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Thursday, March 23, 2006

Russian gas to be supplied to China both from Western and Eastern Siberia

03-23-2006 - Russian president Vladimir Putin told reporters in Beijing that a gas supply agreement signed by Gazprom and China National Petroleum Corporation (CNPC) provides for the delivery of gas from both Western and Eastern Siberia. Putin said in response to reporters' questions that "Exports from Western Siberian would be easier and faster." According to him, this supply project provides for possible construction of a new pipeline transport system with the working name Altai via Russia's western border with China. As for the Eastern route, there are "no questions", according to the president. He noted that this is the second stage in the development of Russian-Chinese energy cooperation. Putin pointed out that Russia and China already know what gas supply volumes they can expect via the Eastern and Western routes. "This is about 30-40 bcm of gas per year. Eastern and Western Siberia have enough resources for this," he said.

Chinese Go for the Resources

03-23-2006 KommersantVladimir Putin and Hu Jintao strike energy deal
The memoranda signed in China yesterday by Russian President Vladimir Putin marks the creation of a new energy alliance between the countries that increase China's energy security and allow Moscow to sell oil, gas and electricity profitably. It was made clear yesterday that the right to export fuel will remain firmly in the hands of state companies Gazprom, Rosneft and RAO UES of Russia.
Full story...

Russia To Supply Large Quantity of Gas to China

 22.03.2006 09:38 [] - Russia and China have settled a contract to deliver gas through pipes from Siberia to China. Officials said the pipelines, which could begin supply within five years, would deliver up to 80bn cubic metres of gas annually. The agreement came as part of a raft of economic deals signed between the two sides during the visit to Beijing of Russian President Vladimir Putin. But there was no deal on a separate pipeline to deliver Siberian oil. Gazprom's chief Alexei Miller said that the timeframe and the scale of the deal had been agreed with China's oil and gas company, CNPC, but he said the financial details were yet to be negotiated. The two sides have signed 15 agreements to promote commercial co-operation, including four relating to the energy sector.

Kazakhstan Postponed Tenders Calling for New Oil Blocks

Kazakstan flag22.03.2006 10:06 [] - Kazakhstan has postponed its plans to call tenders for new offshore oil blocks there, said Kazakhstan's Energy Minister Baktykozha Izmukhambetov. It could happen because of severe criticism of 2005 tenders voiced by Kazakh President Nursultan Nazarbaev. In Kazakhstan, today’s highlight is speeding up crude production at existing projects, primarily at Kashagan field, Kommersant reported. Kazakhstan, which holds the largest oil reserves in the Caspian Sea, has apparently decided to boost crude production for the account of today’s projects instead of calling tenders and selling licenses for new offshore blocks of the Caspian Sea. In this undertaking, the biggest hope is the $30-billion Kashagan field. Anyway, Kazakhstan doesn’t intend to sell licenses for new Caspian deposits in 2006 and the moratorium could be prolonged further on.

Wednesday, March 22, 2006

First Luksar gas well in Saudi Arabia set for October - official

MOSCOW, March 22 (RIA Novosti) - Russian-Saudi Arabian joint venture Luksar will complete drilling of its first well in the Mideast kingdom in October, the company's press service said Wednesday. Lukoil Overseas holds an 80% stake in Luksar, with 20% belonging to Saudi major Aramco. In January 2004, Lukoil won the tender to develop the 29,000-square-mile (11,200-square-mile) Block A natural gas field in the Rub el Hali desert. Lukoil signed a 40-year contract with the Government of Saudi Arabia to explore and develop the natural gas deposit. The Russian energy major says there are large natural gas resources in the north of the desert.

Russian oil production to hit 10.2 mln bbl/d in 2009 - scenario

MOSCOW, March 22 (RIA Novosti) - Russia's oil production is expected to reach 495 million metric tons (9.9 mln bbl/d) in 2007, and 507 million tons (10.2 mln bbl/d) in 2009, an increase of 5% and 8%, respectively, against 2005, a Cabinet spokesman said Wednesday. He said the figures were part of a draft microeconomic scenario of Russia's socio-economic development in 2007-2009 that was set to be discussed in a government meeting Thursday. The document also contains new tax proposals, including gasoline taxes based on quality and tax holidays for Eastern-Siberian deposits, alongside a tax-reduction mechanism for deposits in the final stage of development to complete projects by the earliest possible date. The Federal Statistics Service said Russia's oil production in 2005 totaled 469.6 million tons (9.4 mln bbl/d), a figure that is expected to grow by 2-2.5% (to 479-481 mln tons or about 9.6 mln bbl/d) in 2006 according to Industry and Energy Minister Viktor Khristenko.

Thursday, March 16, 2006

Rosneft President to Face Charges of YUKOS Minors

3/16/2006 - Rosneft President Sergey Bogdanchikov is ready to face charges brought in by the YUKOS minors. His lawyers have applied for extending the term of response to claimants. Similar to ministers Viktor Khristenko and Alexey Kudrin, who had been also served with the writs of summons under this suit, Bogdanchikov had been denying the mere fact of being given the writ up to the last moment but filed the appeal to the U.S. Columbia Court just in time. For Sergey Bogdanchikov, the term of responding to claims of the YUKOS minors expired on March 6. On the same day, Weil, Gotshal & Manges LLP that acts on behalf of Rosneft president on the one hand, and lawyers of the claimants on the other hand, filed an appeal seeking prolongation of the term in the court. Past October 24, twelve minors of YUKOS went to the District Court of Columbia against the Russian Federation blaming on defendants the deliberate attack on YUKOS, which led to the actual "re-nationalization of YUKOS" by disposal of its production arm, Yuganskneftegaz. The case is bound to be long remembered not only because of the essence of claims. Just the mere method of serving the writs of summons is interesting. The officers of justice tend to present writs and respective notifications to top-ranked officials of Russia in time of their trips to the foreign countries. Russia's Industry and Energy Minister Viktor Khristenko, for instance, received the documents in the United States past October 25, in time of the party staged in honor of Russia's delegation. Finance Minister Alexey Kudrin was caught off-guard January 12, when he arrived in Washington to deal with G8 business. Sergey Bogdanchikov was served with the writ February 14, before making a report during the World Oil Week held in London. Another tradition is that the persons notified under the case start by denying the receipt of the writs of summons. Nevertheless, they prefer to condescend to negotiating with the claimants' lawyers some time later. On February 1, for instance, the lawyers of Khristenko, Kudrin, Gazprom, Rosneft and Rosneftegaz filed a joint appeal for establishing the sole and final date of response to all claims of the YUKOS minors. Pursuant to the appeal, which was upheld February 8, such term is 60 days starting from the date when Russia's Foreign Ministry receives notification concerning the suit against the Russian Federation. Sent via the U.S. State Department, the court documents were not submitted as of the end of past week, according to Thomas Johnson, a partner to Covington & Burling, which stands for the claimants.

LUKoil consolidates Kazakh assets

3/16/2006 Analytical department of RIA RosBusinessConsulting - The company is taking over its partner in the Karakuduk oilfield project, Chaparral Resources -
LUKoil is strengthening its position in Kazakhstan. On Monday it announced the acquisition of its partner in the Karakuduk oilfield project, Chaparral Resources, for $88.6 million. This is seen as a fair price. The purchase will allow LUKoil to develop an oilfield with proven reserves of 45.3 million barrels of oil, or about 6 million tons. LUKoil is expected to continue its aggressive policy in Kazakhstan, but it is unlikely to make large acquisitions there. Chaparral Resources operates exclusively in Kazakhstan. Its ordinary shares are traded over the counter in the United States. LUKoil Oversees has a 60 percent stake in Chaparral Resources (the stake had been owned by Nelson Resources, which LUKoil purchased in December 2005). Chaparral Resources and LUKoil Oversees jointly own KarakudukMunai, a Kazakh company which holds a license for the Karakuduk field. Karakuduk ("Black Well"), 68 square meters in size, was opened in 1972. McDaniel & Associates estimated its proven reserves at 45.3 million barrels of oil. The oilfield produced 3.5 million barrels of oil in 2005, up 30.6 percent on the year. LUKoil Oversees, operator of LUKoil's international projects, signed a takeover contract with Chaparral Resources. The deal is expected to be completed in May 2006. At the first stage, LUKoil Oversees will buy Chaparral Resources stock owned by other shareholders. The recommended price is $5.8 per share, 12.3 percent above the average price of Chaparral Resources shares over the past 30 days. LUKoil will pay about $88.6 million to buy Chaparral Resources shares from other owners. The value of Chaparral Resources' proven oil reserves will be $8.1 per barrel. Analysts say this is a fair price. "When LUKoil purchased Nelson Resources last year, it paid $7.4 per barrel," said Denis Borisov, an analyst with IFK Solid. Alexander Blokhin, at Antanta Capital, thinks the insignificant gap in prices is within normal price fluctuation. Chaparral Resources is an active oil producer, which lowers geological risks. "Besides, political risks in this region are much lower than, say, in South America, where LUKoil also has projects," he added. China's CNPC had offered to pay $10.6 per barrel of PetroKazakhstan's proven reserves. "So, the price paid by LUKoil is within the acceptable price range," Borisov told RBC Daily. Interest in Kazakh oil and gas reserves has been very strong in recent years, observers say. "During the Soviet era, Kazakhstan was seen as the second largest oil-bearing province after Western Siberia. Kazakh authorities see Russian companies as a counterbalance to the aggressive expansion by Chinese oil producers, that is why they support LUKoil," Blokhin noted. Borisov thinks demand for Kazakh oil is set to rise while the world's largest oil suppliers in the Middle East are becoming less popular due to instability in the region and small chances of opening new huge reserves there. Acquisition of Chaparral Resources could become LUKoil's last major acquisition in Kazakhstan over the next few years. LUKoil President Vagit Alekperov said on Monday that his company was unlikely to make further acquisitions in Kazakhstan in 2006, but it would instead concentrate on restructuring its assets in the republic. Experts offer various explanations for LUKoil's decision to halt its expansion to Kazakhstan. "The company wants to focus on its gas and processing projects," Borisov said. Blokhin believes the company was faced with the problem of transporting oil from the region, which it hopes to solve by building a pipeline through Azerbaijan. Or perhaps there are no more interesting assets left in Kazakhstan. But this does not mean that LUKoil will not make acquisitions abroad at all. According to the latest information, it plans to buy a stake in the Serbian oil refinery Naftna Industrija Srbije, with annual sales of EUR 1.8 billion. According to the British newspaper The Business, LUKoil is also eyeing an Italian oil refinery owned by Libya's Tamoil offering valued at $2.5 billion. Despite those large-scale acquisitions, LUKoil is expected to continue buying minor stakes in Kazakh oil producers.

Gas OPEC and Russian - Algerian gas agreements

MOSCOW. March 14 (Igor Tomberg for RIA Novosti) - The visit by Russian President Vladimir Putin to Algeria in the first half of March 2006 was brief but very productive. The media front-paged Russia's readiness to write off Algerian debts in exchange for the purchase of arms. But the main success of the visit was achieved in energy cooperation. First, the talks produced additional preferences - a monopoly right of Russian companies to oil production in the Sahara Desert. Algeria is Africa's third nation in oil reserves after Libya and Nigeria. Specific agreements on energy cooperation will be reflected in the documents some time later. They include a memo of mutual understanding between LUKoil and the Algerian Sonatrak petrochemical company. Gasprom will also sigh a similar document with the latter. The second, and most important point is that the results of the gas negotiations are very promising for Russia. Gazprom CEO Alexey Miller said that his company and Sonatrak would jointly produce gas and develop deposits in the north of Africa. "We will help Algeria upgrade its production systems. They will share with us their priceless experience in gas liquefaction. In the 1960s Algeria became a pioneer in this field. Now Moscow is going to produce liquefied gas as well", stressed Miller. Algeria has already promised to take part in building infrastructure for the production of liquefied natural gas (LNG) in Russia, he added. Importantly, Russia and Algeria are going to work together in the European market. In theory, Algerians may receive a portion of Russian contracts for the supply of Europe with gas. But the sides prefer not to reveal the details of their agreements. Algeria ranks seventh in the world in natural gas reserves and fourth in its exports - 60 billion cu m a year - after Russia, Canada, and Norway. Algeria exports its natural gas via pipelines to Italy, Spain, Portugal, Tunisia, and Slovenia. Its LNG goes to France, Spain, the U.S., Turkey, Belgium, Italy, Greece and South Korea. The Russian President's visit has sealed last January's agreements, which give Gazprom access to deposits in Sahara. The Russian monopoly will fulfill some of its commitments by delivering Algerian gas to Spain. The results of the President's blitz-visit to Algeria should be viewed in the context of Moscow's strategic goal to turn Russia into a global energy leader. The situation in the developing gas market is very important in this respect. The formation of the market inevitably generates a package of new mutual dependencies and geopolitical groups, production and cooperation chains and price cartels, which may be regional or even global. By entering world trade, natural gas is turning into a decisive factor of sustainable development. An international forum of natural gas exporters, set up in 2001, is so far playing an advisory role, but it is becoming increasingly important in the world gas market. Russia is gaining more and more weight in it. It is possible that natural gas exporters will soon turn into a kind of gas OPEC, which will be indisputably led by Russia. Experts have come up with this idea when Russia started coordinating different aspects of its gas policy (pricing, above all) with Kazakhstan and Turkmenistan. Gazprom is suspected of a striving to fulfill its external contractual commitments by using resources of neighbors. This maneuver will enable Russia to become a gas integrator on the entire post-Soviet space. Russia will set prices at the future integrated market, concludes the report compiled by joint efforts of Stanford and Huston Universities in 2005. Its authors played several scenarios before arriving at this conclusion. It looks like these scenarios start materializing. In mid-November 2005, Kazakhstan and Russia signed an agreement on gas transit from Turkmenistan and Uzbekistan. De facto Gazprom has taken control over the gas resources of these three republics. Russia, Kazakhstan, Turkmenistan, Uzbekistan, and Iran have tremendous reserves of gas and are actively developing its production and transportation infrastructure. Their cooperation and common political interests are a prerequisite for the formation of a major regional gas alliance. The absence of gas markets in India, Pakistan and China makes this idea even more appealing. Moreover, gas is expected to account for up to 70% of the increase in the demand for energy. Growing tensions between Western gas consumers and Muslim gas producers in the Middle East will further encourage gas producers to set up the alliance. Today, we are witnessing the exacerbation of the conflict between the West and Iran. Or take another scenario - a riot of ethnic North Africans in France. In these conditions both Iran and Algeria would like to strengthen their positions as energy suppliers. The Russian-Algerian gas agreement is a major step for this North African country towards joining the future cartel of gas exporters. Since Europe views it as Russia's major rival in its gas market, this step will make the future gas alliance supra-regional, and will consolidate the positions of all producers at the talks with consumers. Russia's G8 Presidency makes it an obvious leader in this still informal international forum. Analysts will see the Algerian visit of President Putin and its oil and gas results in the context of a would be gas OPEC under Russia's strong influence. (The author has a doctorate degree in economics, and is a leading expert at the Institute of Economics of the Russian Academy of Sciences.)

Oil prices to stabilize at $50-60 per barrel soon - OPEC

MOSCOW, March 16 (RIA Novosti) - Oil prices will stabilize at $50-60 per barrel in the near future, a senior OPEC official said Thursday. "In my opinion, oil prices will in the next several years stabilize at the level of $50-60," Adnan Shihab-Eldin told journalists on the sidelines of a meeting of G8 energy ministers in Moscow. "Recent growth is unlikely to repeat." Eldin said that if the Organization of the Petroleum Exporting Countries managed to stabilize oil prices it would make forecasting easier in future.

Sunday, March 05, 2006

65% of Russian Oil Refineries Outdated

Photo by Olga Kuznetsova, MosNews.com03.03.2006 MosNews - Sixty-five percent of Russia's oil refineries are outdated and in need of major reconstruction work, the country's Deputy Economy Minister Kirill Androsov said on Friday, March 3. Speaking at a meeting of the Federation Council, upper house of the Russian parliament, Kirill Androsov said that an economic motivation for reconstruction of oil refineries must be provided by using them to produce higher-quality fuels. "A stimulus for reconstruction must be provided not by nationalizing them, but by using higher-quality fuels. When it's profitable to use high-quality gasoline, oil companies will produce it," Androsov said, quoted by RIA Novosti. He added that this could be done by lowering duties on high-quality fuels. "The Economic Development and Trade Ministry does not think that dividing vertically integrated oil companies would provide an additional motivation for reconstructing oil refineries," he said. When asked about the price of regular AI-92 grade gasoline sold at gas stations across Russia, he said that "30 percent [of the price] goes to operational costs, 50 percent goes to tax and duties, while the profit to companies — from oil field to gas pump — amounts to 20 percent." However, Androsov said, exerting direct state regulation on retail prices for oil products would not resolve the problems of rising fuel prices. "We have the example of Ukraine, where as a result of such regulation, supply volume of oil products shrunk by 50 percent, and within two weeks the Ukrainian government admitted its mistake." The gasoline price could be lowered by reducing the tax burden, he said. "Our efforts should be focused on the tax part of the gasoline price, in particular excises and mineral resource extraction tax." The deputy minister also said that a government resolution had been drawn up on motivating and organizing an exchange for trading in oil products.

Thursday, March 02, 2006

TNK-BP Replaces 137% of Production with New Reserves

02/03/2006 (11:05) RZD News - TNK-BP has released the results of the independent audit of its reserves as at the end of 2005. This represents the third complete audit of the company’s reserves since its creation in August 2003. The independent firm of DeGolyer and MacNaughton conducted the audit to criteria stipulated by both the United States’ Securities and Exchange Commission (SEC) and the Society of Petroleum Engineers (SPE). The audit confirms that as at December 31st 2005, TNK-BP’s Total proved Reserves were 8.230 billion barrels (liquids only), applying SEC methodology on a life of field (LOF) basis. Of these, Proved Developed reserves were 6.108 billion barrels. This constitutes a Total Proved SEC (LOF) reserve replacement factor of 137%; exceeding the company’s enduring annual objective of at least 100% reserve replacement under these criteria. These figures are adjusted for the sale of assets in 2005. Before the adjustment the SEC (LOF) reserves replacement factor is 149%. Under SPE criteria, Total Proved reserves were 9.229 billion barrels (liquids only). SPE Proved Developed reserves were 6.108 billion barrels. This represents a 125% Total Proved SPE reserves replacement rate after the adjustment for divestments. Before the adjustment for assets sold in 2005, the SPE reserves replacement factor is 139%. The audit results do not include reserves or resources associated with the ownership of 50% of Slavneft by the shareholders of TNK-BP. Nor do they include any figures for gas. In 2005, TNK-BP grew oil production by 6.4% to 77 million tons (average daily production of 1.58 million barrels of oil per day). This compares with Russian industry average figure of approximately 2.4%.The main drivers behind the strong reserve replacement figures were targeted drilling and well work activity and 2005 exploration success. President and CEO of TNK-BP, Robert Dudley said: "This is another very pleasing result in a vital area of our business, as well as a positive contribution to Russia’s reserves. It is also a clear demonstration of the benefits of investing in new technologies and applying them to our existing asset base.”

Russian Diamond Monopoly Bought Oil Company

01.03.2006 14:15 [] - Russia's diamond giant ALROSA has acquired 50.4% interest in oil company Sakhaneftegaz on 6th February, 2006. Sakhaneftegaz is not engaged in any independent production activity and is a holding company that owns controlling stakes in a few oil & gas companies in Sakha (the republic of Yakutia), including 92.6% in Gazprom's unit Yakutgasprom and 85.5% in Lenaneftegaz. The controlling stake in Sakhaneftegaz was acquired from structures close to BIN Bank. ALROSA’s financial advisor in this transaction was TRUST Investment Bank.

TNK-BP Unit To Be Acquired By China or India

01.03.2006 11:02 [] - Russia's state-run firm Sibneft and private oil company Russneft have decided not to bid for Russian oil major TNK-BP's subsidiary Udmurtneft. Thus the only bidders for TNK-BP unit are China’s Sinopec and a joint venture between India's ONGC and Russian gas producer Itera. Udmurtneft produces 120,000 barrels per day and has reserves equivalent to around 1 billion barrels, but its fields are located far from TNK-BP's core Siberian fields. Some sources have said the asset carries an estimated value of around $2-$3 billion and a source close to the situation said that both Sibneft and Russneft, which has already bought several assets from TNK-BP, have decided the price is too high.

Chevron Eyes 25% of Shtokman Gas Project

02.03.2006 10:17 [] - US oil and gas company Chevron is hoping to win the development of a quarter of Russia's huge Shtokman gas project. Chevron is one of five firms shortlisted by Gazprom for the project, which involves developing the Shtokman gas field in the remote and iceberg-strewn Barents Sea to produce liquefied natural gas (LNG) for sale to the U.S. market. Each contender hopes to take part ownership of the vast field, which contains around 3.5 trillion cubic metres of gas.

TNK-BP receives bids for Udmurtneft tender

RBC, 01.03.2006, Moscow 15:36:44. – TNK-BP has received nearly 10 bids for the purchase of its subsidiary Udmurtneft, TNK-BP's Executive Director for gas development Viktor Vekselberg told journalists. The bids include offers from foreign businessmen, he added. Vekselberg also confirmed that TNK-BP intends to issue eurobonds this year. According to unofficial data, Sibneft and Russneft have withdrawn their bids, leaving two international consortiums as the main contenders for a 96.9 percent stake in Udmurtneft. These are ONGC and Itera, and Oil India and the Northwestern oil group. Udmurtneft is developing 23 oil fields in the Udmurtia region and produces approximately 6m tons of oil annually. The tender is likely to be held in April.

Crude-oil export duties to be hiked from April 1

MOSCOW, March 1 (RIA Novosti) - Russian crude-oil export duties will increase by $25.60 per ton to $186.40 ($25.40 per barrel) starting April 1, a Finance Ministry official said Wednesday. Alexander Sakovich, deputy head of the ministry's customs payments department, said current crude export duties, introduced on February 1, were $160.8 per metric ton ($21.9 per barrel). He said the new duties for light crude may be $137.9 per metric ton, and for heavy crude $74.3 per ton. Crude exports accounted for 34.6% of Russia's total exports in 2005, and 54.1% of its fuel exports, against 32.1% and 56.2% respectively in 2004. Export duties are determined once every two months in accordance with global prices for Urals crude.

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