THREE OIL COMPANIES RECEIVED WARNING LETTERS FROM FAS

FAS called upon oil companies to observe the antimonopoly law and fulfill the obligations formalized in the quadripartite Agreement

In March 2018, “TAIF NK” OJSC and “ForteInvest” JSC oil companies increased supplies of motor petrol and diesel fuel for export, simultaneously reducing supplies to the domestic market of the Russian Federation. It limited supplies of goods in the exchange as well as the off-exchange segments of the market, created supply-demand disbalance and influenced significantly the growth of prices.

Such actions are contrary to the quadripartite Agreement concluded in 2011 between the oil companies, FAS, the Federal Service on Environmental, Technological and Nuclear Supervision and the Federal Agency for Technical Regulation and Metrology.

Based on the monitoring in 2017, supplies of light oils to domestic market by “TAIF NK” OJSC and “ForteInvest” JSC were 12% and 4% of the scope of production accordingly (under the Agreement, the figure should be at least 20%).

If the Agreement is not executed, FAS can open an antimonopoly case. Such violations are punishable by seizure of the illegally gained income.

FAS is also concerned about the structure of exchange trading of “Surgutneftegaz” OJSC. For example, from 28 March to 3 April 2018 exchange trading by “Surgutneftegaz” was performed in an uneven manner and predominantly in large deals that were concluded within less than 1 (one) second at the price below the prices formed through the exchange.

Such actions by “Surgutneftegaz” OJSC created an artificial shortage on the supply basis and a sharp growth of prices for motor petrol. As a result, in March 2018 the exchange index on the supply basis of “KINEF” Ltd. was 6%.

In FAS opinion, such actions by of “Surgutneftegaz” OJSC can be the consequences of concerted actions (Article 11 and Article 11.1 of the Federal Law “On Protection of Competition”).

Based on the above, FAS calls upon the companies to eliminate the described facts and adjust the exchange trading in line with the quadripartite Agreement and the Russian law in order to improve the market environment.

Reference:

For several years the Federal Antimonopoly Service has been undertaking measures to develop and improve on-exchange trading with oil, oil products and natural gas, and implement the institution of registering off-exchange contracts for the exchange goods.

These measures are specified in the Order of the President of the Russian Federation “On the main directions for the state policy towards developing competition”.

The Order also approved the National Plan for Developing Competition in the Russian Federation, specifying the lists of the sectors of the economy and the expected results from developing competition.

According to it, the expected results for oil and oil products are developing market pricing mechanisms, particularly, on-exchange small wholesale trading and price indices for the small wholesale market, as well as developing the terminal on-exchange market of oil products.

On-exchange trading enables to form on- and off-exchange indices for the goods and stimulates high-quality tax and antimonopoly regulation, which, in its turn, prevents monopolistically high prices.

Priority demand satisfaction on the domestic market of the Russian Federation is one of the main principles of developing competition and establishing proper market conditions in the oil segments.