How to Partner With the European Bank for Reconstruction and Development In the Russian Oil and Gas...
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Transcript of How to Partner With the European Bank for Reconstruction and Development In the Russian Oil and Gas...
How to Partner With the European Bank
for Reconstruction and Development In the Russian Oil and Gas Industry
Exploration, Production, Processingin Russia
19 November 201310:00 session 2
International Investment Forum
Eric Rasmussen Director, Natural Resources
November 2013 © European Bank for Reconstruction and Development 2013 2
Agenda
What is the EBRD?
Russia’s Potential and Challenges for Oil and Gas Investors
Private CEOs views and expectations
How can EBRD help?
A network of over 40 offices in 35 countries
More than half our bankers based in the region
St. Petersburg RO
Moscow ROYekaterinburg RO
Vladivostok RO
Rostov RO
Samara RO
Krasnoyarsk RO
EBRD in Russia 7 offices
120 Professionals
November 2013 © European Bank for Reconstruction and Development 2013 4
EBRD offers a comprehensive product portfolio to address the investment challenges in Russia
Direct EBRD
financing
LoansLoans
• Non or limited recourse to sponsors
• Hard / local currency
• Medium / long term
• Floating / fixed rates
• New equity
• Privatizations
• Underwriting
• Quasi-equity
• ‘Portage’
Indirect EBRD
financing
• Guarantees to Confirming Banks for trade finance instruments (i.e. L/Cs, payment guarantees etc.) of local issuing Bank covering the payment risk
• Short-term financing of local Issuing Banks providing exporters/importers with liquidity for pre-export and post import and local trade finance purposes
GuaranteesGuarantees
• Specific risk guarantees
• Commodity-backed instruments
EquityEquity
November 2013 © European Bank for Reconstruction and Development 2013 5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
2
4
6
8
10
12
051015202530354045505560657075808590
Debt ABV Equity ABV Net Cumulative Business Volume
Annual busi
ness
volu
me (
AB
V)
Net cu
mula
tive b
usin
ess v
olu
me
Promote market efficiency by investing mainly in the private sector
Mobilise foreign direct investment
Support municipal services to improve people’s lives
Encourage environmentally sound and sustainable development
More than 4,000 projects since 1991
1/4 of all new business in Russia
Largest equity fund program in the EBRD countries of operation
EBRD’s historical investments of EUR 82 billion. About 28% in Russia.
November 2013 © European Bank for Reconstruction and Development 2013 6
EBRD has mobilised EUR 7 billion funding for oil and gas projects in Russia with EUR 1.6 billion of own funds
Pipelines, Storage
& Gasoline Stations
OFS / Remediation
Russia Central Asia Central & SE Europe Ukraine & Caucasus
Refineries
Oil & Gas Extraction /
APG utilisation
November 2013 © European Bank for Reconstruction and Development 2013 7
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
500
1,000
1,500
2,000
2,500
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Oil & Gas portion of GDP GDP (USD bn) (left axis) GDP per capita (USD) (right axis)
USSR POS-TUSSR
Putin inaugurated as President
Subsoil Law introduced
Yukos collapse
Gazprom allows Third Party AccessProduction
Sharing Law introduced
BP + TNK merger
Rosneft completes TNK-BP takeover
Roseneft & Exxon alliance
Russia’s oil and gas industry was dramatically transformed and modernised in the past decade
Russian - Ukrainian gas disputes
November 2013 © European Bank for Reconstruction and Development 2013 8
0
500
1,000
1,500
2,000
2,500
3,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Oil & Gas portion of GDP GDP (USD bn) (left axis) EBRD Mobilised Investment (EUR million)GDP per capita (USD) (right axis)
Uncertainty Low oil prices
Putin promises to double GDP
within a decade
Russia crisis
GDP per capita returns to the levels
of 1990
Asia demandExport boom
High oil pricesExploration boom
USSR Russia
… and Russia and its oil and gas markets still offer lots of potential…
Banking crisis
Asia crisis
November 2013 © European Bank for Reconstruction and Development 2013 9
…however Russia’s high potential for conventional oil and gas is located in places with little infrastructure…
• Uvat oil project in the Tyumen region
• Lukoil's Imilor and Istochnoye fields in the Khanty Mansiysk Autonomous Region
• Surgutneftegaz’s severo-Rogozhnikovskoye field
• The Novoportovskoye oil and gas condensate field in the Yamal-Nenets Autonomous Region
• Caspian Sea - Yuri Korchagin field,• Pechora Sea: Gazprom's Prirazlomnoye field
The government has introduced preferential taxes for East Siberian projects. • Vankor field• Verkhnechonsk oilfield• Suzunskoye and Tagulskoye fields • Lodochnoye field
November 2013 © European Bank for Reconstruction and Development 2013 10
.. and also the high potential for unconventional oil and gas is located in places with little infrastructure.
Tight oil and shale gas formations (EIA, May 2013)
November 2013 © European Bank for Reconstruction and Development 2013 11
2013Refineries 34Refinery capacity (barrels per day) 5.4 m LNG terminals 1Liquefaction capacity (tons per year) 10.4 mLNG storage capacity (000 m3) 200Gas storage terminals 25Gas storage capacity (billion m3) 66 blnTransmission pipelines (000 Km) 250
Russia’s oil and gas industry needs up to $1 trillion investments over the next 15 years for modernization and development
November 2013 © European Bank for Reconstruction and Development 2013 12
A SWOT of Russia’s oil and gas industry suggest a ‘reset’ of international partnerships could boost FDI and enhance exports…
SWOT
Strengths
•One of the world's largest proven reserves of oil (93.1bn bbl) and gas (45.3 tcm)
• Huge output with 10.5 mn bpd of oil and 657bcm of gas
•World's third largest refiner after the US and China.
Opportunities
• ‘Reset’ partnerships with EU and Asia
•Potential to expand refining capacity to 6 million b/d by 2017
• Underexplored East Siberia and offshore fields
• Tax & permit reform can double LNG by 2020
• Bazhenov may hold 75 bn barrels of shale oil
Weaknesses
• Limited FDI from international oil companies (IOC) is holding back innovation and modernization needed to explore difficult reserves
• Gas export infrastructure need upgrade
•Gas sales depend on EU
Threats
• US$280 billion investment needed to keep current oil output until 2020
• Oil output will drop 20% without tax & permit reform
• Proven oil reserves are expected to fall
• Without proactive planning new shale gas will significantly replace Russian gas in Europe and Asia.
November 2013 © European Bank for Reconstruction and Development 2013 13
YEAR
2012
2013
STATE REGULATIONPARTICIPATION BY STATE COMPANIES
80%
13%7%
INCREASE REMAIN THE SAME DECREASE
57%29%
14%
INCREASE REMAIN THE SAME DECREASE
73%
20%7%
INCREASE REMAIN THE SAME DECREASE
47%43%
10%
INCREASE REMAIN THE SAME DECREASE
CEOs welcome the new energy tax reform, but need non-protectionist reform to open access to potential opportunities.
Source: Deloitte 2013 Russian Oil & Gas Outlook Survey
November 2013 © European Bank for Reconstruction and Development 2013 14
The Russian oil and gas industry also needs a high pace of innovation and that requires more private sector engagement.
Oil Production - Market Structure 2013 (%)
Refining - Market Shares 2013 (%)
Gas Production - Market Structure 2013 (%)
Oil Storage - Market Shares 2013 (%)
Sources: BMI, OG Analysis 2013
37
1612
6
29Rosneft
LukoilSurgutneftegas
Gazprom Neft
Others
74.4
8.5
2.72.4 11.9
Gazprom
Novatek
LukoilRosneft
Others
46.8
23.3
17.2
12.7Rosneft OJSC
Lukoil
Gazprom Neft
JSC Bashneft
26.4
21.920.8
19.5
11.4OAO Lukoil
Alliance Oil Co.Gunvor
Rosneft
Caspian PipelineConsortium
November 2013 © European Bank for Reconstruction and Development 2013 15
FDI is eyeing the Russian oil and gas potential, but there are still substantial investment barriers and risks to form new alliances…..
Exploration
Access EHS
Production
Transport
Refining
Favored local
players
Lack of infrastructure
local servicecapacity
Gvt take
… so how can the EBRD help?
• Supporting Russian companies in cross-border investments in EBRD’s countries of operation
• Working with big companies to support smaller local content providers
• Process/resource efficiency: increase refining value added, reduce energy consumption and emissions with better processing and “greener” products.
• Supporting private players with a regional development impact.
• Companies pursuing corporate governance enhancement programmes (especially for early stage and 2nd tier companies, pre-IPO financing, environmental clean-up as well support for Joint Ventures).
November 2013 © European Bank for Reconstruction and Development 2013 16
November 2013 © European Bank for Reconstruction and Development 2013 17
How does EBRD partner with oil and gas companies depending on circumstances?
Russian GovernmentStrategic Interest
Co
mp
lexity of A
sset D
evelop
men
t
EBRD supports• FDI partners • service providers
Incentivised FDI
Domestic playersNOC
NOC alliance with FDI
HIGH
HIGH
LOW
LOW
EBRD supports • FDI• service providers• local content
development
EBRD supports • service providers• energy efficiency • environment, safety
EBRD supports • private players• service providers• efficiency, environment,
safety• corporate governance
November 2013 © European Bank for Reconstruction and Development 2013 18
We all need more international alliances to meet the global energy demand, which may double by 2050….
3 times more energy must come from renewable sources
1.2 billion additional vehicles will be on the roads
300 million people will exit poverty and demand more energy
…. while CO2 emissions must be reduced by 75% of today’s level to avoid climate meltdown
9.5 billion people will live on the planet with 75% in cities (2.5 billion more than today)
November 2013 © European Bank for Reconstruction and Development 2013 19
How to obtain EBRD financing
Financing requirementsFinancing requirements How to obtain finance?How to obtain finance?
Ensure appropriate returns by
carefully assessing the risks:
Disclosed owners and corporate
structure Management team and strategy Business plan and project costs IFRS audits Environmental, social, health and
safety - action plan Need to develop local content?
Ensure appropriate returns by
carefully assessing the risks:
Disclosed owners and corporate
structure Management team and strategy Business plan and project costs IFRS audits Environmental, social, health and
safety - action plan Need to develop local content?
Provide EBRD with an overview of
proposed investment Commitment to cooperation
clarify role of EBRD mandate to initiate transaction mutual understanding of
corporate integrity issues Project / business plan, market
analysis, financial analysis, risk
assessment Exit strategy
Provide EBRD with an overview of
proposed investment Commitment to cooperation
clarify role of EBRD mandate to initiate transaction mutual understanding of
corporate integrity issues Project / business plan, market
analysis, financial analysis, risk
assessment Exit strategy
www.ebrd.com
Contact
Eric RasmussenDirectorNatural Resourcest: + 44 20 7338 8615e: [email protected]
EBRD, One Exchange SquareLondon, EC2A 2JN United Kingdomwww.ebrd.com
Aida Sitdikova DirectorEnergy, Russia and Central Asia t: + 44 7 8025 106 44 e: [email protected]
November 2013© European Bank for Reconstruction and Development 2013
20