Russian Oil and Gas Industry:Future under Financial Crisis

Elena TeleginaDirector of the Institute of Geopolitics and

Energy Security of RussiaMember of the Board, Russian Union of Oil

ExportersDoctor of Economics, Professor

Nice, November 12-13, 2008

www.gazo.ru

Russian Oil Production, mln t

Russian Oil Exports, mln t

ForecastEnergy Strategy 2020

ForecastEnergy Strategy 2020

Russian Oil Production Growth Decline (annual %)

Russian Ministry of Energy

www.gazo.ru

ForecastEnergy Strategy 2020

ForecastEnergy Strategy 2020

Russian Gas Exports, bcm

Russian Gas Production, bcm

Gazprom Resources,trln cm

Gazprom Production, bcm

www.gazprom.ru

www.expert.ru

Gazprom Production in 2007 decreased to 2003 level, bcm

Gazprom Investment Program to 2010, bln roubles

www.gazprom.ru

planPreliminary results

All InvestmentCapital InvestmentLong-term Investment including credits to affiliates and strategic projects

Gazprom; 548,6

Novatek; 28,5

Rosneft; 15,5

LUKOIL; 13,7

Others; 46,8

Gazprom

Novatek

Rosneft

LUKOIL

Others

Russian Gas Production, bcm

Total production in 2007 – 653,1 bcm

www.gazprom.ru

Russia: Expected gas availability still growing with increasing participation of independent producers

www.gazprom.ruwww.eurogas.org

Europe: Natural Gas Imports

Main Transmission projects in Eurasia to 2015

www.iea.org

Projects Participants Investment required

Shtokmanskoye Field (Barents Sea)

Gazprom (50%), Total (France), and Norsk Hydro (Norway)

Investment estimated between $15 and $25 bln

Nord Stream Gazprom (51%), BASF (20%), E.OH (20%), Gasunie (9%)

7, 4 bln euro

South Stream Gazprom, ENI Up to 20 bln euro

Yamal-Europe Gazprom 14 bln USD

East Siberia-Pacific Ocean (VSTO)

Transneft 12,5 bln USD

Sakhalin II Gazprom (50%+1 share),

Shell (27,5%), Mitsui (12,5%),

Mitsubishi (10%)

Up to 10 bln USD

Main Oil and Gas Projects

www.gazprom.ru

International&Frontier Sector (EV/Boe vs Commodity Price)

Russian Oil and Gas RTS Index (since November 2007)

www.finam.ru

Oil and Gas

Gasprom

LUKOIL

Rosneft

Oil and Gas Industry need large investments to be encouraged by legal/policy framework

Majors, NOC’s need sufficient operational cash flow to fund CAPEX commitments

Funding Commitments from BANKS are likely to evaporate until 2009, but projects, equipment financing, production (reserve based landing) financing is possible

Need to raise capital:Capital Markets: essentially closedFrom Partners - at a cost

Projects Abandonned and Postponed If not properly financed before the funding crunch and If promoter sufficiently financed to resist credit freeze

Europe and Russia need a consistent and mutually supportive approach between internal market and external dimension policies.

Dialogue at all levels with producers, transit countries, industry, customers is needed - the industry is determined to facilitate the process.

Conclusions