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Friday, August 26, 2005

Russian natural gas exports up 11.2% in January-July 2005

MOSCOW, August 26 (RIA Novosti) - Total Russian natural gas exports during the first seven months of 2005 totaled 101.2 billion cubic meters, up 11.2% year-on-year, an export subsidiary of the Russian gas monopoly said. According to a press release from Gazprom export subsidiary Gazexport, natural gas exports to non-CIS countries amounted to 92.1 billion cubic meters during the first seven months of 2005 vs. 87.9 billion in 2004. More than two thirds of this went to Western Europe, slightly up on last year. Eastern Europe received almost 30%, up half a percent from last year. Russia exported 9 billion cubic meters of gas to CIS, up threefold year-on-year.

Thursday, August 18, 2005

Oil production up 2.7% in first six months, 50% of oil exported

MOSCOW, August 18 (RIA Novosti) - Oil production in Russia rose 2.7% in the first six months of 2005 compared to last year's figures, with oil exports totaling 54.3%, the Federal Statistics Service reported. A total of 99.8 million metric tons of oil were sold on the domestic market and 124.9 million tons were exported. In June, Russia increased oil production by 1.3% compared to last year's indicator. In June 17.1 million tons were sold inside the country and 20.7 million tons were sold overseas, with exports totaling 53.9%. The statistics service said oil exports comprised 33% of Russia's total exports and 53.4% of its fuel and energy exports. A year ago, these figures were 30.9% and 54.1% respectively. The statistics service also said about $32.5 billion of oil revenues had been transferred to foreign currency accounts of companies in the year's first half, which is 28.7% more than the amount transferred during the same period in 2004. Current foreign currency accounts, in particular, received $27 billion (a 79.2% growth).

TNK-BP board decides to spend $270 million to develop Verkhnechonsk field

IRKUTSK, August 17 (RIA Novosti, Alexander Batalin) - The board of Russian-British oil giant TNK-BP has decided to allocate $270 to bring the Verkhnechonsk (Irkutsk region, Siberia) oil and gas field into experimental-industrial production, a company press release said. The experimental-industrial production project will continue up until 2008. It involves developing infrastructure on the site and boring 20 wells into the ground, 13 of which will be used for pumping oil out of the reservoir and the other seven for pumping water, steam, or gas mixtures into the reservoir to raise reservoir pressure and aid extraction. This project has been made possible by the Russian government's decision at the end of last year to begin building a pipeline from eastern Siberia to the Pacific Ocean. TNK-BP considers its main goal to be to synchronize preparations of the Verkhnechonsk oil and gas field with Transneft's plans for constructing the first stage of a pipeline to Skovorodino (on the Chinese border). This will allow for supply of eastern Siberian oil to Russian consumers by 2008-2009, as well as to countries in the Asia-Pacific region.

Monday, August 08, 2005

Oil Field Sale Delayed

08/08/2005 (10:50) RZD News - Victoria Oil & Gas, a British investor in natural resources projects in the former Soviet Union, said its purchase of a 15 percent stake in a Russian oil and gas field had been delayed after an examination of the seller's ownership title. "It is disappointing that this delay has occurred, but our long experience in the former Soviet Union has taught us to be very thorough with the due diligence process," Victoria Oil chairman Kevin Foo said Friday in statement, reports The Moscow Times referring to Bloomberg.

Russian Oil Sector Stops Development - Economy Minister

Economy Minister German Gref / Frame from Vesti Channel04.08.2005 12:33 MSK MosNews - Former sources of economic growth such as a considerable buildup of the oil and gas sector "have basically exhausted themselves", said on Thursday, Aug 4, Russia's Economy Minister German Gref. This why, he said, the rate of economic growth in the first half of 2005 has "slowed down considerably". Gref was speaking at the regular government meeting dedicated to the results of the first half of the year and to the forecasts for the second half. "What we have talked about earlier, now has become reality," the minister, quoted by the Itar-Tass agency, told his colleagues. The Economy Ministry's data shows that in the first half of 2005 economic growth in Russia amounted to 5.6 percent which is almost 2 percent lower that in the same period of last year. In the second half of 2005 GDP growth is expected at the level of 6.2 percent, with average growth rate for the year amounting to 5.9 percent. Industrial growth in the first half of 2005 amounted to 4 percent as compared with 7.3 percent last year. In German Gref's opinion such negative tendencies are explained by the decline in the rates of growth of oil production and export, of arms exports and of engineering production. In the first six months of this year the rates of export growth slowed down considerably — to 6.6 percent — as compared with 11-12 percent registered in previous years. The Economy Minister specifically noted the fact that the "export of oil has stagnated". In the first half of 2005 it grew only by 0.5 percent as compared with an annual 14 percent growth in the period between 2000 and 2004.

Wednesday, August 03, 2005

A New Oil Major From Nowhere

03.08.2005 Moscow News By Greg Walters Staff Writer - Russia's fastest-growing oil company is no longer knocking on the door of the oil major club. It's climbing in through the window. After roaring out of nowhere to become Russia's No. 10 oil producer by output in just over 2 1/2 years, Russneft says it will double production again this year to reach 400,000 barrels per day. That kind of expansion would bring Russneft to near parity with oil major Tatneft and the remnants of Yukos, or about seventh place.
Following an aggressive -- and, at times, controversial -- expansion strategy, the company has used wheelbarrows full of cash to purchase and then bolt together 25 small, independent Russian oil producers, according to Russneft's count. Today, the company reckons its own worth to be about $3 billion, having been started from scratch in December 2002, and it has been reported to be moving in on some of the major assets of embattled Yukos -- reports the company vehemently denies. Exactly where Russneft got the cash to become a major Russian player in less than three years remains unclear.
"With a company like that, you grow if you have money," said Adam Landes, an oil and gas analyst with Renaissance Capital. "But no one really knows where the money came from, or how much has been spent." Russneft spokesman Eduard Sarkisov said Russneft had taken out "tens of millions" of dollars in loans, but declined to say how much the company had spent on acquisitions.
The company's rapid expansion has caused some analysts to speculate that the company may have the government's blessing to consolidate Russia's oil juniors as part of a bid to boost the country's production.
"I have the sense of benediction from above," said Eric Kraus, head of equities at Sovlink Securities. "The Russian government and the powers that be may be seeking to bring about a consolidation of small and inefficient companies." Over 100 small, independent companies make up the underbrush of Russia's oil extraction industry. That the consolidating force for these small, independent producers is a come-from-nowhere company like Russneft instead of a goliath like LUKoil could be because Russia's biggest oil firms "are already financially stretched maintaining their aging infrastructure," Kraus said.
Russneft was started in 2002 by Mikhail Gutseriyev, former head of state oil firm Slavneft. But the company does not disclose its ownership structure. Gutseriyev -- Russneft's president and the country's 40th-richest man, with a personal fortune of $730 million, according to the Russian edition of Forbes magazine -- was twice elected to the State Duma in the 1990s, most recently as an independent deputy. He quit in 2000 after being appointed president of state-owned Slavneft, a post from which he was fired about a year later for reasons he has said were never explained to him.
Gutseriyev's "large experience in legislative work and in the oil business has, of course, helped the development of Russneft," Sarkisov said. But the company has not received any special treatment from the authorities, he said. Russneft now plans to spend about $260 million on exploration and development at existing fields in 2005, not counting further acquisitions. Russneft has repeatedly denied reports that it is chasing after Yukos' former assets.
Hungarian oil company MOL announced in late April that Russneft had "declared its intention" to purchase Yukos' 50 percent stake in a joint venture in the Zapadno Malobalyksky oil field. Russneft said it had never been interested in the stake. Citing three unidentified sources, Vedomosti wrote in March that Russneft had offered to buy a 76 percent stake in Volgotanker, a former Yukos subsidiary and Russia's largest oil shipping company -- a report Sarkisov called "absurd."
Russneft also denied media reports that it had purchased Yukos' 34 percent stake in Geoilbent, a small oil company based in southern Russia. Both Vedomosti and Kommersant cited unnamed sources saying that the official owner, Cyprus-based Broadwood Trading Investments, was in fact a Russneft unit. Both newspapers, again citing unidentified sources, recently reported that after a tough court battle over the rights to the rest of the shares of Geoilbent -- which Novatek had tried to sell to LUKoil -- Russneft and LUKoil had agreed to share Geoilbent.
Russneft is already mapping out plans for international expansion into Iraq, Sudan and Kazakhstan, Sariskov said, adding that an initial public offering on a foreign stock exchange was only "a matter of time." Some analysts argue, however, that the company's role as a mass-consolidator may become increasingly difficult as domestic oil prices rise to approximate international levels. Russia's small oil producers -- which Russneft has been so eagerly purchasing -- have revenues tied to domestic prices. As those prices rise, so will the cost of buying the companies.
"Small, independent producers are making better margins on the domestic market, so it will be more expensive for Russneft to buy up more production companies in Russia," said Lev Snykov, senior oil and gas analyst at FIM Securities. "If [Russneft] doubles production this year, they won't double again next year. The increase will be a double-digit figure, but it won't be 50 percent."

Gasprom Divides the Duty of Managing Europe..

08-03-2005 Kommersant 
... between Department of Foreign Relations and Gasexport.
As Kommersant found, the head of Gasprom has on his desk a project of reforming the external economical block of the gas monopoly. The goal of the project is to finish crisscrossing functions of the Department of Foreign Relations (DFR)of Gasprom and Gasexport. The first one would supervise preliminary preparation of large international projects without participation (financial one as well) of acting foreign companies. The second one would enlarge the area of its duties and enter new foreign projects. The reform should start before the beginning of the North-European Gas Pipeline construction and the development of Shtokman's deposits.
Gasprom has its share in founding capitals of such companies as TopEnergy (Bulgaria), Gazprom Marketing and Trading Ltd and Interconnector Ltd (Great Britain), ZMB mbh, Wintershall Gas GmbH and Wintershall Erdgas Handelshaus GmbH (Germany), Wintershall Erdgas Handelshaus Zug AG (Switzerland), Volta Spa (Italy), Gazum and Nord Transgas (Finland),Slovrusgas (Slovakia), Europolgas (Poland), Turusgas (Turkey). Usually these companies participate by renting as an owner or participant as a stake holder in the gas networks or transport pipelines. For instance, there is a pipeline Yamal-Europe that runs through the territory of Poland.
The main duty of Gasexport is to sell gas and the secondary job is to manage Gasprom's assets (German WINGAS, WIEH) and to create the gas network in Greece. The company owns from 16 to 100 percent in Overgas (Bulgaria), Panrusgas ( Hungary), ZGG mbH and SOVAG (Germany), Gas und Warenhandels GmbH (Austria), Prometheys gas SA and GasCop SA (Greece), Promgas (Italy), PRAGAS (France), Gas-Trading SA (Poland), Progresgas-Trading (Yugoslavia).
For already several years there was an idea growing inside Gasprom to create a centralized structure of the external economic bloc. One source, who is close to the Board of Directors of Gasprom, explained that Gasprom management owns and manages an underground storage facilities. Gasexport, on its turn, fulfills the contracts with foreign consumers. Because of this situation, the gas monopoly sometimes had to minimize its profits in some segments of the markets due to crisscross of the both companies' functions. As an example, the source mentioned the experience of middlemen's structure TNG that was not always succesfully selling Turkmenian gas in Europe.
In April of 2005, Alexander Medvedev took a position as Gasprom's Deputy Chairman. He replaced Yuri Komarov, who was transferred to head the Gasprom's affiliate company for liquid gas operations. With new powers, Medvedev is ready to take on reform of corporate management of external economic activities. The employees of the giant holding company already discuss how the management would re-assign the duties. However, official information about it is suppose to appear only in the end of August because Gasprom's Chairman Alexei Miller is on vacation until August 8 and Medvedev himself left for vacation on Monday.
After the reorganization inside of Gasprom, DFR would develop foreign economic policy. It would also be responsible for preparation and coordination of large international project to their final stage. After that, the realization of these projects would be handed to different companies within the Gasprom Group.
As Kommersant learned from the source close to Gasprom, the reform project helps Medvedev centralize management of foreign assets, which right now are under control of the Department of Property Management and Corporate relationships, headed by Olga Pavlova. Gasexport did not confirm that Gasprom assets would be transferred under its supervision. However, Gasexport representatives did not deny that the Gasprom would manage its property in Europe through Gasexport. As Kommersant's source explained, the representatives of DFR could be replaced by Gasprom managers in European joint-ventures. The Gasexport officers would be participating in actual deal completion instead of DFR employees.
Let's note, that Gasprom last Friday signed an agreement with Netherlands company Vitol to purchase the capacity to store 143 million cubic meters on gas in a new gas storage facility in Great Britain's Humbly Grove. This one of the parts of the North European Pipeline project. Two months earlier, Gasprom made an agreement with Austrian RAG for construction and use of gas depositary Haidag in Upper Austria. The planned reforms are pretty timely because Gasprom already in Septemeber is intend to name the partners for Shtokman deposits exploration.
Medvedev was several times mentioning oil company Shell as an example for corporate management. Different departments are responsible for the company's policy development and their functions do not overlap. The source also said that there was a talk to give to Medvedev some of the functions of another Chairman's Deputy -Alexander Ryazanov, who is managing a joint venture in the Baltic republics. According to the Kommersant's source information, Gasprom will be coordinating daily work at Eastern, Central and Western Europe, and Ryazanov would be responsible for the CIS territory.

Itera invests in the future

08-03-2005 RBC News - Itera invests in the future The gas company's net profit plunges as it invests in new projects
Itera reported a net profit of RUR 11.209 million in the second quarter of this year, a figure 27.7 times lower than in the previous three months. Its asset value dropped from RUR 13.88 billion to RUR 10.758 billion from April through June 2005. The company's managers blame the disappointing results on seasonal factors and the need to support its subsidiary Sibneftegaz, developing the Beregovoye and Pureinoye fields in the Yamal-Nenetz autonomous region of Russia.
Itera is Russia's second largest private gas company after Novatek. Last year it produced 14 billion cubic meters of natural gas, making a net profit of RUR 1.25 billion. In December last year the company sold a controlling interest in TNG Energy to Novatek, concentrating on its most attractive deposit Sibneftegaz. Last month saw important changes in the system of Itera's ownership, which now looks like this: Cyprus-registered ITERA Holdings Ltd. controls 99.99 percent of Itera and Valery Otchertzov, chairman of the board of directors, holds 0.01 percent.
Experts rate the restructuring as a logical step, in line with the company's strategy to become an open joint-stock company and to hold an IPO in the future. But they believe these plans should be backed by sound financial and industrial performance, something Itera cannot boast now.
"Given problems faced by its most important asset, Itera might have built a financial reserve, which would have reduced its net profit," suggests Maxim Shein, chief analyst at BrokerCreditService. "But in any case, net profit is a volatile indicator and it's difficult to base judgments about the company's development solely on this. The more important factor is revenue, and Itera has stable revenue. Other factors that will be considered by investors ahead of Itera's IPO are the company's relations with Gazprom and its production growth rate," he told RBC Daily.
"It's difficult to assess Itera's financial results," agrees Konstantin Batunin, at CenterInvest. "Firstly, reporting under Russia's accounting standards is not very persuasive. Secondly, without an understanding of the company's strategy, they tell us little. Itera's strategy is not very clear, or else the company doesn't want to advertise it. In any event, it has to solve the problem with Gazprom, but it is clear that Itera's strategic development cannot be restricted to relations with the owner of pipelines," he said.
Indeed, Beregovoye, rated among the best gas fields in northern Russia, with an estimated 300 billion cubic meters of gas reserves, could have been working long ago. Itera announced the start of the project two years ago, but has not yet connected the field to a pipeline system. Gazprom points to a lack of transportation facilities in the region. But there's some improvement here.
"Problems with access to pipelines are being settled," Itera's Eugeny Ostapov said. "At any rate Gazprom confirmed technical conditions for the transportation of gas from this region and details are being discussed by the representatives of both companies. Certainly the problem is being solved slower than we would like it to be. Itera began to develop the Beregovoye field hoping that the pipeline problem would be solved quickly, and that we would be able to get profit. The license agreement stipulates that we have to continue to invest in the project. Though the field is ready for use," he said.
Itera is sparing no effort in implementing its ambitious project in the Yamal-Nenets autonomous region, and is investing heavily in it. "Under the circumstances Itera has to invest significantly in Sibneftegaz, its main production asset, developing the most attractive deposits," says Konstantin Gulyaev at Region Company. "Otherwise the company might ruin its strategic plans and default on its obligations to the Sverdlovsk region."

Russia needs to invest $375 billion in energy over the next 25 years - Fitch

MOSCOW, August 2 (RIA Novosti) - Over the next 25 years, Russia needs to invest around $375 billion in the energy sector, according to report from Fitch Rating Agency on the influence of the energy sector on Russia's credit status. This sum is only 20% of what China intends to invest in energy over the same period, the report said. Insufficient investment in the energy sector is one of the agency's major concerns for Russia. Fitch said that the credit status of Russian energy companies varied widely. Negative factors include low profitability and high capital investment, whereas the large volume of short-term debt makes Russian energy companies subject to refinancing risks. Positive factors include the strong liquidity and stable level of energy sector debt. The Fitch report said that with ongoing reforms in Russia's energy sector creditors needed to pay close attention to the credit status of companies after reorganization, particularly to which companies, after restructuring, were unlikely to have debts, and which would retain existing debt. This factor will have particular importance for the sector as a whole, not only up until 2008, when reforms should be completed, but also for the next decade at least. Fitch said that to reach its economic growth goals, Russia needed to continue reforms in the energy sector. Fitch energy analyst Jeffrey Woodruff said that the government's role in sector reform was very important. The structure of the fuel balance at new power stations will be of key importance for the profitability and credit status of the sector as a whole. Analysts predict that growth level of energy consumption in Russia over the next ten years will exceed the level in more developed countries, he said.

Tuesday, August 02, 2005

Russian natural gas production up in 2005

MOSCOW, August 2 (RIA Novosti) - Russian natural gas production for the first half of 2005 grew by 3789.1 million cubic meters, or 1.1 %, to a total of 372,905.1 million cbm. Russian gas monopoly Gazprom produced 85% of Russia's natural gas, with 319,365.2 million cbm, up by 1385.3 million cbm (0.4 %) from the same period last year. Domestic consumption of natural gas reached 226,413.3 million cbm, an increase of 2553.3 million cbm (1.1 %) compared with last year's period. Gas exports aggregated 92,212,4 million cbm, up by 8802.3 million cbm (9 %) compared with the first half of 2004.

Russian oil production in 2005 up 2.8%

MOSCOW, August 2 (RIA Novosti) - Russian oil production in January-July 2005 grew by 2.8% (7.3 million metric tons), compared with the corresponding period of 2004, while oil exports dropped by 806,000 tons, a Russian Industry and Energy Ministry report said. The ministry said oil production and exports in Russia amounted to about 270 million tons and 147 million tons respectively in January-July 2005. Gasoline production amounted to 18.2 million tons in January-July 2005, an increase of one million tons year on year. Diesel fuel production amounted to about 34 million tons in January-July 2005, an increase of 2.3 million tons year on year. The production of other petroleum products grew in January-July 2005, including fuel oil by 1.76 million tons and jet fuel by 316,000 tons.

Monday, August 01, 2005

US court allows $1.5 bln suit against TNK-BP owners

07-30-2005 Reuters - A U.S. federal appeals court has said Canada's Norex Petroleum can sue the Russian shareholders of oil firm TNK-BP , reinstating a $1.5 billion case against some of Russia's richest men, Norex said on Monday. Norex, an alliance of Canadian firms specialising in cold weather oilfield work, says the Russian investors named in its suit illegally took control of its Russian subsidiary Yugraneft. The defendants in the case include Viktor Vekselberg, Len Blavatnik and Alfa Group, owned by Mikhail Fridman. In 2003, the three magnates joined forces with Britain's BP Plc to create TNK-BP, Russia's second biggest oil firm. Norex filed the suit at the New York southern district court in February 2002, before the formation of TNK-BP, which was sealed with a handshake between British Prime Minister Tony Blair and Russian President Vladimir Putin. The case was dismissed two years later, but reinstated by an appeals court last week, Norex said. TNK-BP said it was confident of winning the battle for Yugraneft, which produces around 10,000 barrels of crude oil per day, less than 1 percent of the firm's total output. "We are very confident of our position and we are prepared to argue our case in court," said TNK-BP spokeswoman Marina Dracheva. "It's important that this latest court decision deals simply with jurisdiction. It does not deal with the merits of the case," she said. "We have already won more than 20 cases which concerned the merits of the case." Analysts said the outcome of the case was hard to predict. "But we do not believe there are any implications for TNK-BP as a company," said Aton brokerage in a written research note. "Rather, we see it as limited to the shareholders of predecessor companies. "We expect the conflict to be resolved -- or ultimately settled, though in the meantime the news is seen as a slight negative as it serves as a reminder of the lack of clarity surrounding past deals -- a background that TNK shares with other Russian oil companies." Analysts at Alfa Bank said the new hearings would take place in September or October.

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