Vitaly Yermakov

Senior Research Fellow

Vitaly Yermakov joined OIES in April 2019.  He has over 20 years of oil and gas industry experience.  Prior to joining OIES Vitaly worked as Head of Centre for Energy Policy Research at Higher School of Economics, Moscow, Commodity Strategist for Sberbank CIB, Visiting Researcher at KAPSARC, Saudi Arabia, Director of Research at Cambridge Energy Research Associates (CERA) and IHS CERA. Before that he was a manager at TNK-BP, an oil company.

Vitaly’s recent publications include papers for Oxford Institute of Energy Studies on the issues of spare gas productive capacity, gas demand flexibility, and gas taxation in Russia. He also published a paper for KAPSARC, Saudi Arabia on price competitiveness of US LNG and Russian pipeline gas in Europe.  Mr. Yermakov is also the author of over 50 CERA and IHS CERA analytical private reports, including analysis of gas demand issues and gas price regulation in Russia and Ukraine, analysis of tax changes for Russian oil and gas industries, regulatory reform in the Russian energy sector and comparative analysis of oil and gas transportation tariffs in Russia and North America.  He also led numerous consulting projects for the CERA and IHS CERA clients, including Russian tax reform for the oil sector, developing gas strategy and developing strategy of marketing LPG for major Russian companies, analysing gas transportation in Russia for a major Western company.

Vitaly has been lecturing for Energy Delta Institute’s executive MBA program on a wide range of topics, including natural gas and LNG developments and pricing, China’s gas demand, and Russian gas developments.  He is a frequent speaker at major industry conferences in Russia and abroad.  Mr. Yermakov holds a master’s degree from Duke University and a PhD from Samara State University.

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                    [post_date] => 2020-09-30 11:42:26
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                    [post_content] => 2020 has been a tough year for Russian gas as it introduced a 'live experiment', testing the pain threshold levels of both Gazprom and other suppliers of gas to Europe under weak demand and rock-bottom prices.  This paper reviews the impact of the crisis on exports of Russian pipeline gas to Europe in 2020 and assesses the economics of these supplies under the wide price range that we have seen occurring in the past months.

The obvious stresses of 2020 have put Gazprom on the defensive. It has given up its market share in Europe to LNG suppliers, primarily from the US, during the first half of 2020.  This picture, however, is somewhat misleading as it exaggerates a situation that was relatively short-term and unsustainable under lower prices. As a harbinger of things to come in the second half of 2020, deliveries of LNG to European regasification terminals declined sharply over the summer owing to shut-ins at US LNG facilities and a return of LNG demand in Asia. Despite the heavy toll from extremely low gas prices this year, Gazprom has evidently adopted a strategy of gradual adaptation to a loose market in Europe and hopes to last longer than most of its competitors. This strategy worked in the past and is likely to work in the near-term.

From the longer-term perspective, however, the policy narratives of rapid energy transition towards a decarbonized future are taking centre-stage in Europe, with potential negative implications for Russia-Europe gas trade. Russia and Europe are quickly drifting apart under the pressures of global rivalries and different visions of the energy future. The best-case scenario in these circumstances is to avoid a disruptive and abrupt halt to Russia-Europe gas trade and hope that common sense prevails.
                    [post_title] => Russian Gas: the year of living dangerously
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                    [post_content] => Growing gas demand, stagnant/declining indigenous supply, the expiration of Gazprom's long-term transit contract on 17 May 2020 and the approaching end of the long-term gas import contract with Russia in 2022, along with a planned switch to alternative deliveries of LNG and Norwegian pipeline gas, are creating multiple challenges for Polish energy decision-makers. An important chapter in the history of Polish gas is coming to an end and a new era is beginning. This Insight discusses the evolution of the Russia-Poland gas relationship, identifies the problems that have emerged, and assesses the opportunities and the risks for both sides stemming from the end of the long-term transit and supply contracts. The Insight also examines how new Russian pipelines and the changes in flows of Russian gas to Europe are likely to impact the transit of Russian gas via Poland and what this means for Poland’s energy security.
                    [post_title] => Russia-Poland gas relationship: risks and uncertainties of the ever after
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                    [post_content] => Russia and Saudi Arabia have approved a production cut of 2.5 mb/d each from an agreed level of 11mb/d. However, there is some uncertainty about what this means exactly for Russia. Recent production of total liquids has been 11.3 mb/d, implying that the cut could actually be 2.8mb/d. However, this includes a significant amount of gas condensate, which was specifically excluded from Russian quotas in an agreement with OPEC in December 2019. Russia’s recent crude oil production has been around 10.5 mb/d, meaning that the reduction could be only 2mb/d if it applies to crude oil only.

The agreement is something of a surprise given previous Russian arguments for a more considered response to the current collapse in demand caused by the Covid-19 epidemic. However, it may well reflect three facts: firstly, that a production cut may have been inevitable as soon as oil storage reached its limit, secondly that responsible action was required to alleviate a global crisis and thirdly that political gains may also be anticipated given the involvement of the US and G20. In addition, the cut may be easier to implement now that we are approaching the summer months when operating (and shutting in) West Siberian wells becomes easier.

In addition, it is clear that the Kremlin and Russian oil companies have been surprised by the rapidity and depth of the recent oil price fall, which may have been another catalyst for the latest agreement. Nevertheless, it would appear that if low oil prices are here for an extended period then Russia can survive the crisis thanks to the flexible exchange rate, large financial reserves, low levels of debt and a low cost of oil production. As such, although Russia may have taken a tactical decision to cut oil production in the short-term for both oil market and geo-political reasons, its long-term strategy of attempting to enhance its competitive position as a robust low cost producer is likely to remain intact.
                    [post_title] => The New Deal for Oil Markets: implications for Russia's short-term tactics and long-term strategy
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                    [post_content] => In our previous Insight, The Russia-Ukraine gas transit deal: opening a new chapter, we examined how the recent Russia-Ukraine gas transit agreement was reached, and analysed the terms of the deal. This follow-up Insight analyses broader question of Russian gas transit to Europe, and the impact of the Russia-Ukraine deal on other routes that bring Russian gas to Europe. This includes longstanding routes, and two new pipeline projects, TurkStream and Nord Stream 2.  It also examines the impact of the deal on the Ukrainian gas market, and the likely short-term price effects in the European market. In doing so, this Insight analyses the broader context surrounding the Russia-Ukraine gas transit agreement.
                    [post_title] => Implications of the Russia-Ukraine gas transit deal for alternative pipeline routes and the Ukrainian and European markets
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                    [post_content] => The successful launch of Novatek’s Yamal LNG project has brought Russia’s plans to develop its LNG industry into the spotlight, and this paper by James Henderson and Vitaly Yermakov examines the prospects for the next decade and more. The Russian government has laid out some aggressive expansion plans, with both commercial and geo-political consequences, and Novatek seems to have taken on the role of “Russia’s LNG champion” as the country seeks to become one of the top four global exporters by 2030. Gazprom and Rosneft also have important plans, and this paper analyses how LNG is now becoming a core part of Russian export strategy as well as a significant catalyst of domestic economic and industrial growth.
                    [post_title] => Russian LNG: Becoming a Global Force
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                    [post_content] => The contamination of the Druzhba pipeline with organic chlorides became the most serious interruption of oil supplies in the 55-year history of oil trade on this key route. This is a follow-up to the OIES Comment published in May 2019 that provided a background to the incident and discussed some of the potential implications of the contamination of the Druzhba pipeline. This comment argues that while the worst of the crisis is over, it is by no means the end of the story. There is little doubt that in the aftermath of the incident European refineries and policy makers will focus on security of supply issues, including options to diversify away from Russian crude. The issue of compensation for the oil contamination in the Druzhba system may become highly contentious. Any changes to Russia’s domestic oil pipeline regulation along the lines of greater control and more checks may increase costs for Russian oil producers.
                    [post_title] => The Druzhba Pipeline Crisis - The Lessons for Russia and for Europe
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The contamination of the Druzhba pipeline with organic chlorides became the most serious interruption of oil supplies in the 55-year history of oil trade on this key route. While it appears to be a one-off event that has not brought about loss of life or affected the environment, the scale of the incident is such that it has had a profound impact on the whole value chain, from production facilities in Russia to refineries in Central Europe. This comment discusses the potential short-term and long-term implications of this key incident.

[post_title] => The Domino Effect: contaminated oil in the Druzhba oil pipeline - implications of the incident for Russia and Europe [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => domino-effect-contaminated-oil-druzhba-oil-pipeline-implications-incident-russia-europe [to_ping] => [pinged] => [post_modified] => 2019-05-07 11:41:12 [post_modified_gmt] => 2019-05-07 10:41:12 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31545 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [7] => WP_Post Object ( [ID] => 31519 [post_author] => 111 [post_date] => 2019-04-15 10:23:34 [post_date_gmt] => 2019-04-15 09:23:34 [post_content] => The Russian refining system still has a significant legacy from its Soviet past, when refineries were located in relatively remote regions to serve the military and industrial complex and output of fuel oil was encouraged to supply heavy industry. However, this focus on the lower end of the barrel left a significant need for upgrading as Russia entered the post-Soviet era and demand for lighter products increased. The government has tried to provide a series of incentives to encourage Russia’s major oil companies to invest in upgrading. Differentiated tax rates, adjust of export tariffs, re-alignment of upstream and downstream taxes and even a command by the then Prime Minister Vladimir Putin that the industry must act to improve its performance have produced some results, particularly since 2015. Since then fuel oil output has declined rapidly, but with demand also falling Russia continues to produce a surplus. Plans for further additions of more complex refining units have been made, thanks to yet more tax incentives, but it would still appear that not all the players will respond as the government hopes. A number of small players may continue to focus on the simpler and less expensive processes, and companies that are the subject of international sanctions have also been given an effective dispensation to slow their upgrading efforts. Many independent refineries are likely to continue using the tactics of selling surrogate refined products without paying excise taxes, to remain afloat. Lower margins for those refineries that are part of Russian vertically integrated companies are likely to be cross-subsidized by profitable upstream operations. Also, the adjustment could take longer than expected due to the social risks of shutting down inefficient facilities.  As a result, it would seem that the planned decline in Russian fuel oil output will be at the slow end of the planned range. This is a concern because the global market for fuel oil is set to be further constrained by the introduction of tighter IMO rules on the use of high sulphur fuel oil in the maritime sector from 2020. As shipping companies are forced to use more environmentally friendly fuel and reduce emission, Russian refiners which produce excess fuel oil could find their margins significantly squeezed. [post_title] => Russia's heavy fuel oil exports: challenges and changing rules at home and abroad [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => russias-heavy-fuel-oil-exports-challenges-changing-rules-home-abroad [to_ping] => [pinged] => [post_modified] => 2019-04-15 10:30:39 [post_modified_gmt] => 2019-04-15 09:30:39 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31519 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [8] => WP_Post Object ( [ID] => 31443 [post_author] => 111 [post_date] => 2019-02-25 11:16:38 [post_date_gmt] => 2019-02-25 11:16:38 [post_content] => The question of flexibility is always important for the gas industry because of the seasonal nature of gas demand. In the past few years the role of flexible Russian gas in meeting Europe’s growing call on gas has been indispensable. This paper looks at how Russia meets its own flexibility requirements in the domestic market and whether peak domestic demand for gas in Russia can introduce constraints on seasonal export flow flexibility. It proceeds with analysis of the roles of seasonal production swings and gas withdrawals from storage in Russia and in Europe in covering seasonal demand peaks. [post_title] => It Don’t Mean a Thing, If It Ain’t Got That Swing: Why Gas Flexibility Is High on the Agenda for Russia and Europe [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => dont-mean-thing-aint-got-swing-gas-flexibility-high-agenda-russia-europe [to_ping] => [pinged] => [post_modified] => 2019-02-25 11:16:38 [post_modified_gmt] => 2019-02-25 11:16:38 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31443 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [9] => WP_Post Object ( [ID] => 31312 [post_author] => 111 [post_date] => 2018-12-17 09:30:16 [post_date_gmt] => 2018-12-17 09:30:16 [post_content] => The concept that Russia has a huge amount of spare gas production capacity has been a key theme for the European gas market since 2012, when Gazprom's long-anticipated launch of the Bovanenkovo field on the Yamal peninsula coincided with a fall in demand for its gas at home and abroad.  The result was that Russia had at maximum around 200bcm of spare capacity on an annual basis, providing it with huge supply flexibility and a large source of gas available at low short-run marginal cost. However, since 2016 the situation has started to change on the demand side. The rapidly increasing call on Gazprom’s gas in Europe in 2017-18, along with some recovery in Russia’s domestic gas consumption, have increased demand for Gazprom's gas.  The supply side responded, but the ramp-up of production at Russia’s new gas fields to planned levels and higher output at balancing fields in response to higher demand have reduced the cushion of spare productive capacity.  At the same time, the natural decline of production at older gas fields has been taking its toll, so that by the end of 2018 worries about the availability of Russian gas for meeting peak demand on a seasonal basis have returned. This paper outlines the key dynamics that are changing the balance and assesses the future risks.

 

[post_title] => Shrinking surplus - the outlook for Russia's spare gas productive capacity [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => shrinking-surplus-outlook-russias-spare-gas-productive-capacity [to_ping] => [pinged] => [post_modified] => 2018-12-14 13:18:12 [post_modified_gmt] => 2018-12-14 13:18:12 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31312 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [10] => WP_Post Object ( [ID] => 30708 [post_author] => 111 [post_date] => 2017-10-31 11:46:14 [post_date_gmt] => 2017-10-31 11:46:14 [post_content] => In a world of low commodity prices the potential for conflict between hydrocarbon producers and governments over tax revenues is exacerbated. In Russia this is even more true because the state relies so heavily on taxes from the oil and gas sectors and because producers are increasingly having to invest in new more remote assets rather than rely on declining Soviet-era low-cost fields. In the gas sector the state has attempted to address this issue by offering a differentiated royalty system that allows discounted rates for new investment, but because of the oversupply of gas in Russia this has led to some unforeseen consequences. Gazprom, as the largest producer, has prioritised production from new more expensive fields with a lower tax burden rather than exploit some of its lower cost existing assets, with the result that government revenues have not been maximised and Russia’s competitive position in global market has not been optimised. This paper explores the implications of this outcome and discusses potential changes in policy which could alleviate the problems. [post_title] => Gas and Taxes: The Impact of Russia's Tinkering with Upstream Gas Taxes on State Revenues and Decline Rates of Legacy Gas Fields [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => gas-taxes-impact-russias-tinkering-upstream-gas-taxes-state-revenues-decline-rates-legacy-gas-fields [to_ping] => [pinged] => [post_modified] => 2017-11-21 11:14:27 [post_modified_gmt] => 2017-11-21 11:14:27 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=30708 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 11 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 41428 [post_author] => 111 [post_date] => 2020-09-30 11:42:26 [post_date_gmt] => 2020-09-30 10:42:26 [post_content] => 2020 has been a tough year for Russian gas as it introduced a 'live experiment', testing the pain threshold levels of both Gazprom and other suppliers of gas to Europe under weak demand and rock-bottom prices.  This paper reviews the impact of the crisis on exports of Russian pipeline gas to Europe in 2020 and assesses the economics of these supplies under the wide price range that we have seen occurring in the past months. The obvious stresses of 2020 have put Gazprom on the defensive. It has given up its market share in Europe to LNG suppliers, primarily from the US, during the first half of 2020.  This picture, however, is somewhat misleading as it exaggerates a situation that was relatively short-term and unsustainable under lower prices. As a harbinger of things to come in the second half of 2020, deliveries of LNG to European regasification terminals declined sharply over the summer owing to shut-ins at US LNG facilities and a return of LNG demand in Asia. Despite the heavy toll from extremely low gas prices this year, Gazprom has evidently adopted a strategy of gradual adaptation to a loose market in Europe and hopes to last longer than most of its competitors. This strategy worked in the past and is likely to work in the near-term. From the longer-term perspective, however, the policy narratives of rapid energy transition towards a decarbonized future are taking centre-stage in Europe, with potential negative implications for Russia-Europe gas trade. Russia and Europe are quickly drifting apart under the pressures of global rivalries and different visions of the energy future. The best-case scenario in these circumstances is to avoid a disruptive and abrupt halt to Russia-Europe gas trade and hope that common sense prevails. [post_title] => Russian Gas: the year of living dangerously [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => russian-gas-the-year-of-living-dangerously [to_ping] => [pinged] => [post_modified] => 2020-10-01 10:45:11 [post_modified_gmt] => 2020-10-01 09:45:11 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=41428 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 11 [max_num_pages] => 0 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => 1 [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => [is_privacy_policy] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_favicon] => [is_posts_page] => [is_post_type_archive] => 1 [query_vars_hash:WP_Query:private] => e6094fd0398b17a515303b2f5b1a6a38 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) )

Latest Publications by Vitaly Yermakov