With gas prices at record highs, Rosneft seeks permission to export through Gazprom – paper

MOSCOW. Aug 30 (Interfax) – Amid record high gas prices in Europe, Rosneft CEO Igor Sechin has asked President Vladimir Putin to allow the company to export 10 billion cubic meters of gas per year under an agent agreement with Gazprom, national daily Kommersant reported, citing the letter.

Sechin proposed to pay a significantly higher gas extraction tax on this amount that he estimated would generate up to an extra 37 billion rubles per year for Russia’s budget.

However, Rosneft does not have significant amounts of available gas at the moment, it plans to ramp up production in 2022, the paper said.

Sechin said in the letter that it would be "advisable to limit [the exports] to existing current contracts with new consumers that are not buyers of PJSC Gazprom gas." Rosneft signed a memorandum with BP in 2017 on the possibility of supplying 10 bcm of gas per year to Europe, Kommersant recalled.

Sechin said exchange prices for gas in Europe have reached record levels, but current budget revenues from gas exports "do not fully reflect the favorable market situation." In light of this, he proposed to pay the mineral extraction tax (MET) on gas exported by Rosneft "according to the actual market situation."

At current prices in Europe, the MET rate could be "about 5,000 rubles" per 1,000 cubic meters, which is "more than 3.5 times" higher than the current MET rate for Gazprom, Sechin said. In that case, additional budget revenues, meaning the difference between the higher MET that Rosneft would pay and Gazprom’s current MET, would total up to 37 billion rubles, he said.

A possible increase in Rosneft exports in future could generate additional revenue of up to 150 billion rubles, Sechin said.

He said exports by Rosneft "will facilitate the lifting of restrictions" that European Union antitrust legislation imposes on utilizing the capacity of the Nord Stream 1 and Nord Stream 2 gas pipelines, as well as the Opal pipeline that is the continuation of Nord Stream 1 in Europe. Unutilized Opal capacity now totals 12.8 bcm per year, the paper said.

Sechin proposed to directly link the MET rate for gas exported from Russia to the exchange price of gas in Europe by making changes to the Tax Code.

Kommersant said Putin has instructed Deputy Prime Minister Alexander Novak and Finance Minister Anton Siluanov to consider Sechin’s proposal.

The paper said that Sechin sent his letter at a time when Gazprom is trying to deal with the consequences of the August 5 fire at its condensate plant in Novy Urengoi, which has also affected gas exports.

Exchange prices for gas in Europe have been steadily above $500 per 1,000 since the start of August due to low reserves in storage ahead of the winter and lower than expected supplies from Gazprom.