NewsFlash / 1 / June 2017

World news in brief • OPEChasagreedtoextendtheoilproductioncut

agreementforninemonthstoMarch31,2018,KuwaitiOilMinisterEssamal-Marzouqtoldjournalists.ThenextOPECmeetingandOPEC/non-OPECministerialmeetingwillbeheldonNovember30,NigerianEnergyMinisterEmmanuelKachikwusaidonTwitter.

• Oilandgascompaniesareshowingthefirstsignsofrenewedappetiteforinvestmentafternearlythreeyearsofretrenchmentbuttheirtoppriorityremainsreducingdebtandcoveringdividends,accordingtoindustryleaders.MorethantwothirdsoftherespondentstothesurveybyWoodMackenzie,theheadsofoilandgascompaniesandenergyconsultancy,expectedspendingonexplorationtorisebasedon2017results,however,accordingtomostofthemthegrowthrateswouldnotexceed10%.About60percentoftherespondentsthoughttheindustry’stoppriorityforthisyearwasprotectingdividendsorpayingdowndebt,comparedwithonly39percentwhofeltitwasinvestmentinexploration,M&Aordevelopingnewprojects.“Cautiousoptimismisthewatchword,”saidMartinKelly,headofcorporateanalysisatWoodMackenzie.“Wearebeginningtoseetentativesignsofinvestmentreturningbutcompaniesarestillthinkingfirstandforemostaboutmakingsuretheirbalancesheetsareinorder.”

• TheInternationalEnergyAgency(IEA)lowereditsoildemandgrowthforecastfor2017by45thousandbarrelsperday(bpd)upto97.9mlnbpdthisfollowsfromIEAmonthlysurvey.IEAloweredtheglobaldemandestimateduetoweakerdemandgrowthinthefirstquarterinsuchcountriesasGermany,TurkeyandIndia,andlowerdemandforoilintheUSinthesecondquarter.Thus,IEAloweredthedemandforoilinthefirstquarterof2017from96.6mlnbpdto96.5mlnbpd;thedemandinthesecondquarterisestimatedat97.3mlnbpd(previously97.4mlnbpd;inthethirdquarter-98.6mlnbpd(98.5mlnbpd).Inthefourthquarter,theforecasteddemandremainedatthelevelof99.1mlnbpd.

Source: Consensus Bloomberg, EIU

Brent Crude Oil Forecasts, $/barrel

Oil & GasNewsFlash

July2017

Brent, WTI and Urals spot prices

( 27 April 2017 - 29 June 2017)

Source: EIA; www.topoilnews.com

• Overallglobaldemandforoilisexpectedtopickupby1.4mlnbpdto99.27mlnbpdin2018,theInternationalEnergyAgency(IEA)predicts.Thesearetherecordgrowthrates,IEAstates.IndiaandChinawillcontinuetobethedriversofgrowthindemand.Oilconsumptioninthesecountriesisduetohealthymacroeconomicconditionsandpopulationgrowth.

NewsFlash / 2 / June 2017

World news in brief • ShaleoilproductionintheUSwillincreaseasaresultof

theextensionoftheOPEC+agreementonoilproductioncut,SuhailMohamedAlMazrouei,MinisterofEnergyoftheUnitedArabEmirates,toldthejournalists.“Shaleoilwillmakecomeback,butwehavenofearsaboutit.Shaleoilwillnotbeabletosatisfytheentiregrowthindemand.AndUSshaleoilproducerswillnotbeabletoreturntothemarketwiththepreviousvolumes,”hesaid.

• Qatar’sdominanceintheLNGmarketisbeingthreatenedbynewlyemergingplayers,includingtheUSandAustralia,andQatar’sdecisiontoliftitsmoratoriumondevelopingnewcapacityattheNorthDomefieldhassentaclearsignaltoitscompetitorsthatitispreparedtoboostgasoutputfromtheacreageandincreaseexportsifneeded.Meanwhile,accordingtoInterfaxGlobalGasAnalytics,Qatarisbecomingmorestrategicinmarketingitscargoes,whichwillhelpitmaintainitsimportanceasanLNGplayer.Consequently,thecountryhasbecomeoneofthefirstLNGsuppliersintheMiddleEastandAfricatoofferflexiblesupplycontracts,whichcaterfortheneedsofprice-sensitivecustomers.QatarisalsotakingstakesinLNGimportandexportprojectstoboostitsflexibilityasasupplier.

• AnalystsatUBSloweredtheforecastforoilpricesforthenexttwoyears.Accordingtotheirestimates,thisyearBrentwillcostonaverage$56perbarrelagainstpreviouslyexpected$60perbarrel,WTIwillcost$53perbarrelandnot$57.5perbarrel.Theforecastfor2017wasworsenedforBrent-from$65perbarrelto$60perbarrelandforWTI-from$63perbarrelto$57perbarrel,accordingtotheBank’sreport.Expertsexpectthatin2017oilproductionintheUSwillincreaseby1.2mlnbpdandnextyear-by1mlnbpd.Asaresult,thecountrywillproduceabout11mlnbpdbytheendof2018.

• ThenumberofactiveoilandgasrigsintheworldroseinMayforthefirsttimeinthreemonths,accordingtotheUSoilfieldservicescompanyBakerHughes.Onaverageinthelastmonthintheworldworked1935plantsvs1917inApril.InthiscasetheMaylevel530morethaninthesamemonthin2016.IntheUSthenumberofunitsinMay,up40fromthepriormonthandamountedto893–thehighestsinceApril2015.Atthesametime,inCanadathefiguredeclinedby23to85rigs.

• OPECcrudeproductionjumpedinMaytotherecordlevelof32,08mlnbpdsincethebeginningoftheyear,IESreports.OilproductionofOPECmemberstatesincreasedby290,000bpdcomparedwithApril2017.TheincreasehasbeenduetoincreasedproductioninLibyaandNigeria.Atthesametime,oilproductionofnon-cartelstatesdecreasedby65,000bpdascomparedwiththesameperiodof2016.

• Globaloilsupplyroseby585,000bpdinMayto96.7mlnbpdasbothOPECandnon-OPECcountriesproducedmore,accordingtotheEIA.Totaloutputstood1.25mlnbpdaboveayearago,thehighestannualincreasesinceFebruary2016.

•“QatargasexpectstoworkmorecloselywithShellintheyearstocome.“ThisdealprovidesQatargaswithaccesstoShell’sgassalesportfoliointheUnitedKingdomandcontinentalEurope,aswellastheflexibilitytomanageLNGdeliveriestoourglobalclientportfolio,”KhalidBinKhalifaAl-Thani,ChiefExecutiveOfficer,Qatargas,added.TheagreementwillcomeintoforcefromJanuary2019,LNGwillbesuppliedbyQatarLiquefiedGasCompany4–JVofShell(30%)andQatarPetroleum(70%).

• OPEChasretainedtheworldoildemandforecastforthisyearat96.38mlnbpdin2017,accordingtotheorganisationmonthlyreport.TotalOECDcommercialoilstocksfellinApriltostandat3,005blnbarrels.Atthislevel,OECDcommercialoilstockswere251blnbarrelsabovethelatestfive-yearaverage.Crudeandproductsstocksstoodatasurplusabovetheseasonalnormofaround171blnbarrelsand80blnbarrels,respectively.Intermsofdaysofforwardcover,OECDcommercialstocksstoodat64.1days,some4.1dayshigherthanthelatestfive-yearaverage.

• PresidentTrumpannouncedthattheUnitedStateswouldwithdrawfromtheParisclimateAccord.“(Thisdecisionwasmade–INTERFAX)tobeginnegotiationstore-entereithertheParisAccordorareallyentirelynewtransactionontermsthatarefairtotheUnitedStates,itsbusinesses,itsworkers,itspeople,itstaxpayers.Sowe’regettingout.Butwewillstarttonegotiate,andwewillseeifwecanmakeadealthat’sfair,”statedD.Trump.AccordingtoD.Trump

“CompliancewiththetermsoftheParisAccordandtheonerousenergyrestrictionsithasplacedontheUnitedStatescouldcostAmericaasmuchas2.7mlnlostjobsby2025accordingtotheNationalEconomicResearchAssociates.”

• USChevronCorp.facednewproblemsinimplementationoftheAustralianGorgonLNGprojectworthofUSD54bln.ChevronCorp.’sGorgonliquefiednaturalgasplantshutaproductiontrainforaboutamonth,atleasttheeighthoutagesinceoperationsstarted14monthsago.Othertwoproductiontrainsareoperatingnormally.“TheissuewithTrain1isbecausetheyhavehadthesefrequentinterruptionsitcreatessomeuncertaintyforAsiaPacificLNGmarkets,”saidWoodMackenzieLtd.’sAustraliaanalystSaulKavonic.

“Particularlyifitcanbeshutoffatshortnotice-thatcanresultinlesscargoesonthemarket,whichcombinedwithotherfactorscouldhaveanimpactonspotpricingintheshortterm.”

NewsFlash / 3 / June 2017

Kazakhstan news in brief

• TheInternationalMonetaryFund(IMF)expectsKazakhstan’sGDPgrowthtobe4%in2018,DeputyChairmanoftheNationalBankGalimzhanPirmatovhassaid.“WemakefourroundsofforecastsattheNationalBank[throughouttheyear].ThisyearthefirstwasdoneinFebruary,nowwearecompletingthesecondroundandwehopethatbyJulywewillpublishitsresults.Ourforecastsshow2.2%forthisyearand4.7%fornextyear,theIMFhas[forecasts]-2.5%forthisyearand4%fornextyear,”PirmatovsaidduringtheIMFpresentation

“ProspectsfortheDevelopmentoftheRegionalEconomy”inAlmaty.

• TheAtyraurefineryputintooperationa20MWpowergeneratorforthefluidcatalyticcrackingunitatitsdeepconversioncomplex,thecompanysaysinapressrelease.“ConstructionofadeepconversionunitisthefinalstageoftheAtyraurefinerymodernisationproject.Aftertheprojectiscomplete,theprocessingcapacityoftherefinerywillincreaseto5.5mlntonnesofcrudeoilayearfromtoday’s5mlntonnes.Theoutputofgasolinewillincreaseto1.745mlntonnesyear,dieselto1.640mlntonnesandaviationkeroseneto244,000tonnes.TheAtyraurefinerywillstartproducingK4andK5diesel,whichisequivalenttotheEuropeanstandardsofEuro-4andEuro-5,theutilisationratewillreach85%,”thepressreleasesays.

• Todate,Kashaganhasproducedover2mlntonnesofoilandover1blncubicmetersofgas,KazMunayGasCEOSauatMynbayevhassaid.“Inthenearfuture,twogasinjectioncompressorsaretobelaunchedattheoilfieldinordertoincreasethevolumeofdailyoilproduction.Ifitscurrentrateis180,000bpd,thenbytheendoftheyearthisfigurewillincreaseto370,000barrels,”Mynbayevsaidinhisarticleentitled“Fromoptimisationtoenhancingefficiencyandtransparency”publishedinthenewspaperKazakhstanskayaPravda.

• TheEuropeanBankforReconstructionandDevelopment(EBRD)expectstheeconomyofKazakhstantoexpandby3.5%in2018,thebankssaysinapressrelease.EBRDaffirmeditspreviousforecastforKazakhstan’seconomygrowthin2017at2.4%,accordingtothepressrelease.

• InJanuary-May2017,Kazakhstanproduced29.862mlntonnesofcrudeoiland5.595mlntonnesofgascondensate,up7.9%and18.9%respectivelycomparedtothesameperiodlastyear,theStatisticsCommitteeoftheNationalEconomyMinistrysaid.Kazakhstanproduced9.672blncubicmetersofnaturalgasinagaseousform,up17.3%year-on-year.Associatedpetroleumgasoutputincreased15.1%to12.239bcm.

• Aksai-basedCondensateJSC,WesternKazakhstan,commissionedavacuumdistillationunit(VDU)andproducedfirstoiltarandvacuumgasoil,company’sgeneraldirectorEduardDzhunusovtoldInterfax-Kazakhstan.“TheconstructionoftheVDUplus16kmofpipelinesandseventankswiththetotalcapacityof4,000cmlastedaboutayear,”Dzhunusovsaid.TheVDUcapacityis250,000tonnesofproductsperyear.“Theunithasalreadyproduced1,000tonnesofoiltarandabout2,500tonnesofvacuumgasoil.WeplangasoilexportstotherefineriesofKazakhstan,Russiaandothercountries.ThefirstexportsupplyofgasoilisonitswaytoFinland,”Dzhunusovsaid.

• Kazakhstan’sEnergyMinistry,theGeologyandSubsoilUseCommitteeofKazakhstan’sMinistryforInvestmentandDevelopmentandagroupofinternationalcompanies–interestedparticipantsintheinternationalprojectEurasia,includingKMG-EurasiaLLP,AgipCaspianSeaBV,RNExplorationLLC,CNPCInternationalLtd.,SOCAR,NEOSGeosolutions,signedamemorandumofunderstandingwiththeaimofconcludingacontractforgeologicalexplorationoftheCaspianDepressioninaccordancewiththeKazakhlegislation,thepressofficeoftheEnergyMinistrysaidon21June.“TakingintoaccountthefactthatpartoftheCaspianDepressionislocatedontheterritoryoftheRussianFederation,theauthorizedbodiesofKazakhstanandRussiahaveexpressedtheirintentiontoexchangegeologicalandgeophysicalinformationandcoordinatetheiractivitiesintermsofunifyingthemethodologyforconductingtheCaspianDepressionstudy,”theEnergyMinistrysaid.

• Kazakhstan’sGDPgrew4.1%inJanuary-May2017,MinisterofNationalEconomyTimurSuleimenovsaid.

NewsFlash / 4 / June 2017

TAXATION

Customs Code of the Eurasian Economical Union

Themember-statesoftheEurasianEconomicUnion(hereinafter–the“EEU”)signedanagreementonthenewCustomsCodeoftheEEU.ThenewCustomsCodeoftheEEUwillreplacethecurrentCustomsCodeoftheCustomsUnionandinternationalagreementsoncustomsregulationissuesconcludedearlier.ThenewCustomsCodewillcomeintoforceaftertheEurasianEconomicCommissionreceivesnotificationsonratificationoftheagreementfromthefivemember-states,butnotearlierthan1July2017.

Excise Taxes on Diesel Fuel

Agovernmentalresolutionintroducedchangestotheapplicationperiodsoftheexcisetaxratesondieselfuel.Previously,theloweredexcisetaxratesondieselfuelappliedfromNovembertoMarch.Accordingtotheamendments,thereducedexcisetaxratesondieselfuelapplyfromNovembertoMay.Therateswillstaythesame.Theamendmentscameintoforceon1April2017.

Electronic VAT Invoices

An order of the Minister of Finance approved new rules for circulation of electronic VAT invoices. The main changes include:

• AnoptiontoregisteraVATinvoiceissuedearlierinpaperformatintheelectronicVATinformationsystembyindicatingthedateofthepaperVATinvoicethatisearlierthanthedateofuploadingtheinvoicetotheelectronicsystem;

• AnoptiontoissueanelectronicVATinvoicebyanattorney(operator)onbehalfoftheprincipaloronbehalfofparticipantstoajointactivity;

• Indicationofeachparticipant’sshareinajointactivity;

• Introductionofgeneralclassifiersforthetermsofdeliveryanddeparture,countryofdestinationofgoods/services;

• Anoptiontoindicatethatadealismade“withoutacontract;”

• Arequirementtoindicatethegoodslinenumberinthecustomsdeclarationnotonlyforgoodsimportedfromthirdcountries,butalsoforgoodsimportedfromtheEEU(goodslinenumberintheStatementonImport).

The new rules will come into effect on 1 October 2017. As the new rules enter into force, the current rules adopted in 2015 will ceased to be valid.

In-Kind Fulfilment of Tax Liabilities

A governmental resolution approved rules for the execution of tax liabilities via payment of taxes in-kind. The rules establish a procedure for the determination of the volume and value of minerals, and procedure for realisation of minerals supplied by subsoil users to execute the tax liabilities related to:

• mineral extraction tax;

• rental tax on exports of crude oil and gas condensate;

• royalty;

• share of the Republic of Kazakhstan under a production sharing agreement.

The resolution came into force on 6 March 2017 and extends to relationships arising from 1 January 2016. The previous rules are recognized as null and void.

NewsFlash / 5 / June 2017

Top 10 Oil Reserves Countries (bln barrel)

Source:http://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-full-report.pdf

Top 10 oil producing countries, 2016 Top 10 Oil consuming countries, 2016

Distribution of proved reserves in 1996, 2006 and 2016 (%)

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