Azernews.Az

By Bloomberg

OAO Rosneft’s likely reliance on natural gas to expand output will create little value for the Russian energy company because it’s unable to export the fuel, Alfa Bank said.

“This is one of the company’s key weaknesses,” Alexander Kornilov, an oil and gas analyst at the bank in Moscow, said Monday in an e-mailed research note.

State-controlled OAO Gazprom has a monopoly on gas exports by pipeline, leaving competitors to fight for a crowded domestic market. Russian gas prices have been slow to catch up with export rates, prompting producers including OAO Lukoil to suspend some new extraction projects.

Rosneft plans to raise total hydrocarbon output by about 20 percent to 300 million tons by the end of the decade, it said July 10. While the forecast wasn’t broken down by fuel, the increase is likely to come from gas as new oil developments will only offset declines at aging fields, according to Alfa Bank.

“We forecast the company’s gas output to jump to at least 80 billion cubic meters by 2020 from the 57 billion cubic meters produced in 2014,” Kornilov said. The focus on gas, without access to export markets, “does not promise much value accretion.”

Gas prices in Russia have risen more slowly than forecast following an increase in supply. Lukoil, Russia’s largest oil producer after Rosneft, expects domestic gas tariffs to match export prices by 2020 instead of 2016 as previously expected.