Forecasting of Russian economy Energy sector modelInstitute of Economic Forecasting. IEF RAS. 11. Forecast of petroleum refining. Current and expected structure of Russian petroleum

© Institute of Economic ForecastingIEF RAS

© Institute of Economic ForecastingAlexandria

September, 2014IEF RAS

Forecasting of Russian economy

Energy sector model


2

Energy sector of Russian economy• Produces 14,2% of GDP• Forms 66,5% of Russian exports (33% -

oil,12,8% – natural gas, 20,7%-petroleum products)

• Makes 25,8% of total investments• Provides 27,4% of government budget income• Provides 4,5% of employment• Has a high multiplier effect (1.65 on gross

output, 1.05 on GDP,0.57 on budget income)

Energy Sector in Russian Economy

© Institute of Economic ForecastingIEF RAS 3

Russian Economy Model

World economy growth scenarioRussian economy model

Foreign trade submodel

Input-output table

Input-Output models (CONTO, RIM)

Energy balance

Region 2Region 1

Region 1 Region 2 Region N

Oil sector model

Models of regional economy

Model of petroleum products demand

Investment and capital

funds

Governmentalbudget

Region N

Population incomes and

expenses


4

Model of oil sector

Domestic demand for

petroleum

OIL EXTRACTION

PETROLEUMREFINING

Structure of oil processingand directions of shipments

Taxation parameters :Levels of mineral

extraction taxand export duties

Forecast of Russian economy growth

The required level of budget expenditures


5

Model of oil sector

OIL EXTRACTION

PETROLEUM REFINING

Oil exports

Domestic oil consumption

Depletion of reserves

Capital intensity

Tax PaymentsTax Rates

Input of new wells

Structureof reserves

World OilPrices

Domestic oil Prices Revenues

Investment

Profits

Operational costs


6

Forecast of capital intensity in oil sector

The methodolody of Capital intensity curve composition

Capital intensity estimation in 2007 and 2014,in $(2007)/tonn

More rapid growth of oil extraction led to faster increase in capital intensity.On the other side low rate of implementation of the new technologies has ledto an additional increase in capital expenditures for the development

of the most complex, in particular offshore, oil fields

20

30

40

50

60

70

80

90

100

0 10 20 30

Capital Intensity(2007)$/tn

Capital Intensity(2014) $/tn


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Investment in oil sector (RIM Model)

r capinv2 = credloanjur2/def, brent*rateusdm,prof_2Variable name Reg-Coef Mexval Elas NorRes Mean Beta

0 capinv2 - - - - - - - - - - - - - - - - - 744.19 - - -1 intercept 230.26458 64.5 0.31 16.12 1.002 credloanjur2/def -213.44379 44.1 -0.10 12.14 0.35 -0.5323 brent*rateusdm 0.22211 50.7 0.49 1.74 1639.73 0.6504 prof_2 0.46230 32.0 0.30 1.00 483.78 0.714

Investment in oil sectordepends more on currentfinancial results (rouble cost ofoil barrel and gross profits),rather than on the accumulatedsize of credit debt


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Structure of oil extraction

Total amount of oil extraction is divided into following categories: output of theold wells, output from production support, output of the new wells on old fieldsand new wells on new field.About half of all extracted oil in 2030 will be produced on the new fields (put inoperation after year 2014)

Oil extraction depends onsupport of production onthe old, already developedfields and input inoperation of the new fields.

0

100

200

300

400

500

600

2014 2016 2018 2020 2022 2024 2026 2028 2030

Old wells on old fields Production supportNew wells on old fields New wells on new fields


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Model of petroleum refining

Domesticdemand

PETROLEUM REFINING

Revenues

Investments

Tax Rates (export duties andexcises on petroleum)

Productioncapacities

Profits

Ratio between light and heavy

petroleum

Operational costs

Domestic oil prices

Export duty on crude oilWorld oil prices

Yield Ratio between export of oil andexport of light petroleum

Export of crude oil

Domesticprices

Export of petroleum


Domesticdemand forpetroleum

Required amountof oil for refining Oil extractionOil surplus

Export of oil Export of heavy petroleum

Export of light petroleum

Export of gasoline Export of diesel

IncMazutShareLightIncLightShareLightincEff *)1(*_ −+= IncMazutShareLightIncLightShareLightincEff *)1(*_ −+=

Yield ratio

Production ratio betweenlight and heavy petroleum

Tax Rates

Oil distribution

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Forecast of petroleum refining

Current and expected structure of Russian petroleum refining

Currently, heavy petroleum products form about 70% of petroleum export. Due to increasing the depthof oil refining in 2030 production of heavy petroleum will decline. This will create a choice betweenexport of crude oil and export light petroleum products

Exp

ort

Dom

estic

co

nsum

ptio

n

Dom

estic

co

nsum

ptio

n

Exp

ort

Export of crude oil

Export of light petroleum

Tax rates


Populationincome index

Retail trade turnover index

Index of production in mining

Index of construction

Number of passenger

cars

HOUSEHOLDS DEMAND

BUSINESSDEMANDNumber of trucks and freight cars

DEMAND OF QUARRY VEHICLES

AGRICULTURE DEMAND

Industrial Production Index

Agricultural production index

The main results of model calculations isthe forecast of different consumersdemand for gasoline and diesel fuel.Model provides forecast for RussianFederation as well as for FederalDistricts and particular regions

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Demand for petroleum

Decomposition of the demand for petroleum


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Oil extraction in 2030, mln tonn 420 -20% 525 0% 630 20%

2030/2013

Average growth rates

2030/2013


2030/2013


Gross output 150% 2,4% 157% 2,7% 164% 3,0%

Manufacture 139% 2,0% 149% 2,4% 158% 2,7%

Construction 178% 3,5% 185% 3,7% 192% 3,9%

Transport 195% 4,0% 202% 4,2% 209% 4,4%

Services 227% 4,9% 237% 5,2% 247% 5,5%

GDP 164% 2,9% 173% 3,3% 181% 3,5%

Household consumption 179% 3,5% 187% 3,8% 196% 4,0%

Government expenditures 116% 0,9% 119% 1,0% 121% 1,1%

Investment 187% 3,8% 198% 4,1% 208% 4,4%

Exports 141% 2,0% 152% 2,5% 161% 2,8%

Imports 156% 2,6% 162% 2,9% 168% 3,1%

Influence of oil sector on Russian economy


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Oil extraction in 2030, mln tonn 420 -20% 472,5 -10% 630 20%

2030 к 2013


2030 к 2013


2030 к 2013


Gross output -7,5% -0,3% -3,8% -0,1% 7,0% 0,3%

Manufacture -10,0% -0,4% -5,1% -0,2% 8,8% 0,3%

Construction -6,9% -0,2% -3,5% -0,1% 6,8% 0,2%

Transport -7,3% -0,2% -3,7% -0,1% 7,1% 0,2%

Services -10,0% -0,3% -5,0% -0,1% 10,3% 0,3%

GDP -9,0% -0,3% -4,6% -0,2% 8,2% 0,3%

Household consumption -8,1% -0,3% -4,1% -0,1% 8,4% 0,3%

Government expenditures -3,0% -0,2% -1,5% -0,1% 2,6% 0,1%

Investment -10,2% -0,3% -5,2% -0,2% 10,1% 0,3%

Exports -11,1% -0,5% -5,7% -0,2% 8,7% 0,3%

Imports -6,1% -0,2% -3,1% -0,1% 6,3% 0,2%

Influence of oil sector on Russian economy


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Tax maneuver in oil sector

Tax maneuver consists of:Increase of mineral extraction tax by 1.6 timesReduction of export duties on oil from 60% to 30%, gasoline from 90% to 30%, diesel from 65% to 30%50% reduction of excises on light petroleum

Tax maneuver may result in:Growth of domestic prices on petroleum up to 10% Increase of CPI by 0,5 percentage pointPossible decline of GDP growth rates in 2015-2016 by 0,2 percentage pointSignificant degrease in amount of petroleum refining in favor of crude oil exportsImprovement of petroleum refining structure due to disposal facilities with a high proportion of heavy petroleum products

500

510

520

530

540

550

560

2015 2016 2017 2018 2019

base scenario tax maneuver

Oil extraction, mln. tonn


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Tax maneuver in conditions of high oil prices(120$/br)

Cash flow distribution, bln $ Oil export, mln. tonn

Petroleum refining, mln. tonn

10.2 12.0 14.3 17.2 19.81.1

7.8

17.018.5 18.5

-10.1-16.5

-25.3 -26.7 -28.0

-50

-40

-30

-20

-10

0

10

20

30

40

50

2015 2016 2017 2018 2019

Operational costsEffect of investmentBelarus expensesPopulation expensesOil companies incomeGovernment budget income

220

240

260

280

300

2015 2016 2017 2018 2019base scenario tax maneuver

220

240

260

280



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Tax maneuver in conditions of high oil prices(80$/br)

Cash flow distribution, bln $ Oil export, mln. tonn

Petroleum refining, mln. tonn

6.4 6.4 7.7 9.2 10.7

-1.8

1.0

7.28.0 8.8

-3.9-5.5

-11.6 -12.4 -13.3

-25

-20

-15

-10

-5

0

5

10

15

20

25

2015 2016 2017 2018 2019

Operational costsEffect of investmentBelarus expensesPopulation expensesOil companies incomeGovernment budget income

220

240

260

280

300


220

240

260

280



THANK YOU

FOR YOU ATTENTION

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© Institute of Economic ForecastingIEF RAS 19

Appendix: Model complex

Input –Outputmodel

Population’sincome & expenses

Cars and vehiclesEnergy balance

Chemistry and petrochemistry

Turnover of passengers &

goods

Domestic demand of petroleum

Tax rate (mineral extraction tax and export duties)

World prices

Price model

Capital intensity

Operational costs

The yield ratio between export of crude oil and petroleum

Petroleum refining

Profits

Investment

Oil Extraction

Crude oil export

Petroleum export

Production capacity

Tax revenues

Exchange rate

Domestic prices

Rev

enue

s

Documents

Forecasting of Russian economy Energy sector modelInstitute of Economic Forecasting. IEF RAS. 11. Forecast of petroleum refining. Current and expected structure of Russian petroleum