Russian business daily RBK reports that the Russian state parliament (Duma) passed a law regulating the development of gas extraction fields in the continental shelf, scheduled to enter into force on July 1, 2013. The law introduces property tax breaks for gas extraction facilities located within the Arctic sea continental shelf and removes the ban on transfer of ownership over respective artificial islands and facilities within the shelf.
The law contains amendments to the Continental Shelf Act that regulate the process of gas extraction and utilization of artificial islands, facilities and under-sea pipelines, as well as the process of drilling for probing and extraction purposes. Extraction licenses will contain a provision regulating the measures for oil spill containment in the frozen sea environment.
The law will enable the development of the gas extraction project in the Shtokman field (http://en.wikipedia.org/wiki/Shtokman_field, http://www.shtokman.ru/en/) and provide the federal budget with an estimated 937.7 billion rubles (USD 30.25 billion) in the next 25 years.
At the same time, business daily Vedomosti reports that the largest Russian gas extraction company Gazprom cut its capital investment forecast for 2013 by half, to 790 billion rubles (USD 25.5 billion). The company is expected to invest as much as 2.8 trillion rubles (USD 90.3 billion) in the period from 2013-2015, approximately 30 percent less than previously planned. Experts agree that Gazprom’s investment plan remains robust regardless of the cuts and could be expanded in the near future. Gazprom’s market capitalization with respect to closing on December 18 was 3.3 trillion rubles (USD 106.5 billion).
Gazprom’s Management Board is expected to examine the company’s investment plan for the period from 2013-2105 at its meeting tomorrow. The total planned investment program, including financial investments, should amount to 3.1 trillion rubles (USD 100 billion). Projected cuts are a consequence of reduced investment plans for the company’s flag projects, such as the Yamal peninsula oil field and the South Stream pipeline project – investments related to the latter project are delayed because of the paperwork required for laying the pipeline across the Black Sea. New projects include the development of a single extraction and transport system in Eastern Siberia and the Russian Far East to enable future exports to China and other Asian and Pacific Ocean regions.
Financial experts agree that the reduction of investment plans represents good news for investors, but the company usually increases its investment plans along the way. For instance, Gazprom planned to invest 777 billion rubles (USD 25 billion) in 2012, but will probably end up spending 975 billion rubles (USD 31.5 billion) on capital investments by the end of the year. Analysts are not convinced that the investments will yield adequate returns given rising domestic competition and price pressures in Europe, requiring the company to provision for retroactive discounts for European customers.
The company paid out a record-high 212.35 billion rubles (USD 6.85 billion) in dividends in 2011. Although the company will probably pay lower dividends in 2012, it is expected to continue its generous policy towards the shareholders, as the Russian Government expects government-owned companies to pay out at least a quarter of their net profits as dividends.