Russian Oil & Gas Outlook Survey

Analysis

Russian Oil & Gas Outlook Survey

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The purpose of this survey is to assess the interim performance of the sector and the current performance of individual companies, as well as to share the views of Oil & Gas company executives on the short-term and long-term prospects for business development.

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Key highlights 2017

As predicted by most oil and gas executives in 2015, the year 2016 was marked by a growth in oil prices, with the price of a barrel going up from USD 34 to USD 56. This year, the survey has found that only half of the respondents remain optimistic about a potential boost in prices in 2017.

Many of the respondents surveyed have replied that Russia and other countries will see oil demand continue at the same level while gas will enjoy a growth. This may have an impact on hydrocarbon prices because retaining and growing production levels usually come from obtaining a higher recoverability from traditional deposits and exploring new ones, including those with complex barrels that require large-scale investments, as noted by more than 80 percent of the respondents.

With high capital intensity and complicated access to funding, almost half of the surveyed respondents believe Russian oil and gas projects will see more participation from foreign companies in 2017.

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Key highlights 2016

Deloitte CIS has completed its tenth annual Russian Oil and Gas Outlook Survey, based on interviews with executives from state and private enterprises. Its findings highlight the interim results of operations throughout the industry, current results of certain companies, their plans and short-term and medium-term growth opportunities.

As demand growth slowed down and markets became over-saturated, 2015 saw a further decrease in oil prices, following the previous year's drop. Renewed EU and US sanctions against Russia put energy companies in an even more challenging environment, both financially and technically. Nonetheless, oil production in Russia grew in 2015, mostly due to increased oil recovery from conventional fields and the exploration of new deposits, including reserves that are hard to recover. Indeed, Russia set a historic record last year beating the Soviets with daily oil production at 10.7 mbpd.

Experts believe that the decline in oil prices is pushing the upstream sector to improve the profitability of oil fields in 2016, including by raising the production efficiency of extensively depleted fields.

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Key highlights 2015

The companies will feel the impact of the sanctions imposed on Russia. However, they could also have a positive effect. 2014 saw significant economic changes in the country. Due to the sanctions imposed against Russia by the OECD and slumping oil prices (up to USD 45 per barrel), fuel-and-energy companies have encountered new issues. Thus, due to the sanctions, a number of joint Arctic shelf development projects have been already blocked or will be blocked in the near future. The sanctions have made it difficult to acquire the high-tech equipment needed to recover hard-to-extract oil. Western service companies are leaving the Russian market and are difficult to replace.

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Key highlights 2014

Despite the positive dynamics in the demand for hydrocarbons and the current tendencies in industry development, in 2014 the majority of companies in the Oil & Gas sector are not likely to see any changes to their core asset portfolio. This is one of the findings of the eighth annual Russian Oil & Gas Outlook Survey, which was conducted by Deloitte CIS professionals and included an opinion poll for executives and top specialists from state-owned and private companies in the sector. The survey helped recognise the interim results of the work of the entities in the sector, the results of their ongoing activities and the potential for industry development in the forthcoming year.

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Key highlights 2013

According to our respondents, 2012 was notable for greater activity in investments into current operations, innovative solutions and environmental programmes. 79% of survey respondents also reported an increased expenditure on capital projects, which is significant too. Most of the respondents cited efficient asset management as a driver for sustaining and enhancing their competitive edge. Other drivers given include the implementation of new technologies, innovative solutions and performance management programmes, and the reduction of operating and administrative costs. Only 13% of oil and gas companies, however, mentioned risk management.

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Key highlights 2012

Given the favourable outlook for hydrocarbon demand, most oil and gas companies plan to expand their core asset portfolios and are preparing to invest in the resources and field development mainly using their own funds for financing. For most oil and gas companies, the main operational priorities are to improve contractors' performance and optimise logistics.

The companies' expectations of tax regulations are clear – nearly 40 per cent of all respondents said Mineral Extraction Tax (MET) differentiation is the main factor that will favourably affect industry development.

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Key highlights 2011

One of the most significant global events for the oil and gas industry was the accident on the BP-leased DeepwaterHorizon rig. Direct damage to the company as a result of the disaster amounted to USD 8 billion, while it will take years, or even decades, to deal with the environmental consequences. This incident has forced all oil and gas companies to reconsider their security and labour protection policies.

Today companies are planning to increase investments in areas that have suffered reductions in previous years, such as innovative solutions, research, and capital projects. Respondents said that the aim behind these investments was to raise the profile of their business in terms of both quality and quantity, which will require the implementation of new technologies. Due to difficulties associated with oil production and the implementation of new technologies. Due to the difficulties associated with oil production and the implementation of new state regulations, oil and gas companies will need additional sources of capital in the near future.

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Key highlights 2010

This year, the questionnaire was prepared based on the changes that have taken place in the global economy. Many of these questions deal with the crisis and the possible ways of ending it. As in previous years, we have interviewed the managers of companies operating in the hydrocarbon exploration, production and processing markets in Russia. The scope of our survey encompassed both large national and international vertically integrated companies, as well as independent small and mid-sized enterprises.

Half of the survey participants felt that the sources of their competitive advantage were efficient asset management and minimisation of administrative and production costs, as well as control over strategy and efficiency management program implementation. A third of the respondents give preference to the introduction of new technologies and innovations and risk management.

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Key highlights 2009

Many people are apprehensive about changes in export duties, as well as Mineral Extraction Tax differentiation according to geological conditions. Many companies either have started or intend to start reviewing investments in refinery. However, about 40% of respondents do not intend to change their investment plans significantly in the areas of exploration and production. Cost-cutting and efficiency-enhancing initiatives are being brought to the forefront. Companies are viewing the increase in services and energy saving efficiency as valuable opportunities to reduce costs. Lastly, although many respondents are considering headcount optimisation, one of the key problems is still a talent shortfall.

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