Friday, April 29, 2005
Oil major Urals Energy buys 26.75% of shares in bank Zenit
29.04.2005 IntelliNews Today - Oil major Urals Energy bought 26.75% of shares in bank Zenit from the subsidy of Tatneft, Tatneft Oil Ag. At the same time, Tatneft kept its blocking stake in the bank and continues to improve its cooperation with the bank. The price paid for the stake was not disclosed. This purchase was inline with the strategic goal of the bank to find a long term strategic partner. Also the bank wanted to diversify its shareholders base so that none of its shareholders has a controlling stake. It was also important for the bank that Urals Energy will be not only the bank's shareholder, but also a client. This will give a strong impulse for the development of the business.
LUKoil stands to gain on ratings upgrade
04.29.2005 RBC News - International raters Moody's Investors Service has upgraded the senior implied rating of LUKoil to Ba1 from Ba2, also lifting to Ba2 from Ba3 LUKoil's senior unsecured issuer rating. Moody's said the move primarily reflected ongoing solid underlying performance which in the first nine months of 2004 generated EBITDA of $5.2 billion against $4.4 billion for the same period in 2003. It also reflected the company's position as Russia's largest oil company, vast upstream reserves and strong downstream integration. Visible improvements in corporate governance were weighed since A3-rated ConocoPhillips acquired a 7.6 percent stake last September, raising this to 10 percent in January, alongside gradual improvements in LUKoil's operational performance and efficiency. LUKoil will benefit from the upgrade, experts say. "Rating reviews are unlikely to have any significant impact on the oil company's share prices since Russian investors pay more attention to other factors. But in the long run, LUKoil could greatly improve its borrowing opportunities," Ivan Guminov, analyst at Pallada Asset Management, told RBC Daily. About 18 months ago, he recalled, LUKoil issued about $6 billion worth of bonds at seven percent interest - almost the same yield as Gazprom's bonds had, though Gazprom enjoyed a far better rating at that time. "Now, when their ratings are almost the same, we can expect that the oil company will borrow on even better terms - for example on the market of Eurobonds," Guminov said. Some analysts say the Moody's upgrade reflected company efforts to reduce the amount of its secured loans. They do not rule out that LUKoil might borrow additionally to replace secured loans with unsecured. Yelena Anankina at Standard & Poor's thinks, however, this would not affect the company's position on the market. "We use a different method to decide on corporate ratings. We do not make significant distinctions between secured and unsecured obligations," she said. "We think the advantage of lenders who had given secured loans is not obvious in Russia where any existing assets can be accepted as security. But most Russian oil companies took loans on the security of their future oil exports. It is a big question whether Russian courts will see such debts as unsecured," Anankina said. Experts judge it more advantageous for LUKoil to issue ruble-denominated bonds. "Interest rates are attractive both for issuers and on the Eurobond market, though to a lesser extent," said Anna Matveyeva at Troika Dialog, adding that this was due to expectations of U.S. rate hikes. If LUKoil wants to borrow on good terms, it has to hurry, those watching say. "Now is a good time for domestic borrowing. But this should be done quickly, at best in early May, as the situation could worsen in the summer. Now, the market remains attractive to borrowers, it's full of cash," Matveyeva said. Even if LUKoil borrowed in the summer, it would not be too bad, she argued. "If it issues, say, three-year bonds, the yield could be 7.6 percent," the analyst noted. LUKoil officials neither confirmed nor denied those speculations.
Siberia-Far East to start national oil grid
04.29.2005 RBC NEWS - Eastern Siberia and the Pacific Ocean are scheduled to be linked by early 2009 in the first phase of a planned single-system oil pipeline crossing all Russia, Viktor Khristenko, minister for industry and energy, said on Thursday. The national network will build to pump 80 million tons a year. Khristenko said the system was necessary to achieve the two strategic goals of comprehensive regional development and diversification of energy export routes. "Having implemented the new project in accordance with Russiaâs energy strategy, we will be able to fully meet the needs of oil companies necessitated by an increase in the throughput capacity of infrastructure facilities of the fuel and energy sector," the minister said. A decree has been signed defining stages of the system's construction. The first takes a line through Taishet, Ust-Kuta and Kazachinskoye in the Irkutsk region to Tynda and Skovorodino in the region of Amur. Throughput capacity will be 30 million tons, funded by Transneftâs oil transportation system. Construction will begin after a technical and economic feasibility study is prepared. The first stage is expected to complete in the second half of 2008. The second stage takes the route between Skovorodino and Primorye region's Perevoznaya Bay, to carry up to 50 million tons of oil a year. Building time will be determined under a program for using hydrocarbon resources in eastern Siberia and the Far East approved by Russiaâs ministry for natural resources. A working group will be appointed to ensure cooperation between federal bodies, overseeing monitoring and control of design and construction. Andrei Reus, deputy minister for industry and energy, will head the team.
Analysts comment on LUKoil dividends
RBC, 28.04.2005, Moscow 13:13:22.LUKoil dividends have met investors' expectations, analysts say. Alfa Bank experts say that LUKoil is to allocate 21 percent of its net income for 2004 to pay dividends, as it was announced. The recommendations voiced by the board of directors are approved, LUKoil shares will bear the dividends yield of at least 3 percent taking into account the current market price for these securities. LUKoil has been increasing this ratio for the past several years, they say. Industry observers believe that the oil company will stick to this strategy in the future. Others say that the company will allocate 30.5 percent of its RAS net income for dividend payments. The current yield on shares is 2.9 percent due to high price for LUKoil securities, experts point out. The company has posted RAS net profit of RUR78.027 (around USD2.786bn). Thus, dividends are to equal to about 22 percent of IAS net profit for the reported period.
SAKHALIN ENERGY SEEKS $5 BLN
MOSCOW, April 28 (RIA Novosti) - Sakhalin Energy, the operator of the Sakhalin 2 oil and gas project, wants $5 billion in loans to swing the site into full-fledged production, Vedomosti reported. Ivan Chernyakhovsky, Sakhalin Energy press secretary for Russia, says the partners are negotiating a $4 billion loan with the Japan Bank for International Cooperation and plan to apply to the U.S. EximBank, the European Bank for Reconstruction and Development and the ICGD for the remaining $1 billion. Chernyakhovsky declined to specify the loan terms, but said that the money would be redeemed from energy earnings. The loans, he said, were needed to finalize the project infrastructure, including pipelines and a gas liquefying plant. A deal with the banks is scheduled to be sealed this year. The only example of a Russian company or project getting a large loan, experts say, was Rosneft's attraction of $7.5 billion late last year to buy Yuganskneftegaz, Yukos' main subsidiary. However, Kakha Kiknavelidze, an analyst with Troika Dialog, says this was a politically motivated deal, which makes a difference. But he still expects Sakhalin to get the money only because project partners are international majors. Analyst with MDM Bank Anton Zatolokin says a loan would be less costly than development on the partners' own money and export revenues will secure the loan at a term of no less than five years. Under the 1994 production sharing agreement for Sakhalin 2 (150 million metric tons of oil and 500 billion cubic meters of gas), a share of 55% goes to Royal Dutch/Shell, 25% to Mitsui and 20% to Mitsubishi. The consortium plans to export up to 9.6 million metric tons of liquefied natural gas per year beginning in 2007.
Thursday, April 21, 2005
Russian Oil to Become an Exchange Commodity
21.04.2005 17:38 FC Info News - For the first time ever, Russian oil may become an exchange commodity. The New York Mercantile Exchange (NYMEX) intends to trade in futures for the Russian Urals oil. It will hold trading sessions in Budapest, not in the US or Moscow. Today Urals oil is not sold at stock exchanges since Russian oil is sold at a discount Brent price, with Brent serving as a marker oil grade.
RUSSIA'S UES CEO: YUKOS CASE UNDERMINED RUSSIA'S INVESTMENT CREDIBILITY
MOSCOW, April 21 (RIA Novosti) - Anatoly Chubais, CEO of Russia's UES (Unified Energy Systems), believes that foreign investors show interest in Russia. This was the main idea of his remarks published today in the Izvestia newspaper. At the same time, Chubais added that investors were still worried about the Yukos case. "I've just returned from the US where I held a road-show, i.e. fifteen meetings a day with potential partners and investors. The first question that 80% of them asked me was about Yukos and Khodorkovsky. It goes without saying that the whole story heavily undermined investors' confidence in Russia," said Chubais. However, the authorities' policy has been making rather positive signals of late. "The reduced limitation period on privatization deals, tougher regulation of tax bodies' authority, the president's meeting with businessmen - all these are positive indicators," said Chubais. Nonetheless, he believes that the positive signals have not outstripped the negative aftertaste yet. "But it is common for the investment community to forget quickly about the bad when it sees a consistent positive policy of the authorities and, most importantly, good prospects. According to Chubais, there was no point in the Yukos case economically speaking, and it was nothing but detrimental for the economy." "In this sense, the Yukos story has a far broader meaning. What worries Western investors is the disregard for the interests of minority shareholders who lost huge amounts of money due to the Yukos case. Western businessmen are hardly concerned whether a country is a democracy or not, whereas lost profits are already a serious reason," Chubais said. As for the "colored" revolutions in the CIS countries, Chubais said: "Fortunately, a revolutionary scenario is virtually unrealistic for Russia."
Wednesday, April 20, 2005
Criminal case started against oil company Samaraneftergaz
20.04.2005 IntelliNews Today - Samara criminal prosecution started a case against Yukos subsidiary Samaraneftegas. The company is accused of extraction of greater volumes of oil than it was allowed by licence agreement. It is said that the company obtained USD 11.7mn of profits from this illegal extraction during 2001-2003. Also it is accused for not payment of extraction tax during 1999-2000 that amounted to USD 12mn. In total claims faced by Samaraneftegaz amount to around USD 1bn. The largest of these claims were announced in 2004 and related to overdue taxes from 2002. It is probably that it will be the next asset of Yukos after Yukganskeftegaz to be auctioned. Lastly, the prosecution tries to start a case against the head of the companyâs management Pavel Anisimov. The latter is suspected of fraud.
Tuesday, April 19, 2005
Nevzlin Names Key Yukos Foes
04.19.2005 By Alex Fak Staff Writer Itar-Tass - Yukos shareholder Leonid Nevzlin Yukos shareholder Leonid Nevzlin has accused Finance Minister Alexei Kudrin and Kremlin chief of staff Dmitry Medvedev of directly overseeing the state's assault on the oil company, according to comments published Monday. Nevzlin, who lives in Israel and has denied prosecutors' charges that he ordered former Yukos security chief Alexei Pichugin to carry out a series of murders, also lashed out at Sibneft owner Roman Abramovich, accusing him of being one of a "group of plotters" who tried to wrest Mikhail Khodorkovsky's company away from him. Kudrin, who in 2003 said Yukos was trying to undermine government efforts to increase taxes in the oil sector, guided Federal Tax Service officials in their campaign against Yukos, Nevzlin told Vedomosti. The tax service falls under the formal purview of the Finance Ministry. Nevzlin also said he had proof that Medvedev was involved in the attack on Yukos, but he declined to elaborate. In December, Nevzlin received a 60 percent stake in Group Menatep, which owns just over half of Yukos, from Khodorkovsky. The trial of Khodorkovsky and another Yukos shareholder, Platon Lebedev, on charges of tax evasion and fraud ended last week. Verdicts are expected April 27. Nevzlin accused Abramovich of luring Khodorkovsky into takeover talks with Sibneft and said that Khodorkovsky was in simultaneous talks with both ExxonMobil and ChevronTexaco about the sale of a blocking stake in the combined company. Abramovich told Khodorkovsky that President Vladimir Putin had approved the sale of the stake to a foreign partner, even as he was telling Putin that Khodorkovsky was deceiving the president, Nevzlin said. Abramovich halted the merger in November 2003 after Sibneft failed to secure management control over the combined company. But associates of Abramovich have long insisted that he halted the merger a month after Khodorkovsky's arrest because of the political risks in being associated with Yukos. Sibneft spokesman John Mann said Nevzlin's story sounded "like a far-fetched conspiracy theory." Abramovich has previously been accused by people connected to Menatep of being in cahoots with the Kremlin in the fight against Yukos. In an apparent reference to Abramovich's 2003 purchase of English soccer club Chelsea, Khodorkovsky told the court last week: "As opposed to those shy businessmen and businessmen-bureaucrats who stand behind the case against Yukos, I do not own yachts, palaces, racing cars or soccer clubs." Nevzlin said he planned to sue Kudrin and Medvedev, and perhaps other government officials, for billions of dollars, probably in a British court this fall, Interfax reported. But Nevzlin's accusations against Kudrin and Medvedev were met with some skepticism Monday. A Kremlin spokesperson said the government would not comment until it received court papers and suggested that Nevzlin "might just be trying to make waves." A lawyer at an international law firm, speaking on condition of anonymity through an intermediary, said, "From the legal point of view, Nevzlin's threat has no grounds at all." By threatening to sue members of the government, Nevzlin was "clutching at straws," said Michael Heath, a political strategist at Aton Capital. "What force would a foreign court decision have in Russia?" Heath said. "These guys at Menatep, at Yukos, sometimes you just think they get drunk on the idea of influencing things via Western PR agencies. At the end of the day, they cannot change a thing." Singling out Kudrin, in particular, was "absurd," Heath said. "Kudrin is a bean counter. The order pushing the tax service to go after Yukos would come from higher up than the Finance Ministry."
Monday, April 18, 2005
Oil and gas production up in Russia
RBC, 18.04.2005, Moscow - Russia's oil output totaled 114 million tons in the first quarter of 2005, 3.6 percent more than in the same period last year, Russia's federal state statistics service reported. Last month, oil production was 4.3 percent up from March 2004, and it was 10.5 percent higher than in February 2005. Primary oil refining stood at 49.3 million tons in January-March 2005, an increase of 3.9 percent on the year. In March 2005, primary refining increased 0.8 percent compared with March 2004, and it was 5.7 percent more than in the previous month. Gasoline production was up 6.8 percent in January-March 2005, at 7.7 million tons. Production of diesel fuel in the same period was reported at 14.4 million, up 5.7 percent. Last year, primary oil refining was 195 million tons, up 2.6 percent compared with the previous year. Production of natural gas was 1.7 percent in the first quarter of this year, at 170 billion cubic meters. In 2004, 591 billion cubic meters of natural gas was produced in the country, 1.6 percent more than in 2003. Generation of electricity in January-March 2005 rose 2 percent, to 267 billion kWh. Last year, production of electricity was up 1.6 percent at 931 billion kWh.
Friday, April 15, 2005
New back tax claims inevitable
04-15-2005 RBC News - The work on tax administration will continue and large companies will inevitably face claims related to investigations into tax payment practices, senior deputy finance minister Sergey Shatalov has told RBC TV. According to Shatalov, it would be strange if only one legal case related to tax evasion practices were initiated. "From time to time, one can learn about some companies filing for bankruptcy protection in the West," Shatalov emphasized. Commenting on the situation with back tax claims against BP-TNK the deputy finance minister said that he had no understanding about where this piece of information came from. He added that tax authorities denied their charging the British-Russian joint venture with using illegal tax evasion schemes after holding additional investigations into the issue. "I don't know where this information comes from and why it jolts the stock market," he added. On April 11, representatives of BP-TNK announced that the Russian Federal Tax Service had handed an act on the results of additional investigations into tax payment practices for 2001 to TNK. The service reportedly claimed RUR22bn (around USD785m) in overdue taxes for the period so that total claims against the company were boosted to RUR26bn (around USD928m). However, official representatives of the Federal Tax Service have refuted this information. Russian authorities have claimed that they would have a strict position dealing with large companies evading taxes. Presidential assistant Igor Shuvalov announced that the YUKOS case was a prime example for other firms using similar schemes for minimizing tax payments. Russia is supposed to use the same approach to such other companies, even if its image suffers. Shuvalov claimed that a main political task for Russian authorities was to reduce the existing tax burden and to work out a transparent taxation system. He promised to stiffen the taxation system and those who violate tax regulations will be sued by authorities, Shuvalov said.
Foreigners welcomed to offshore projects
04-15-2005 RBC News - Participation of foreign companies in the development of Russia's offshore resources is inevitable, Vladimir Kuznetsov, deputy head of the federal energy agency, told reporters on Thursday. He said offshore projects were very costly, some of them estimated at more than $10 billion, and payback periods were long. On the other hand, bringing foreigners into such projects would allow Russia to enter the markets of North America and Asia Pacific region, he noted. Kuznetsov believes Russia has to take part in international consortiums in the third world countries, notably in Africa and Latin America, as well as in the Pacific and Indian Oceans. "Tenders are being held everywhere, and, in order to win, synergy is needed in all areas, from technologies to financing," he stressed. A new law on mineral resources, coming into force in the middle of next year, restricts access of foreign companies to auctions for strategic deposits. Only those companies where foreigners hold a minority stake (not more than 49 percent of authorized capital), will be allowed to participate. In February, the natural resources ministry and the federal agency for the use of natural resources decided to bar foreign companies from auctions for the country's largest deposits in 2005. At the same time, both bodies admit it would be very difficult to develop Russiaâs offshore resources without foreign investment, both financial and technological. Earlier this month, natural resources minister Yury Trutnev said his ministry was for allowing foreigners to take part in the development of offshore resources, but only together with a company representing Russia.
TNK-BP TAX CLAIMS CAUSE UPROAR
MOSCOW. (RIA Novosti economic commentator Vasily Zubkov) - Yelena Tolgskaya, an official spokeswoman for the Federal Taxation Service, today told RIA Novosti that no new tax claims had been filed against TNK-BP. A routine audit of the company's accounts is all that is being conducted. Moreover, the Arbitration Court has not yet ruled on the previous tax claims to TNK-BP for 2001, which are worth 4 billion rubles ($142 million), as it postponed the examination of the case until May 23. The fog surrounding almost a billion dollars in back taxes and the Russian-British oil giant for a whole week is gradually dissipating, revealing the causes of the uproar. First, the political reasons. While President Putin urged foreign investors in Germany to invest more aggressively in Russia, reports emerged that the tax authorities were again on the rampage in the country and that the Kremlin was again flexing its muscles with regard to Russian business. This undoubtedly scared cautious investors. Moreover, the TNK-BP saga started hogging the headlines just a few days after the Russian leader had promised at a Kremlin meeting with the business elite that he would take efforts to solve tax issues under his personal control. Accordingly, the uproar around Russia's largest joint venture, which is seen as a prime example of international co-operation, can be interpreted as a blatant attempt to discredit the president. Secondly, another reason could be regular market speculation based on unreliable information. Immediately after news about new TNK-BP tax claims was leaked, most liquid shares fell by 2-5% and the RTS (Russian Trading System) index plunged by almost twenty points. Therefore, some Russian media, for example, Noviye Izvestia, presumed the reports about a new tax offensive against TNK-BP could well have been launched in someone's self-serving interests. An analysis of the entire chain of the scandalous leak could reveal who might have ordered it. The scandal around TNK-BP has served a catalyst to reinvigorate efforts against leaks used in self-serving interests. The head of the Federal Service for Financial Markets, Oleg Vyugin, has promised to submit a concept for an insider information law to the government within a month. The Finance Ministry, the Ministry of Economic Development and Trade and the Central Bank have approved it, and Vyugin is confident the law enforcement ministries will follow suit. Big business is still very young in Russia. It still has to learn ethical and moral norms that have taken shape in the West over the past two centuries. Tax claims may well be filed in the future against major Russian companies, as too many offences were committed in the past. Presidential aide Igor Shuvalov believes the authorities will continue to apply tough measures against taxpayers that break the law, even if the measures adversely affect the government's image. Meanwhile, Deputy Finance Minister Sergei Shatalov says it would be strange to limit the tax claims "to only one case." And with that he obviously meant Yukos.
Thursday, April 14, 2005
Mammoth's Join Hands for North Russia's Oil- & Gasfields
04.14.2005 rzd-partner news - LUKoil and ConocoPhillips are sure they will get through all legal procedures within the month to establish a joint venture, which will work fabulously rich LUKoil-held deposits in the northern part of the Timan-Pechora oil-and-gas bearing province in European Russia's extreme continental north. Vaghit Alekperov, LUKoil President, and Jim Mulva, ConocoPhillips President and Director General, met in conference today to discuss their companies' strategic alliance, LUKoil PR say in a press release. The conferees also took stock of partnership prospects in third countries, where they also have a chance to join hands. Corporate partnership closely complies with previously made understandings, the bosses pointed out. German Gref, Russia's Minister of Economic Development and Trade, and Yuri Trutnev, Minister of Natural Resources, received Messrs. Alekperov and Mulva together to evaluate prospects of LUKoil/ConocoPhillips partnership in and outside Russia, says the release. ConocoPhillips won an auction of September 29, 2004, to acquire a 7.59% block of federally held announced and issued LUKoil ordinary shares at $1.988 billion. According to information circulated at that time, LUKoil and ConocoPhillips intended to establish a joint venture to prospect and extract petroleum and natural gas in Russia, with LUKoil to hold a 70% block, and ConocoPhillips the other 30%. As the joint venture contract has it, ConocoPhillips will pay LUKoil more than $370 million for a 30% share of LUKoil petroleum and gas resource rights, and additional sums for 30% of joint venture-related companies' circulating capital and for a similar share of capital investments LUKoil has made in the prospective joint venture's oil- and gasfields since January 1, 2004. Joint venture management will be up to LUKoil and ConocoPhillips on parity arrangements. The venture is expected to produce and sell an approximate daily 200,000 barrels of petroleum by 2008. All extracted petroleum will be piped to a LUKoil terminal in Varandei, a township on the Barents Sea coast in the Nentsi autonomous area, northernmost continental part of European Russia. From Varandei, the oil will go on by tankers to transnational markets. LUKoil intends to build up the terminal throughput to a daily 240,000 barrels by 2007. ConocoPhillips will take part in designing and funding the seaport enlargement project, reports RIA-Novosti.
LUKoil and ConocoPhillips heads meet Russian officials
RBC, 13.04.2005, Moscow 18:38:52.LUKoil president Vagit Alekperov and ConocoPhillips president James Malva have met today to discuss corporate cooperation and forming a strategic alliance, LUKoil press department has announced. The two top-managers have also met Russian economic development and trade minister German Gref and natural resources minister Yury Trutnev to hold talks on prospects of cooperation between companies in Russia and abroad. The press release reads that before end-April all legal procedures related to the establishment of a joint venture will be complete. The newly established company is to produce hydrocarbons in the Timano-Pechora oil and gas field. The two companies also discussed prospects of cooperation for working abroad. ConocoPhillips has won the tender for selling the state stake in LUKoil amounting to 7.59 percent. Later it boosted its stake in the Russian oil company to 10 percent and ConocoPhillips representative has joined LUKoil board. Under bilateral agreements, ConocoPhillips could increase its stake in LUKoil to 20 percent and is no entitled to sell LUKoil hares within a four-year period.
Wednesday, April 13, 2005
Deripaska Enters Oil Business
April 13, 2005 By Maxim Filimonov Reuters LONDON - Basic Element, controlled by metals tycoon Oleg Deripaska, wants to set up its own independent oil company over the next two years and float its shares in London, the head of the company said. Russia's oil market, shaken by the Kremlin's breakup of former market leader Yukos, is dominated by a number of big companies. The role of the state in the strategic sector is only growing, making startups difficult. "We don't want to compete with [state oil firm] Rosneft or LUKoil. We want to buy deposits to serve our petrol stations and become an independent company," Basic Element's managing director David Geovanis said in an interview. He said the new company would eventually have annual oil production of 4 million tons (80,000 barrels per day) and around 80 million tons in reserves. By comparison, oil major LUKoil produced 1.69 million bpd last year. Basic Element's biggest asset in Russia is RusAl -- the world's No. 3 primary aluminum producer, with ambitious expansion plans. It also has a timber business. "I think Russia has three driving forces worth developing: oil and gas, metals, and timber," Geovanis said. "In metals we've already got RusAl, in timber we're building up the Soyuzbumaga holding company, but in oil we haven't had anything so far." Basic Element has already made cautious steps into the oil sector: It has acquired the relatively minor Afipskoye refinery and a small network of petrol stations in southern Russia. Geovanis said the company's goal for the moment was to establish its own raw materials base. It is eyeing deposits in Western Siberia, as well as in the Urals and in Kazakhstan. The firm had already bid unsuccessfully in several tenders for oil assets but the company based its investment case on a $25 oil price, meaning its offers of 70 cents per barrel of reserves were trumped by winning bids of up to $3, he said. With oil prices running above $50 per barrel, the firm might now have to double the amount it is prepared to pay, he said. After the company is up and running, at least 20 percent to 25 percent of it will be offered in an initial public offering on the London Stock Exchange to raise money for the firm's further development, he said. "Our aim is to get access to cheap Western money," Geovanis said. He added the oil company may also tie up with a foreign firm to develop oil in Russia, adding that Basic Element was currently in talks with at least two foreign companies.
LUKOIL CONFIRMS NATURAL GAS AMBITIONS
04-13-2005 Moscow. (RIA Novosti economic commentator Vasily Zubkov) - Russia is planning to produce 633.7 billion cubic meters of natural gas this year. In 2004, it produced 591 billion cubic meters, with Gazprom accounting for 92.3% of the total. The rest came from "independent producers" or oil companies and organizations that specialize in natural gas production, such as Novatek and Nortgaz to name but two. The share of these market participants will no doubt grow: LUKoil, Yukos, TNK and other companies have already declared their far-reaching ambitions. LUKoil head Vagit Alekperov, for example, considers natural gas business to be the foundation for the company's stable long-term development. Many independent producers could step up their output drastically today. But since Gazprom is a transport monopoly, it alone fixes prices for natural gas purchases, which means the "independent" producers, who do not have their own transport facilities, have to sell their natural gas to Gazprom at one-fifth of the export price. How can this Gordian knot be cut to satisfy everyone? And how can the state's interests be upheld? After all its long-term energy strategy states that the non-Gazprom share of natural gas production should be raised to 20%. This is perhaps why every natural gas market player is closely monitoring a LUKoil project in the Yamal-Nenets autonomous area, as mechanisms that could help solve a great in the future may be evolving there. The company's Nakhodkinvkoye gas deposit, which was recently put on stream in the Ob estuary, should produce a total of up to 11 billion cubic meters of natural gas in 2005-2006. The deposit's gas resources total more than 250 billion cubic meters, plus about 9 million tons of oil. Taking the Bolshekhetskaya depression on the Yamal Peninsula as a whole, where LUKoil wants to develop four more fields, the aggregate reserves come in at an estimated trillion cubic meters of natural gas, 38 million tons of gas condensate, and over 70 million tons of oil. The Nakhodkinskoye deposit is only the beginning of LUKoil's natural gas projects in the region. In two years' time, when the deposit reaches design capacity, its annual output will rise to 10 billion cubic meters a year. This will be about a quarter of all the natural gas produced by LUKoil. The oil giant has already spent $400 million on developing the new field, with one-third going on the construction of a 117-kilometer pipeline, including a 22-kilometer stretch on the bottom of the Tazovskaya Bay. The new gas pipeline has linked LUKoil gas wells (out of the 31 drilled 22 have already been commissioned) with the nearest gas compressor station, Yamburgsky, which is the starting point of Gazprom's long-distance pipelines. In October 2003, long before the Nakhodkinskoye deposit was launched, Gazprom and LUKoil signed a contract on the delivery of all LNG they produce at a fixed price per 1,000 cubic meters for a period including 2007. The partners agreed that as prices grew on the domestic market they would review purchase prices. This contract is now supplemented by a general agreement on strategic partnership between the two companies for 2005-2014, which was signed two weeks ago in Moscow. Gazprom chief Alexei Miller has described the agreement as a fine example of mutually beneficial long-term cooperation between Gazprom and independent gas producers. Alekperov, for his part, pointed out that the joint use of Gazprom's and LUKoil's production and scientific capabilities, as well as their labor and financial resources, would boost Russia's economic development and strengthen both companies economically. LUKoil's official spokesman, Dmitry Dolgov, has not ruled out the possibility that if natural gas production far exceeds transportation capabilities, the gas concern and the oil company may start working together on new infrastructure projects in the region. The time may arrive soon enough. Gazprom itself is considering gas production on the Yamal Peninsula as early as 2008. The initial production level has been put at 15 billion cubic meters, rising to 45-60 billion cubic meters by 2010. Moreover, there is an idea to build a large gas liquefaction plant in Yamal, although for many the transportation of LNG across the polar seas, rather than production itself, is a frightening prospect.
Tuesday, April 12, 2005
TNK-BP DOES NOT INTEND TO REVISE ITS PLANS OF INVESTMENTS INTO RUSSIA
LONDON, April 12 (RIA Novosti correspondent) - The TNK-BP company still has long-term plans for investments into Russia, the company's president Robert Dudley said, addressing the eighth Russian Economic Forum in London. According to our business plan in 2005, the investments are planned at the level of $1.8 billion , Mr. Dudley said. He did not mention the tax claims made to the TNK-BP yesterday. However, he expressed concern about a number of negative circumstances which may undermine the confidence of foreign investors in Russia. The investors, and not only foreign ones, are not always fully confident in the situation, the businessman said. Not all changes are viewed as positive. According to Mr. Dudley, the state continues to increase its influence, creating the elements of a command-administrative economy. He also pointed out the cases of a selective use of the laws. Mr. Dudley also expressed concern about a new draft law "On Mineral Resources," under which the companies with a foreign participation would be limited in the rights to develop strategic deposits. We would like to see, he said, more concrete definition of strategic deposits and what share of foreign participation would be liable to limitations.