"Gas basket" Ukraine: what proportion of domestic gas will be?
Ukraine is to Russia not only long fights for the Donbass, and protracted diplomatic with the participation of the European Commission for the transit of gas through Ukraine and Russian gas supplies "Naftogaz" at prices of the European market. In short, the continued difficult bargaining for the second so-called winter package. Formally, September 16 at the Vienna talks the parties agreed on the main points, and is expected to sign an agreement next week in order to have from October 1, "Gazprom" resumed gazopostavki to Ukraine for its needs on a prepaid basis.
According to the first "winter package" "Naftogaz" buy Russian gas at the end of November 2014 on 1 June 2015 imports of Russian natural gas directly to the needs of Ukraine, according to the top management of the government and "Naftogaz" should only complement the so-called diversified gas basket of the country, to reduce risks and dependence on one source of imported gas - "Gazprom". And last year, in this sense, we have made considerable progress, increasing gas imports from Europe as repeatedly told ZN.UA. But the main source of gas supply to Ukraine was and remains the natural gas production in its own territory. Here success, as evidenced by the facts were much more modest.
Given the inertia of the industry, the decline of production rates this year may be adversely affected by the general situation with the gas. Already this year, the situation with gas production in Ukraine has deteriorated dramatically. This applies both to the state company "Ukrgasdobycha" parastatal "Ukrnafta" and private mining companies. If the first eight months of last year production growth was 2.5%, but this year for the same period, on the contrary, there is a drop in production of 2.5%. In absolute terms, the fall has 300 million cubic meters. Nationwide, at first glance, it seems to be not critical yet, but the trend is alarming. On this and many other related problems of the national mining industry September 10 held a substantive discussion with direct participants of the Ukrainian gas market in the course of the round table "Will Ukraine with its own gas: production, taxes and investments", organized ZN.UA and consulting company "Nyufolk ". For publication, we have chosen the most reasoned and bright, in our view, to the speakers.
According to most of them, the main problem of gas production in Ukraine remains high taxes. Raising the rent twice in August last year, radically changed the situation on the market. The period of rapid growth in gas production is over and today this industry is going through, to put it mildly, not the best of times. Some cushion companies and inert process gas production still fails to fully experience the depth of the problems of the mining industry. In addition to high taxes, private companies have a lot of other problems, first and foremost, with the state policy on gas production. An illustrative example is the situation with the largest private natural gas producer "Neftegazdobycha", which in the past three years is a part of DTEK. For five months, state authorities block the work of the company. Its accounts are arrested, which makes it impossible to sell gas, "Neftegazdobycha" forced to give it to the gas transportation system is actually pumped into underground gas storage (UGS) at not quite certain conditions. Today, about 450 million cubic meters of gas the company is in underground storage. Roughly speaking, this gas resource is simply withdrawn from the market, and that a third of the gas produced by private companies. If the situation does not change, about a thousand people working in the company, as well as contractors, will be unemployed.
Government policy in relation to the private gas production is not only fraught with problems in the energy sector, but will have significant implications for all economic and social development, especially in those regions where mining companies, including private ones, and where they took over a large part of the social burden.
Oleg PROKHORENKO, head of the PAO "Ukrgasdobycha": "If the policy of the state regarding the" Ukrgasdobycha "will not change fundamentally, we will continue to lose its gas. Representing the largest public gas producer country, unfortunately, I consider it necessary to talk about the threat of decline . Because if the state policy regarding the PAO "Ukrgasdobycha" will not change fundamentally, we will continue to lose its gas production in Ukraine. I responsibly declare: Unfortunately, there is a decline in gas production this year. It is 200 million cubic meters in the area of ATO and the fall of natural gas companies operating under joint operating agreements (DM) with PAO "Ukrgasdobycha." This year, more precisely, in the second half of the year, we are already working in the new tax regime - rents on extracted gas is 70%. This situation killing the company. We do a lot of calculations, projections, we do a lot to save money ... but it will not save us. Here are the latest estimates prepared by us. In our economy influenced by four main factors.
The first - the price of gas sales.
The second - the world price of oil, it linked the prices of our oil products and liquefied gas, we produce and sell.
The third factor - the level of rents, ie taxes.
Fourth - the level of payments to "Naftogaz Ukraine", which sells all of the produced gas.
What is happening? We are working at 70% of the rent for the last month the price of oil slipped by 20-25%. This means that the money that we had planned to receive for the sale of petroleum products and that finance the current activities of the company, we will receive less. If we were planning to get for petroleum products and liquefied petroleum gas about 600 million USD per month, now this amount will not exceed 500 million USD. And this is not the limit. Now we have to make predictions and calculations based on an oil price of $ 30. Per barrel. In the basic financial plan for the next year pawned oil price of $ 60. Per barrel, but I do not believe in this forecast.
I think that the oil price will be closer to $ 30. Per barrel. In such circumstances, if the rent is 70%, the price of oil - $ 30. Per barrel, and the level of payments "Naftogaz" for gas "Ukrgasdobycha" - only 83% of that observed in the last year, after payment of all taxes remains for us to finance all activities, operating and capital, 1.3 billion USD. As it is correlated with the needs of the company, unless the operating costs necessary to 5.7 billion USD? First of all, wages, energy, basic spare parts for repairs, transportation, chemicals, interest on bank loans - without all this the company simply "stop", we will not be able to service existing wells. But this is only the current activities excluding new capital investment. To support the production of gas at the existing level, to compensate for the natural pressure drop, we need substantial investment. If we do not make any capital investment, are drilling are not, do not do the operation on gas production intensification, the next year production could fall to 12.4 billion cubic meters of natural gas to 14.5 billion cubic meters this year.
To maintain production at a level of 14.5 billion cubic meters in 2016, we need to invest 13.5 billion USD. This amount includes USD 8.2 billion for drilling, seismic, pipes and other equipment, construction and connection of new wells. If we drill, connect new wells, moving at the level of the past and current years, it will predictably 1.24 billion cubic meters of gas to partially compensate for the natural fall. But this is not enough. If we want to fulfill the plan for the extraction of gas in the volume of 14.5 billion cubic meters a year, we need to produce an additional 900 million cubic meters, which we can get, especially from operations to intensify existing wells and on commissioning of booster compressor stations. This is 5.3 billion USD. The baseline for the next year (in case of lack of funds for investment) - a drop in production to 12.4 billion cubic meters. "Ukrgasdobycha" hopes to produce 14.5 billion cubic meters, ie necessary to compensate for the loss of 2.1 billion cubic meters of gas. This requires operating costs at 5.7 billion USD, capital expenditures - 13.5 billion. That is, if the rent is 70% when the price of oil continues to fall, we do not (will not) means even on operations, not to mention the capital investment.
The question arises: what he wants from the state "Ukrgasdobycha"? Or the state continues to extort money from the company through the rents in the falling volumes of gas or the government wants to maintain the level of gas production, which shows the company. Miracles do not happen, we can save on procurement, on implementation, but production - is a physical process, it drops all the time to maintain it needed capital investment. That's what happens with the production without investment by the example of one of the "youngest" of our fields - Kobzevskogo (see. Fig. Online ZN.UA). Prior to April 2014 due to investments mainly in new wells has been able to maintain production levels. But all this time remained underfunded construction of a booster compressor station (BCS), which would allow to maintain production at the level of 2012-2014., And since May 2014 is rapidly beginning to lose mine production rate. After a delay of several years BCS yet been put in place, but now it can perhaps a little support production at mid-2015, the effect of BAC is much less - the deposit will not be able to return to the level of production 2012-2014. That is, the more we hold off on investment, the more we save in gas and can even lose the deposit. This is a simple physics of the process.
The state must choose the way: either we do not fund capital investments of the state mining company (by reducing rents), then soon we get a picture of falling gas production in all fields, as shown in the example Kobzevskogo; and we strive to maintain production at a constant level - then you need to invest. We did the calculations, if we produce 2.14 billion cubic meters of gas (in addition, more than indicators of the baseline scenario of 12.4 billion cubic meters in 2016), it would cost the state 4.4 billion UAH (including depreciation of long-term investments needed to next year). If we do not s get this amount of gas, the state ("Naftogaz") will go to the market and buy the volume of the import of 12.3 billion USD. This is what we take account of gas price of $ 250. Per thousand cubic meters. The State, represented by "Naftogaz" would still need to provide the 2.1 billion cubic meters. The question arises: what is better - to get it in Ukraine, which will give us a salary to workers, domestic enterprises will download orders or pick up money from us through the rent and then buy the same gas in Russia three times more expensive? Saving 70% of the rent - is additional budget expenditures on the purchase of gas and increased our gas dependency on Russia.
Arthur Somov, CFO "Karpatygaz": "In 70% of the rent, even the drug trade becomes uninteresting. We work on the basis of cooperation agreements with the state company" Ukrgasdobycha. "In his speech, I will focus on three fundamental areas. Item 1. With respect to insurance stock, I want everyone to understand why private companies are so worried. Today, the gas business, I can say responsibly, do not believe the government. In any state initiative begins search for "where the crux of the matter", and not even a dog, the whole horse. Perhaps it is a problem of the entire state, why not built communications, at least with the oil and gas business.
Probably, if the ratio is correct, then after some time the trust return. But to date, the trust of the gas business in the state is not. This also applies to the situation last winter, when "Naftogaz Ukraine" addressed the monopoly supplier of gas for more than a hundred of the largest enterprises. This also applies to our personal experience with the previous government.
Item 2. "Karpatygaz" works at the intersection of public and private sector - working with "Ukrgasdobycha." I 110% support the head "Ukrgasdobycha." Today in Ukraine develops rather interesting situation: all initiatives to reduce rent payments apply only to private companies, which account for 15-20% of gas production. Then, like a huge share of the market - 80% of which occur in "Ukrgasdobycha" - subject to the rent of 70%. The main problem of the gas market - the rent, the rent and the rent again. No transparency of the market, do not tender ... When 70% of the rent, even the drug trade becomes uninteresting, not to mention the gas production in Ukraine. Therefore, the rent will be reduced - investors will come. The experience of the previous two or three years has shown that the opacity of the market, its infrastructure problems are not put off foreign investors from coming to Ukraine. Here JKX came back in the mid-90s of the last century, when Ukraine was generally incomprehensible situation. The same applies to Burisma, Shell, etc. If companies are imposing some insane taxes, it does not matter what other conditions are created, they will be derivatives only thing.
Paragraph 3, painful enough for us - the PSA (Production Sharing Agreement). In fact, when we talk with the deputies, everything is understood. But the result is important! In July, the bill was defeated by a change, improve the PSA. Because it came to the rostrum Rada deputy of one of the right-wing parties and unproven he told that it's all bad. And we voted against. Populism is not just rolls over, it is no longer limited. Returning to the problems of "Karpatygaz" have today the state is pushing for the signing of the PSA. But probably not in the conditions that exist today. When we serve the documents for signing the PSA, where everything is approved, I am afraid that by the time we had "a bit dead" to sign the PSA will have no one. But in general we welcome all foreign investors in the oil and gas sector of Ukraine.
Andrew MIZOVETS, president of the Association of "Gas Traders of Ukraine", "Insurance reserves of gas at the proposed conditions - it is freezing of funds". Add some numbers. Let's start with the fact that, according to "Ukrtransgaz", in July for the industry was supplied 640 million cubic meters of gas. Of these, "Naftogaz of Ukraine" - 60 million cubic meters, the company related to Oblgases - 40 million, not including HMOs, all the rest "closed" private providers traders. That is, the share of private traders in the summer reaches 80% of the total supply industrial consumers.
Of course, since the fall of their share will decline, while the share of "Naftogaz" and the regional gas companies to grow. But the fact that private providers play an important role in the gas industry, says that the work is done, and there are results. More figures. Last year production growth of private companies reached 30%, and this year we expect to fall.
Why? The answer is simple: taxes, rent, money washed out. Separately recall the decision of the Cabinet Forced transfer of consumers in the gas supply "Naftogaz". Until today, in order to return customers, the mining companies and associated gas traders are forced to sell at a large discount. Already mid-September, but we still have no understanding as we go through the winter heating season. We have less gas in underground storage than last year. Yes, in the country to reduce gas consumption, since the beginning of the year for the industry - by 25%, all in Ukraine - 20%. But the fall in consumption does not solve the issue of gas injection into underground storage facilities.
Next problem - the formation of an insurance reserve. "Current" resolution of the Cabinet of Ministers provides for each supplier of 10 percent of the supply of gas supplies quarterly, is about 30% of deliveries per month. Who we are invited to "insure" 100%! If a judgment will (as expected on September 20) to October 1, already have to have an insurance reserve. Where his brother? Insurance gas supply - is the freezing of money. If mining companies providing the resources, so they, too, should form the stock, while still pay the rent for the produced gas, which forms the reserve stock. Today, private companies supply the market 350- 400 million cubic meters of gas per month, or 1-1.2 billion in the quarter. Under the current legislation, UGS private traders need to keep 120 million cubic meters of gas, and the new - already 400 million. This gas will actually "lie" in underground storage instead of going to the market - consumers. At today's prices is about 2 billion USD, they need somewhere to take. Loans also now no one gives. All look forward to the enactment of the regulator, which dot the "i". I wish that it was as progressive as the Law "On the Natural Gas Market", which we really applaud.
Roman Storozhev, president of the Association "Subsoil users of Ukraine", "The increase in safety stock is killing the business of traders, without solving the problem per se. In addition, 300 million cubic meters of gas in underground storage facilities is necessary to replace the market with imported gas. Be saved if Georgia 300 million cubic meters of gas in underground storage facilities in winter period? I think not. 300 million cubic meters at the national level - it is very small, but if from the turnover of the domestic market, such a situation may derail market scare off investors. This will require gas suppliers to "freeze" 100% of current assets, simply omit them in store. Where can I get money? Loans in UAH today - is 35% per annum, and if we go to a foreign bank the first category, there us no one will give money, because in Ukraine there is a sixfold require collateral.
In western Ukraine, in fact, no one believes, no we will not give gas in storage, no we will not give cheap loans. Upon the decision to increase the safety stock traders kills business, and in fact does not solve the problem of filling of UGS. As I said, 300 million cubic meters - is very little to "Naftogaz Ukraine".
However, Yuri Vitrenko, business development director of "Naftogaz Ukraine", said that "Naftogaz" in early summer offers private mining companies and traders to form gas reserves in underground storage facilities for the coming winter as a resource, produced and harvested in Ukraine and from import. But no company on such an appeal has not responded. In this sense, according to Yu.Vitrenko, the above-mentioned participants of the gas market can be said to have brought. And not shared jointly and severally liable with the NAC. Nevertheless, he is confident that by the beginning of the heating season in the Ukrainian underground gas storage is accumulated at least 16.5 billion cubic meters of gas.
In view of reverse supply and import of "Gazprom", says Yu.Vitrenko, Ukraine may take the coming autumn-winter season is relatively painless. So "Help!", In his opinion, it is not necessary to shout. However, in more detail about the situation on the gas market and its vision Yu.Vitrenko and other top managers "Naftogaz" will be discussed in the next room ZN.UA.
As the position of the legislators, in particular, the deputy Olga Belkova. She says that the government is seeking a compromise with the tax relationship with the private mining companies. And although it is not a final solution to the problem, start. In addition, O.Belkova initiated the next week in the framework of the round table TEKovskogo Committee. It just goes on the PSA, which is so opposed to private gas producers.
September 21, 2015