorable market situation." In light of this, he proposed to pay the MET on gas exported by Rosneft "according to the actual market situation," in which case the MET rate could be "about 5,000 rubles" per 1,000 cubic meters, compared to the current MET rate of 1,290 rubles paid by Gazprom.

Giving Rosneft access to pipeline gas exports from Russia, even while maintaining a single export channel, would also solve the problem of fully utilizing the capacity of the Nord Stream 2 and Opal gas pipelines, which Gazprom cannot fully use due to the rules of the EU's Third Energy Package, Sechin said.

Exporting an additional 10 bcm of gas per year would generate an extra 60 billion rubles of MET revenue for the budget, as well as 100 billion rubles of customs duties and 50 billion rubles of revenue from taxes on Rosneft profit and dividends. Rosneft said the source of the gas would be its Rospan and Kharampur projects, which are expected to increase production by 25 bcm in 2021-2022. This will make it possible to export gas without hurting the domestic market, the company said.

Gazprom's position, which is cited in the report, is directly opposed. The gas giant said that quotes for 2022 gas futures indicate that prices are unlikely to remain high, so it is unsound to make long-term decisions on regulation of gas exports and tax legislation based on short-term fluctuations in market prices for gas.

Furthermore, Gazprom recalled that Rosneft is still buying substantial amounts of gas on the Russian market to meet its contracts within the country, but now wants to export.

The Finance Ministry, meanwhile, sees risks in switching to spot prices for calculating the MET in the long term due to market volatility, but supports this option as an experiment. The Economic Development Ministry believes it is necessary to analyze the risks of competition between the gas that Rosneft plans to export to Europe and the current and future exports of Gazprom.

The Federal Antimonopoly Service supports Rosneft's proposal to give independent gas producers access to exports through an agent agreement. The Energy Ministry believes that an agent contract does not contradict the federal law On Gas Exports and "can be concluded between Gazprom and Rosneft," the paper reported.