Tatarstan allows small oil companies to float freely
The oldest holding of small oil companies Nefteconsortium is closed down in the republic because of the cancellation of tax concessions
As Realnoe Vremya found out, Nefteconsortium holding with shares in the authorised capital of 12 small oil companies is closed down in Tatarstan. While Invest MNK company established instead won’t be the legal successor of its assets. So Tatarstan’s independent oil companies are set free. According to the republican president’s adviser in oil and gas and oil field development Renat Muslimov, the centralisation of management stops, while the new company will save only the technical coordination of projects. Tatneft that recently bought new parcels for 3,1 billion rubles isn’t going to engage small oil companies in their development.
Nefteconsortium dissolves itself
The cancellation of the preferential tax regime for depleted fields did the dirty on the Tatarstan oil industry. In a hunt for the development of difficult oil-rich areas, there is an excessive concentration of mineral users in the southeast of the republic: by different estimates, over 52 small oil companies have worked here. Due to this, according to Vygon Consulting, Tatarstan turned out to be one of the big regions in preferential oil production (about 17% of production across Russia). But with the stricter tax regime, some small Tatarstan oil companies started to close unprofitable oil wells.
The older Tatarstan holding Nefteconsortium founded during the rise of small oil companies in the republic 25 years ago didn’t withstand the fall either.
“This year Nefteconsortium will be completely closed down. Invest MNK PLC will operation instead,” Director General of the new company Marat Zagardinov confirmed for Realnoe Vremya.
He refused to share other details on the closure of the holding. According to SPARK-Interfax, Nefteconsortium shareholders voluntarily decided to close the company notifying about this as early as January 2021. However, few people believed in such an outcome because the Tatarstan “patriarch” of oil production remains one of the founders of 12 small oil companies. SPARK-Interfax reads that now the consortium owns 100% of Vella, 75% of Sheshmaoil, 50% of Ruslanoil, 49% of Nokratoil, 20% of Pioneer-2000, 15% of Mellyaneft, Troitskneft, Aloil, Akmay and 7,5% of Geotech, Yelabuganeft. It is considered that many of these companies are close to Shafat Takhautdinov’s family, a former Tatneft director general (small oil companies started to increase production volumes under his rule). In total, they produce about 50% of annual oil production of small oil companies (7,3 million tonnes in 2021).
Svyazinvestneftekhim runs away with Invest MNK
Nevertheless, the process of dissolution of the consortium is coming to an end. It became known last week that Svyazinvestneftekhim left Nefteconsortium and joined the capital of new Invest MNK. As the press service of the forward explained, it is purely a technical procedure as a result of which the public package of 25% of shares was handed over to the authorised capital of Invest MNK. At the same time, Svyazinvestneftekhim won’t provide financial support to small oil companies or issue loans, press secretary of the holding Elvira Sayfullina specified. In other words, the participation of the public holding in the new company will turn out nominal.
Despite the participation of Svyazinvestneftekhim, the new company doesn’t get the legal succession of 12 assets of Nefteconsortium, while the small oil companies themselves are set free, the republican president’s adviser in oil and gas and oil field development Renat Muslimov told Realnoe Vremya:
“Invest MNK won’t join the capitals of 12 small oil companies. But they will stick to the general management line without joining the companies’ capitals,” he said.
According to him, the first task was to “unite and follow a general policy on the field development and production,” so that “they don’t work scattered.” He says that oil production volume planning “stayed and will stay,” while “joining or not joining the capitals has never been the main task.”
So with the closure of Nefteconsortium, its shares in 12 small oil companies will be purchased by the rest of founders, while the state’s participation will be as small as possible. The small companies themselves refused to comment.
Small oil companies stay at old fields
Nowadays small oil companies of the republic work at oil depleted fields, noted the interlocutor of the newspaper. According to him, because of the cancellation of tax concession, the companies started to freeze unprofitable wells and there is a shortage of money to develop new areas. “It is senseless to take out loans because oil sale prospects aren’t clear. Plus, the tax manoeuvres seriously worsened the situation of small oil companies. Why should they make investments if there is no confidence in the future?” he explains.
Tatneft creates reserves in Zainsk and Nizhnekamsk
At the same time, Tatneft purchased two rich-oil areas: Makarovsky and Verkhnyaya Uratma paying 3,1 billion rubles for them. Both were bought at Rosnedr auctions. The areas are located in Zainsk and Nizhnekamsk districts where there has been no production yet. Oil reserves in the national register of mineral reserves in the area are 3216/889,000 tonnes in Category A as of 01.01.2021, its area is 31,6 square kilometres. Tatneft paid 1,7 billion rubles for it. For the second area, Tatneft paid 1,2 billion rubles. Its area and reserves are twice smaller. According to oil companies, Tatneft bought the areas for a price above the market. “Roughly speaking, it is $0,6 per barrel,” Realnoe Vremya’s interlocutor noted.
It was considered first that Tatneft could invite small oil companies to the development because the areas aren’t “the richest and oil-bearing.” However, the press service of the company rejected such a possibility.
“Tatneft also worked within Netfteconsortium in technical issues earlier. I don’t yet know how they are going to develop these fields. But it is crumbs for Tatneft,” noted Renat Muslimov.
According to him, oil production of small companies in 2022 will turn out 100-200,000 tonnes lower, while the plan for 2023 will be determined later. The expert thinks that it is necessary to develop the production in the east of the republic, but the will is slowed down by high geological exploration costs.
One in two fields of small oil companies is unprofitable without concessions
The cancellation of concessions on mineral tax and export duty affected 50 out of 94 fields that Tatarstan’s small oil companies develop.
“An economic study shows that the development will become unprofitable due to the cancellation of concessions for following companies: Tatnefteprom-Zyuzeyevneft (15 fields), Carbon-Oil (6), Yelabuga-Oil (1), Trans-Oil (1) and Nurlat Oil Company. The shutdown of unprofitable wells, reduction of drilling volumes, investments in cost-intensive events to increase the oil production of layers are inevitable in another 25 fields,” chief engineer of Nefteconsortium Oleg Vyshensky explained earlier.
Tatarstan oil companies lost about 30 billion rubles, Tatarstan President Rustam Minnikhanov said at a Gaidar Forum session last year: “Last year we lost about 30 billion because of the change, highly viscous oil was put in line with classic oil. In other words, we produce using a heating method but pay taxes as if we were producing in the classic way. We haven’t been heard. But it is our budget, we lost income tax,” he complained. As a result, oil companies of the republic lost an investment component too.