Sunday 10 May 2020

Transneft cargo turnover could fall by 10-13% in 2020

Russia's Joint Stock Company Transneft is a huge Russian state-owned transport monopoly. It is the largest oil pipeline company in the world. Pipeline transportation of crude oil is the important activity. Amazingly, JSC "Transneft" is operating over 70,000 kilometers of trunk pipelines. The main owner is Ministry of Energy (Russia) (78.6%). The number of employees in 2008 was 106,000. The company was founded in August 14, 1993.

Transneft, Russia’s huge oil pipeline monopoly, plans to direct half of its adjusted net profit under International Financial Reporting Standards (IFRS) into future dividends. This became known in April 2020. Transneft was certainly in talks with the government about making potential dividend payments on its 2019 profits in installments.

The worldwide Coronavirus Covid-19 Pandemic situation has caused the demand for oil to decrease. Many places are shutting down oil wells in response to what seems to be the Great Glut (an excessively abundant supply of something) of 2020. Many people are wondering how all these wells will be restarted once prices improve. Shutting down oil wells needs to be done with extreme care based on the characteristics of the formation into which the well is drilled, its rate of production, and the specifications of the oil that flows from it. However, there is a risk of permanent damage if the well remains shut-in for more than a few weeks.

The OPEC+ certainly created a deal to reduce oil supply. Because of this deal, Transneft's cargo turnover could fall by 10-13% in 2020. Transneft’s oil supplies to the domestic market are likely to fall by less than its exports.

Transneft is facing some difficulties related to oil quality. Transneft faces claims of up to $1 billion related to contaminated oil, more than double its own estimates. Unfortunately, up to 5 million tonnes of tainted Russian oil was contaminated en route to central Europe via the Druzhba pipeline. Interestingly, the company said that it would pay compensation of no more than $15 per barrel. However, according to multiple industry sources, the claims from Urals buyers, on average, stand at around $30-$40 per barrel, or at almost $1 billion.

The history of Transneft is interesting. The Oil Transporting Joint-Stock Company Transneft was established by Decree of the Government of the Russian Federation. The founder is the Government of the Russian Federation. The company was founded in August 14, 1993. In 2008, Transnefteproduct, a company transporting refined oil products, was successfuly merged into Transneft. In 2018, Transneft certainly took over 31% of shares which belonged to the Russian Federation in Caspian Pipeline Consortium.

Here are the Subsidiaries of Transneft:

Novorossiysk Commercial Sea Port
Transneft Druzhba
Transneft-Service LLC
Transneft Diascan, JSC
Omirico Limited
Transneft Metrology, JSC
Transneft Media, LLC
OAO Uralsibnefteprovod
Transneft Siberia, JSC
Transnefteproduct, JSC
Transneft Druzhba, JSC
Ooo 'tes'
OOO Vostoknefteprovod
Oao Severo-kavkazsky Transnefteproduct
OAO Severnye MN
Transneft Baltic, LLC
Transneft Ust-Luga Ltd
Sibtransnefteprodukt OAO
Transneft Finance, LLC
Mostransnefteprodukt, Oao
TransCapitalInvest Limited
Trade House Transnefteproduct, JSC
Promsfera, Zao
Transneft Volga Region, JSC
OAO Uraltransnefteproduct
Svyaztransneft, JSC
Chernomortransneft, JSC
JSC Verhnevolzsknefteprovod
Ooo Balt Ransnefteproduct
Ryazantransnefteprodukt, Oao
Petrotrans-Primorsk, LLC
SvyazstroyTN, OJSC
Transneft UW Service, JSC
OAO Severo-zapadnye MN
STNP Private Security Agency, LLC
DP PrikarpatZapadTrans
Mostransnefteproduct JSC
Balttransnefteprodukt OOO
Transneft East, LLC
Nii Tnn , Ooo
Novoport Holding Limited
Trans-Flot CJSC
OAO Volga Main Pipelines
Giprotruboprovod, JSC
NPF Transneft, JSC

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