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Monday, August 28, 2006

Court Rejects Yukos Appeal Against Bankruptcy Verdict

Photo: AFP23.08.2006 MosNews - The Moscow Arbitration Court on Wednesday rejected an appeal by lawyers of the shattered Yukos oil company of a decision declaring the company bankrupt, the Associated Press news agency reports. The court had declared Yukos bankrupt on Aug. 1, upholding an earlier vote by the company's creditors —- a group dominated by the tax authorities and the state oil company OAO Rosneft. Court officials could not immediately be contacted to confirm the decision. The bankruptcy is seen as the final act in a politically charged campaign that has led to the company's dismantling against massive back tax claims and the imprisonment of its founder, Mikhail Khodorkovsky. Kremlin critics call the case a drive to recapture influence in the oil sector by transferring Yukos assets to state companies, and a simultaneous crackdown on Khodorkovsky's perceived political aspirations. Rosneft and state gas monopoly OAO Gazprom are expected to acquire the remaining Yukos assets as they are liquidated to pay off creditors. Rosneft acquired the biggest Yukos production unit following its auction in December 2004 against a part of the company's tax bill.

Sakhalin Energy Suspends Construction

Aug 28.2006 Kommersant News - Sakhalin Energy that is the subsidiary of British-Dutch Shell and the Sakhalin-2 operator has suspended construction of some of the ground-surface pipelines. The official reason is that the company itself revealed violation of technical provisions. But more likely than not, it is the response to Federal Service for Natural Resources Supervision that harbors doubts about ecological safety of the project and which claims could be used by Gazprom to get 25 percent in Sakhalin Energy. Sakhalin Energy representatives said the company suspended construction of two ground-surface pipelines in the dangerous landslide area of Makarovsky uplift of the Sakhalin Island, as the recent inspection revealed some cases of technical provisions' violation by the subcontractor. The dates of the project won't be affected, they pointed out. By strange coincidence, Russia's Federal Service for Natural Resources Supervision completed its check on the oil/gas pipelines past week. The results haven't been disclosed so far, but Oleg Mitvol, who is the deputy chief of this supervisory authority of Russia, announced in early August that, according to his data, Sakhalin Energy failed to take all actions required to eliminate the danger of the mud flow. It is Russia's state monopoly, Gazprom, that benefits from close attention paid by the Federal Service for Natural Resources Supervision to the project. Since 2005, Gazprom has been negotiating with Shell the transfer of 25 percent in Sakhail-2 and the claims of federal authorities may curtail the price of the asset. Sakhalin-2 project is carried out under the Product Sharing Agreement (PSA). Its operator is Sakhalin Energy that is a venture of Royal Dutch/Shell (55 percent), Japanese Mitsui (25 percent) and Mitsubishi (20 percent). The developed fields are Piltun-Astokhskoe and Lunskoe with recoverable resources estimated at 150 million tons of crude and 500 billion cu meters of gas. First deliveries of LNG are slated for summer of 2008.

Tuesday, August 15, 2006

U.S. Welcomes Russian Energy Investments

10.08.2006 - MosNews - The United States welcomes Russian investments in Central Asia and China, Deputy Assistant Secretary of State for European and Eurasian Affairs Matthew Brize told reporters on Wednesday, Aug. 9. Brize added that Russian investment will help to strengthen the region's energy sector. The U.S. official expressed his belief that Russia will continue to be the key player in the energy market as long as this market exists. He added that the role of Shanghai Cooperation Organization in the regional economic development has been positive. Brize, who was quoted by the Itar-Tass agency, also said that energy cooperation in the Caspian region was impossible without Russia. He emphasized that 40 percent of all Caspian projects, which the U.S. administration has been promoting in recent years, are linked with Russia. Speaking about the recently-launched Baku-Tbilisi-Ceyhan oil pipeline, which received support from the United States, Brize explained that the U.S. adminsitrations views the pipeline as means to avoid monopoly on the oil and gas markets. The U.S. government plans to use the Baku-Tbilisi-Ceyhan pipeline to attract Turkey to the development of the Caspian and Caucasus regions.

Moscow Court Confirms $130M Back Tax Claim Against Russian-British Oil Major TNK-BP

14.08.2006 MosNews - A Moscow arbitration court has confirmed a $130 million back-tax claim for fiscal 2001 against Russian-British joint venture TNK-BP, Russian newspapers reported on Monday, Aug. 14. TNK-BP, Russia's third-largest crude producer, had disputed the tax claim before the court ruling last Friday, Aug. 11,, business daily Vedomosti said. Analysts at investment bank UFG Deutsche Bank said that the claim was a modest one for TNK-BP, but added that it "lessens its chances of reducing another back-tax claim of about $2.1 billion dollars". TNK-BP, which has set aside $1.5 billion in view of numerous tax claims against it, could not be reached for comment. Fiscal claims, which are common in Russia due to frequent changes in legislation, are one of the key risks facing businesses, and are frequently condemned by businesspeople as a means of exerting pressure on them. TNK-BP is 50 percent held by BP PLC and 50 percent by the Russian groups Alfa Group and Access/Renova.

Tuesday, August 08, 2006

Chinese Import of Russian Oil to Rise to 15 Mln Tones

08/08/2006 (12:34) RZD News - Chinese import of Russian oil is expected to rise to 15 million tones in 2006, while China imported 12.78 billion tones last year, said Chinese Deputy Minister of Trade Yu Guangzhou, as quoted on Tuesday by the Renmin Ribao newspaper. Russian oil deliveries to China are expected to be on the rise. According to the representative of the Chinese Ministry of Trade, the project of an oil pipeline is now on the drawing boards from the Russian border to China with an annual throughput capacity of 30 million tones. It will be 1,030 kilometers long, and only 63 kilometers of the total will run across the Russian territory. These 63 kilometers is a siding of the Eastern Siberia-Pacific oil pipeline, under construction now in Russia. The siding will run from the city of Skovorodino, Amur Region, the closest point to the Chinese border. The pipe will be built there by the end of 2008, reports ITAR – TASS.

Crude Oil to Soar to $250/Bbl

Aug. 08, 2006 Kommersant - The prices for crude oil soared again yesterday. Sept futures for Light Sweet climbed to $76.40 a barrel (the record is $78.4) on discovery of corrosion in Trans Alaska pipeline, which forced BP to halt daily deliveries of 400,000 barrels. The breakdown coupled with summer car trips of Americans and continued military campaign in Lebanon abruptly hiked the prices by more than $1. The shortage of Alaska crude looks trivial vs. the threat of Iran to use the so-called energy weapon, if the United States imposes sanctions against Tehran. Iran warned the prices may reach $200 in this case. But the worst will happen only if Iran not only stops deliveries but also blocks the Strait of Hormuz passed by oil tankers from Kuwait, Saudi Arabia and the United Arab Emirates. As more than 15 million barrels of crude are daily shipped via the Hormuz, i.e. nearly 40 fold more than via Trans Alaska, the sharp reduction in deliveries will trigger global recession similar to the one happened in 1980 to 1982 and fuel the prices to $250, according to S&P. Still, the most probable scenario is the end of the Lebanese conflict and the following adjustment in crude prices to $70 by the end of 2006 and to $60 by late 2008. The United States and Asia will maintain the rates of growth, while Europe will accelerate. Another option is denial of Arab states and Venezuela to export crude to the United States exclusively. Should it happen, the prices may hit $90 but it won't last long. The embargo won't be strict, so once the crude reaches the ocean, it will go where the money is, S&P forecasts.

Russia to Amend PSA

Aug. 07, 2006 Kommersant - Russia's Energy and Industry Ministry presented Friday the draft report on progress in Product Sharing Agreements (PSA), which emphasized deviations in their technological procedures. Now PSA operators will either have to amend the terms of the agreements or prove that deviations don't breach their provisions. The 2005 report of Energy and Industry Ministry that was presented Friday spotted some shortcomings in all three PSAs of Russia, including Kharyaga field ($800 million invested; French Total is the operator) and two offshore projects in the Sea of Okhotsk – Sakhalin-1 (over $5.6 billion; U.S. ExxonMobile) and Sakhalin-2 (more than $11 billion; British-Dutch Shell). The PSA projects yielded roughly $110.3 million (nearly 3 billion rubles) to Russia past year, said the report. Almost an equal amount went to the budget in state duties for using "Russia" or "the Russian Federation" in the names of the entities. "One of the problem issues is deviating from technological procedures of the fields' development," said the report of Viktor Khristenko's ministry. Project operators are offered either to amend the agreements or confirm that no changes are needed. It is worth mentioning that the ministry calls for no sanctions for the oil companies but urges the Natural Resources Ministry to render assistance in reaching an accord about new technological procedures. But deviations may postpone the time, when Russia starts getting revenues under the projects, Natural Resources Minister Yury Trutnev said some time ago. Kharyaga, for instance, yielded the first profit oil only in 2005. Russia will be short of more than 2 million tons of such oil in 2006 due to the higher drilling costs. Natural Resources Ministry is probing into the Sakhalin-2 project now. The inspection will last till August 20, but the ministry claims already the operator "is changing drilling dates, production level and rates of hydrocarbon selection," which will ultimately shelve the efficient stage of the project. Meanwhile, Industry and Energy Ministry is studying the Sakhalin-2 budget, which the investor urges to extend from $12 billion to $20 billion. Russia's bureaucrats apparently dislike the progress in PSAs, though the root cause could be the general dissatisfaction with such agreements. Moscow introduced product sharing procedures in the wake of the low prices for hydrocarbon, but they are skyrocketing now.

Home Time Running Out for Americans at Shtokman

Aug. 04, 2006 Kommersant - by Natalia Grib - Gazprom's selection of partners for the development of the Shtokman gas condensate deposit is taking on political overtones. U.S. Secretary of Energy Sam Bodman criticized the slow pace of the decision-making process. Deputy chairman of the Gazprom management board Alexander Ryazanov retorted to Kommersant that that was the business of the Gazprom board and not of American officials. The Russian gas monopoly has already begun searching for candidates to replace the American ConocoPhillips and Chevron companies in response to the U.S. position on Russia's WTO accession. Reuter's quoted Bodman yesterday as saying that he hoped the Russian government would make a choice on Shtokman partners soon. That deposit, in the Barents Sea, has proven reserves of 3.7 trillion cubic meters. Gazprom is picking two or three partners from a shortlist of five companies. Those companies are the French Total, Norwegian Statoil and Hydro and American ConocoPhillips and Chevron. Gazprom promised to make its choice this month, but Kremlin sources say that the selection process may take the rest of the year. "Their decision-making process – I find it very difficult to understand, frankly. I suppose it's possible that they never decide," Bodman said. He has reason to worry. Besides the fact that this is the fifth shortlist that has been compiled since the deposit was discovered in 1988, the technology for gas transport is not well enough developed yet to allow a pipeline to be laid to the deposit, due to drifting icebergs. Gazprom is picking partners for only the first of three phases of development of the deposit. At this stage, it is crucial to find technology that will minimize the risk of an ecological catastrophe in the Artic waters. The Norwegian companies already operate in nearby waters, making them attractive partners. The French Total is the world's largest liquefied natural gas dealer. Gazprom is now in negotiations with the Russian Naval Fleet on the use of bays at Vidyaevo, Murmansk Region, for the construction of a liquefied gas plant. After the failure of the Russian and U.S. presidents to reach an agreement of Russian WTO accession, Russian President Vladimir Putin stated that the Norwegian contenders were "professional" and "comfortable" partners for Shtokman. A small Canadian company called Sempra, which has four regasification terminals and a client base in the United States, may be chosen over the American giants as well. Ryazanov is said to have met with Sempra representatives in London recently. A source has also reported that there will be negotiations soon in Moscow on deliveries of gas from Shtokman to Japan. If the American companies are not included in the first phase of the project, they could still be chosen for the second or third phases.

The Sale of YUKOS Begins

Yukos is bankruptAug. 02, 2006 - Kommersant - by O. Pleshanova, D. Rebrov, E. Alexeev
The oil company is declared bankrupt
The fate of YUKOS has been decided. The Moscow Arbitration Court, in compliance with the decision of the YUKOS creditors meeting of July 25, declared the company bankrupt yesterday and placed it in receivership for a year. YUKOS shareholders are concerned that its property, to which Rosneft, Gazprom, Gazprom Neft and TNK-BP have the main claims, will be sold cheap. Experts say that the company has no chance of survival. The court hearing took several hours yesterday as Judges Pavel Markov, Galina Bugaeva and Galina Mikhailova allowed all participants in it to have their say. YUKOS interim receiver Eduard Rebgun said that the company had been operating in the red since 2003 and that 68 percent of its income in 2005 was from dividends from the Sibneft stock it owns. Registered claims by creditors now amount to 491.575 billion rubles, but that figure may rise to 790 billion rubles. The sale of the company's assets is expected to raise 477 billion rubles. The court allowed lawyers to read a statement by Tim Osborn, representative of the YUKOS stockholders and head of Group MENATEP. Osborn accused Rebgun of "manipulation of the figures" and assessed YUKOS' assets at $38 billion. He warned the court against the "sanctioned embezzlement of capital worth $15 billion," saying that he would appeal to foreign courts. YUKOS lawyers asked for a recess in the hearing until other courts, including the European Court of Human Rights, make their decisions on various aspects of the claims against YUKOS. When Rebgun reminded the court that YUKOS had already filed for bankruptcy in the United States (in an attempt to retain possession of Yuganskneftegaz), the court rejected the YUKOS lawyers' request. Rebgun was confirmed by the court as interim receiver. He will manage the sell-off of the company's assets. His salary of 8,664,000 rubles per month, which was recommended by the Ministry of Economic Development and Trade and approved by the creditors meeting, was disputed by Rosneft. That company suggested that 4.5 million rubles per month would be sufficient. The court set his salary at 1.8 million rubles per month. Osborn said that the decision to bankrupt the company was part of the "carefully planned actions of the Russian government" to rid itself of the company and said he expected the company's assets to be sold off for reduced prices. Former head of the YUKOS legal department Dmitry Gololobov, who lives in Great Britain and for whom there is an international arrest warrant out, said that the decision "will not be likely to have any effect on the situation of the imprisoned main YUKOS shareholder [Mikhail Khodorkovsky and Platon Lebedev], but the criminal prosecution of ordinary managers will most likely be stopped as no longer necessary."

Itera gas producer net profit rises 200% y-o-y in 1H06

MOSCOW, August 7 (RIA Novosti) - Itera, Russia's No. 1 independent natural gas producer, said Monday its net profit calculated to Russian Accounting Standards rose 200% year-on-year in the first half of 2006 to 960 million rubles (about $35.5 million). Itera, which holds a virtual monopoly on gas trading in two key former Soviet republics the gateway to western European energy markets, Georgia and Ukraine, attributed the profit growth to a planned rise in earnings resulting from an increase in the volume and the price of gas sales. Itera, which has a charter capital of 60 million rubles ($2.23 million), said its gross profit had risen 220% in the reporting period to 6.19 billion rubles (abut $229 million), while the prime cost of its products had declined 50% to 6.06 billion rubles (about $224 million).

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