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Saturday, April 29, 2006

Rosneft IPO on track- minister

ST. PETERSBURG, April 29 (RIA Novosti) - An initial public offering of Russian state-run oil giant Rosneft is proceeding according to plan, the Russian economic development and trade minister said Saturday. "Thus far everything is going according to plan. I think that we will manage to do it in the third quarter [of 2006]," German Gref said responding to a question about the IPO timeframe. The company's president said Monday Rosneft could approve the terms of its initial public offering at a meeting of its board of directors in June. Sergei Bogdanchikov said the June meeting will approve the size of share blocks to be floated on Russian and foreign trading floors. The Rosneft president earlier said a consortium of four foreign and eight Russian banks was helping the company to prepare the issuance of shares for the stock market. He said the participation of domestic banks in the IPO effort would enable the Russian public to purchase the company's stock. Gazprombank, a subsidiary of Russian natural gas giant Gazprom, and state-run retail savings bank Sberbank are among the domestic banks preparing the company's initial public offering, Bogdanchikov said. The head of the Federal Financial Markets Service said Monday Sberbank could purchase Rosneft's shares during the IPO to sell them to the public. German Gref confirmed last week that the IPO, through which Russia's No. 2 crude producer with a market capitalization of more than $25 billion could float shares worth $3bln in Russia and $12-billion on the London Stock Exchange, would take place in the third quarter of 2006. Gref also said his ministry had approved late last week the schedule and procedure for the company's upcoming IPO. Rosneft plans to sell some of its stock to repay a $7.5-billion loan it took to buy 10.74% of shares in Gazprom and thereby increase the state's share in the energy giant to a controlling block.

Itera gas group net profit rises 35% in 1Q 2006

MOSCOW, April 28 (RIA Novosti) - Itera, Russia's No.1 independent gas producer, said Friday its net profits had increased 35.73% in 1Q 2006 against 4Q 2005 to 532,816,000 rubles ($19.5 million). Itera has produced natural gas in the Yamalo-Nenets Autonomous Area in West Siberia since 1998. The Company has invested over $1 billion in the gas industry. Itera is the world's fourth largest natural gas company in terms of reserves. It holds a virtual monopoly on gas trading in two key former Soviet republics, Georgia and Ukraine, which lie at the gateway to western European energy markets. The company is also an increasingly important player in the energy-rich Caspian Sea region. Itera plans an initial public offering of its shares in 2007.

Centrica's Shares Up On News about Bid form Gazprom

26.04.2006 13:01 [] - Shares of UK energy firm Centrica rise 1.9 percent in early trade on Wednesday after a report that Britain has ruled out blocking any takeover bid by Russian gas giant Gazprom. By 7:57 a.m. the shares were at 309 pence each, up from Tuesday's 302-1/4p, despite trading without the right to its latest dividend payout of 7.4p. In February the UK government said a Gazprom bid would face "robust scrutiny" after officials at the Russian firm were quoted as saying it was mulling an approach for the firm.

Rosneft To Borrow $4bn for Vankor Field Development

24.03.2006 13:03 - [] - Russian state-run oil firm Rosneft wants to borrow as much as $4 billion to develop its Vankor oil and gas fields, Rosneft president Sergei Bogdanchikov said, Interfax reported. Rosneft will spend $1 billion on the project this year and plans to spend a total of about $3.5 billion in the following two years, Bogdanchikov told the news service in Beijing. Rosneft already has two potential lenders lined up and plans to conduct its initial public offering as early as July, Interfax reported.

Wednesday, April 26, 2006

Europe Gives Little for Stockman

Photo: Dmitry Lekay,Kommersant04-26-2006 Kommersant - by Natalia Grib, London; Petr Sapozhnikov - Moscow threatens to turn the pipelines eastward
Gazprom has for the third time changed the deadline for choosing partners for the development of the Stockman oil field. Now the deadline is undefined. This may mean that Gazprom has not been offered the long-term energy assets in Western Europe that it was counting on. Gazprom deputy chairman Alexander Medvedev announced the deadline change at the Russian Economic Forum in London yesterday. The shortlist of contenders for partnership in developing the Stockman field was announced last September and consists of the Norwegian companies Statoil and Hydro, the American Chevron and ConocoPhillips and the French Total. Two or three of them are to be finally chosen.
Gazprom has been firm in its negotiating position that the payment for joining the project would be high and must be assets. Gazprom head Alexey Miller met with the heads of the five companies again last week ad sources in Gazprom and the foreign companies confirmed that a decision would be made this week. It is likely that Gazprom knowingly entered into a conflict with European Union countries because of the self-assurance provided by the Stockman offer. Earlier this week, Miller told EU ambassadors in Russia that "it mustn't be forgotten that we are actively developing new markets" while warning them against political pressure on Gazprom as it attempts to expand on the markets of those countries. Marc Franco, head of the European Commission delegation in Moscow paraphrased Miller yesterday when he stated that "attempts to limit the activities of European companies on the Russian market and to politicize the sale of gas will not lead to positive results." Gazprom is continuing its effort to enter the European market without the potential Stockman partners as well. The Dutch newspaper Het Financieele Dagblad reported yesterday, citing the Dutch minister of economics, that Gazprom was interested in purchasing local energy companies there. Dutch Economic Minister Laurens Jan Brinkhorst commented cautiously that "we must avoid a monopolistic situation. We must develop this step by step." The next step may be even harsher statements about the need for the diversification of Russian gas supplies, such as Transneft president Semen Vainshtok's announcement yesterday that the 30 million metric tons of oil would be reroute from the West to the East. "Discrimination against Russian oil will continue as long as there is an excess supply of it in Europe," he said.

Soros Worried About Russian State Rosneft IPO

George Soros26.04.2006 MosNews - George Soros, the billionaire financier, has warned that the Kremlin's planned initial public offering of the state-run Rosneft could legitimize Russia's moves to renationalize chunks of its oil and gas industry and harm Europe's energy security. Writing in today's Financial Times, he warns that the planned flotation of the state-owned oil company on the London Stock Exchange "raises serious ethical and energy security issues". "Europe is relying for a large portion of its energy supplies on a country that does not hesitate to use its monopoly power in devious and arbitrary ways," Soros wrote. "Allowing the Rosneft IPO to go forward would consolidate and legitimize a state of affairs that is detrimental to Europe's energy security and weaken the European Union's hand in negotiating better conditions with Russia." Soros was one of the biggest and earliest portfolio investors in Russia, and has spent millions of dollars promoting civil society. He clashed with some of Russia's 1990s-era "oligarchs", but is now turning his criticism on the government. The Rosneft IPO, expected in July, could raise up to $20bn, making it the world's largest. But Soros highlighted ethical concerns around the fact that Rosneft's biggest asset is Yuganskneftegaz, former main production arm of Yukos, the oil group created by Mikhail Khodorkovsky. Rosneft acquired Yugansk in a murky auction after Khodorkovsky was jailed for fraud and Yukos was hit with $28 billion in tax claims. That, said Soros, typifies Russia's dubious methods in reasserting centralized control over energy, including Gazprom, the natural gas giant. In the face of such practices, he says European countries should stop competing with each other to obtain Russian energy and act together.

Russia Should Cut Oil to Europe, Cut Discounts on Urals Crude � Transneft

Semyon Vainshtok24.04.2006 MosNews - Russia's planned oil pipeline to Asia will help cut deliveries to Europe, which is currently being oversupplied with Russian crude, the head of Russia's pipeline monopoly Transneft told a newspaper, the Reuters news agency reported. "We have overfed Europe with crude. And every single economic manual says that excessive supplies depress prices," Semyon Vainshtok told the daily Nezavisimaya Gazeta in an interview published on Monday. "As yet we cannot reduce supplies, as all our exports are going to Europe. But as soon as we divert (flows) to China, South Korea, Australia and Japan, that will immediately take away crude from our European colleagues," he added. Vainshtok has repeatedly said that building a pipeline to Asia would help diversify Russian oil flows and cut discounts on the country's mainstay Urals crude blend in European markets. His new comments are likely to come under much closer scrutiny after another Russian monopoly, state gas behemoth Gazprom, shocked Europe last week by saying it would supply gas elsewhere if its expansion in Europe was blocked. The European Union said Gazprom's threats only confirmed Europe's views that it needed to diversify its energy imports. Russian critics say Gazprom's comments mean the Kremlin is increasingly active in using energy as a weapon in a situation when Europe relies on Moscow for a quarter of its gas needs and Russia produces every ninth oil barrel in the world. Vainshtok said Transneft planned to use a shipping fee of $38 per ton of crude oil on the Asian-Pacific pipeline route to make it competitive with current fees paid on the route to the Black Sea port of Novorossiisk. The $11.5-billion pipeline will ship 600,000 barrels per day at the first stage, mainly to China, with supplies rising to 1.6 million bpd at the second stage, when a big terminal is build on the Russian Pacific coast. Vainshtok said his firm would borrow 13.4 billion roubles ($487.1 million) from state bank Sberbank and another $2 billion via a five-year loan from Western banks. The firm had previously planned to borrow up to $6 billion from Western banks, led by Barclays.

Russia's Gazprom Threatens to Halt Gas Supplies to Europe

20.04.2006 MosNews - Russia's state-controlled natural gas monopoly Gazprom said on Wednesday, April 19, that if European Union countries continue to block its international ambitions it could redirect gas supplies to other markets. The move comes after the British Financial Times newspaper reported that the British government wanted to legislatively block Gazprom's acquisition of Britain's biggest gas supplier Centrica. In a statement after a meeting between Alexei Miller, Gazprom's chief executive, and EU ambassadors, the company said: "It is necessary to note that attempts to limit Gazprom's activities in the European market and politicize questions of gas supply, which in fact are of an entirely economic nature, will not lead to good results." As MosNews reported earlier this week, the Financial Times learned that the U.K. government had considered changing merger rules to block a potential takeover of Centrica, Britain's biggest gas supplier, by Gazprom. Gazprom's CEO met ambassadors of the 25 EU states in Moscow on Tuesday, April 18, to discuss Gazprom's relations with Europe, and insisted the world's largest gas producer understood its responsibilities as supplier of a quarter of the EU's gas. Wednesday's statement by Gazprom threatened to devote more of the company's supplies to fast-growing markets elsewhere if plans to expand in Europe — where it has ambitions to move into downstream gas distribution — were thwarted. "It should not be forgotten that we are actively familiarizing ourselves with new markets, such as North America and China. Gas producers in central Asia are also paying attention to the Chinese market. This is for a reason: competition for energy resources is growing," it said. Gazprom said that, while it would fulfill its current contracts with European clients, any future relationship with these countries should take into account the Russian company's ambitions to move into the downstream markets. Sergei Kupriyanov, a spokesman for Gazprom, told the Financial Times: "We just want European countries to understand that we have other alternatives in terms of gas sales. We have a fast-growing Chinese market, and a market for liquefied natural gas in the U.S. If the European Union wants our gas, it has to consider our interests as well." Gazprom's threats follow an outline agreement between Russia and China to supply the Chinese market with gas from Western Siberia, which is also the main source of gas for Europe. Given that Gazprom's reserves have been static for the past five years, the supply of gas to China will decrease the volume of gas available to European countries. Gazprom has made no secret of its ambition to supply up to 20 percent of the U.K.'s gas by 2015. Other European countries have also expressed concerns about Gazprom's plans to take a share in their domestic markets. The EU earlier indicated it would be prepared to let Gazprom into its downstream market if Russia were to liberalize access to gas pipelines to other countries and independent producers — a prospect that Gazprom has ruled out.

LUKoil, ConocoPhillips in refinery talks - LUKoil president

ASTANA, April 25 (RIA Novosti) - LUKoil (RTS: LKOH) - Russia's No. 1 independent crude oil producer, is in talks with U.S. energy giant ConocoPhillips to process its oil in the United States, the company's president said Tuesday. "We are currently in talks regarding processing our oil at Conoco's refineries in the U.S.," Vagit Alekperov told a news conference in the Kazakh capital. "Unfortunately, the [global] economy is reluctant to accept Russia's oil supplies." Alekperov said Conoco's proposals were not completely in line with LUKoil's strategy, but praised the U.S. company for strengthening LUKoil's position in the north-east of the U.S. by selling it the Mobil-brand retail network. In late spring 2004, LUKoil bought Conoco's 779 Mobil stations in New Jersey and Pennsylvania through its 100%-owned subsidiary Getty Petroleum Marketing Inc. LUKoil is a vertically integrated oil and gas company. Russia's ING Bank (Eurasia) is LUKoil's majority shareholder (63.3%), with ConocoPhillips holding a 16.8% stake.

Putin calls for oil refinery on border in Russia's Far East

TOMSK, April 26 (RIA Novosti) - President Vladimir Putin said Wednesday that construction of an oil refinery on the border in Russia's Far East would help derive maximum profits from a proposed oil pipeline in the region. Putin said the scale of the mooted $11.5 billion East Siberia-Pacific pipeline was unprecedented and would open up new markets, while an oil refinery would make sure the pipeline produced maximum possible benefits. "We should consider in advance the construction of an oil refinery complex, plants and enterprises in Russia so that our economy will maximally benefit from the country's export capabilities," Putin said at a meeting with regional governors in the Western Siberian oil city of Tomsk ahead of a meeting with German Chancellor Angela Merkel. Putin cited data from the Ministry of Economic Development and Trade that estimated the cost of the refinery at between $2.19 billion and $2.92 billion, and said state-owned oil company Rosneft could start construction next year. Earlier this month, Rosneft Vice President Alexei Kuznetsov said the company had been considering constructing of an oil refinery on the pipeline, which will be operated by state-owned oil pipeline monopoly Transneft, and that it would have output capacity of 20 million tons per year. The pipeline is slated to pump up to 80 million metric tons a year (1.6 mln of bbl/d) from Siberia to the Russian Far East before being sent on to the Asia-Pacific region, in particular to energy-hungry China. The first stage of construction was initially expected to be completed by the end of 2008. Transneft boss Semyon Vainshtok said Wednesday that construction could start as soon as the end of this week.

Tuesday, April 25, 2006

Russia to transport 1.3mln tons of oil a year to China

MOSCOW, April 25 (RIA Novosti) - Russian state-run oil pipeline operator Transneft said Tuesday it plans to transport 1.3 million metric tons of oil per year (26,000 bbl/d) to China via a pipeline running across Kazakhstan. Chief executive Semyon Vainshtok said companies, including Russian-British joint venture TNK-BP, had already begun supplying the Atasu-Alashankou oil pipeline, which went on stream in December. "Russian oil will be pumped in the amount of 1.3 million metric tons," Vainshtok said. He added that the companies had already supplied 300,000 metric tons of oil via the pipeline, which is expected to start pumping crude to energy-hungry China in mid-2006. The pipeline is the second part of the Kazakhstan-China inter-state oil transportation project and has a capacity of 10 million metric tons a year. It is expected to double its capacity in the future.

Tuesday, April 18, 2006

Rosneft consolidates Yugansk stake

14.04.2006 - The Moscow Times - Rosneft has consolidated its majority holding in Yuganskneftegaz, the huge production unit that once belonged to Yukos, the company said in a statement Thursday as it moved ahead with preparations for an initial public offering later this year. The statement said Rosneft's stake in the unit had been increased from 50 percent to 76.79 percent as of March 31. A company official said the additional 26.79 percent stake in Yugansk had been transferred to Rosneft's balance sheet from Baikal Finance Group, the opaque shell company used to purchase the production unit and sidestep legal risks in a disputed government auction in December 2004. The official, who was speaking on condition of anonymity because of the sensitivity of the situation, declined to comment on why the Yugansk shares had remained on the balance sheet of Baikal Finance Group, which is registered in the same building as a grocery store in the city of Tver. He declined to say whether any money had changed hands in the latest transaction. Rosneft bought 100 percent of Baikal Finance Group when it took over Yugansk following the disputed auction. Analysts said the share transaction looked like a technical move to simplify the company's structure ahead of its IPO this year. Rosneft's acquisition of Yugansk more than tripled its output to nearly 1.5 million barrels per day, making it the world's No. 8 oil producer and, according to Rosneft, No. 2 in terms of reserves. The acquisition, however, also opened Rosneft to legal attack from Yukos shareholders, who have claimed in a lawsuit filed in the United States that Rosneft and Baikal Finance Group were part of a conspiracy to expropriate Yugansk. Yukos still owns a minority 23 percent stake in Yugansk, which could pose problems for a full consolidation of Rosneft's subsidiaries ahead of the IPO. Yukos, however, is now facing bankruptcy and possible liquidation after Rosneft, a major creditor, filed to bankrupt it last month.

Crude Importers Don't Stake on Russia

 April 13, 2006 The Kommersant – The forecasts for crude production in 2006 have been trimmed both for Russia and for other oil states that are outside of OPEC, says the monthly report promulgated by International Energy Agency (IEA) Wednesday in the wake of another surge in crude prices. The outlook of Russia's government is even more pessimistic. Russia's production of crude won't be as high as forecasted for the following four years, IEA Executive Director Claude Mandil told The Financial Times yesterday. Mandil said he doesn't think the output will be so high outside OPEC, pointing to Russia first of all. The revision of IEA forecasts in respect of Russia could be hardly called surprising. Mandil told the meeting of G8 energy ministers in March Russia will grow production of crude by 2.5 percent to 3 percent in 2006. Today's forecast of IEA is 2.8 percent. The estimate was curtailed on colder weather in Siberia, which drove down production, and on takedown of Russia's two independent oil giants, Sibneft that became a part of Gazprom and YUKOS. This cost 200,000 barrels a day to Russia, IEA calculated. The interesting point is that Russia's cabinet is even more pessimistic about acceleration in crude output. Industry and Energy Minister Viktor Khristenko said in February Russia's production of crude will step up 2 percent to 2.5 percent this year vs. 2.2 percent in 2005. The outlook of Economic Development Ministry is traditionally discouraging. It sets forth 1 percent to 2 percent increase in near years.

Flow Your Own Way

April 14, 2006 The Kommersant - by Dmitry Butrin -
The price of Urals oil now independent of Brent
The pricing system for Russian oil exports has been a topic of discussion among professionals for a long time. That discussion will grow broader as the New York Mercantile Exchange begins trading in Russian oil futures in the autumn of this year and the Russian Ministry of Economic Development and Trade and Ministry of Industry and Energy make preparations for the launch of a Russian oil exchange in 2007. Information agencies and other reporters on the oil market are gradually changing their methods for determining the price for Urals oil, basing it less on the price of Brent.
The price of Urals will most likely be independent of Brent within a year, and then it will be possible to determine Russia's real influence on world oil prices. The present pricing system is based exchange trading in "maker" types of oil – American WTI and North Sea Brent – and the differential between them, with is calculated by reporting agencies based on real cash deals close to the spot market. The differentials on Urals in many cases are greater than 10 percent of the price of Brent. This has long been a source of criticism. The differential is based on significant indicators, such as the lower quality of the (high-sulfur, or sour) Urals as compared to the (low-sulfur, or sweet) Brent, logistic risks associated with the terminals at Russian ports and the pipeline system. On the other hand, the pricing system is not based purely on the market. It does not depend on the balance of supply and demand for Russian oil, but on the balance of trading operations by the largest buyers on the cash market, some of which, such as Stasco and SK Trading, are affiliated with major companies such as Shell and South Korea's SK Energy, which are interested in playing on differentials and making a profit the price differences in different regions. According to Deputy Economics Minister Kirill Androsov, plans for the establishment of an oil exchange in Russia look as follows. Between May and July of this year, the government will form an interagency working group and the exchange and its clearing center will be registered as legal entities by September. By September of next year, a trading platform will be formed and, in the third quarter of next year a trading system with immediate delivery (spot trading) will be launched. Trading in futures contracts will be organized later, no earlier than the fourth quarter of next year. At that time, it will be possible to say that an independent pricing system has been established for Urals oil. Androsov stipulated that all plans are "approximate." The working group will set exact dates. The reasons for the slow pace are clear. Economics Ministry experts say that it is necessary to form a standard for Russian export blend crude oil, which entails reducing its sulfur content by optimizing the load density at the Ufa oil refineries and changing the routing of export flows. In addition, Russian Federal Service for Financial Markets head Oleg Vyugin says that changes will be necessary in legislation, mainly the description of futures trading, which is now poorly defended from the legal point of view. Finally, according to Deloitte partner Maxim Lyubomudrov, there are a number of problems with the taxation system and it has no experience analyzing the use of hedging instruments such as futures. Participants on the market are skeptical even of a spot market for oil. The conversion from a cash market to an exchange system has never been seen in the world, and influential, conservative forces on the oil market, such as Glencore, are unlikely to agree to the change without administrative pressure. The formation of a spot market will not lead to independent pricing. Futures and forwards instruments are necessary because they allow not only oil companies, but also banks, investment companies, insurance companies and so on to play the market. Expertica (formerly Crown resources) and the NYMEX commodities market have come out with a Russian Energies Futures project to trade in Russian export blend crude oil futures in London beginning in the end of July. Vyugin states that the Russian government supports that effort fully, and does not see any reason to object to parallel quotations on Russian oil in Russia and Great Britain. The Russian government has strong influence in the project: without the cooperation of Rosneft and Gazprom (which controls Sibneft), the project will go nowhere. The founders of Russian Energies Futures say that, if 5 percent of exports are traded on the system, it will be a success.

Monday, April 17, 2006

US court bans YUKOS from selling foreign assets

RBC, 14.04.2006, Moscow 17:49:11.For the Federal Court of New York's ruling to ban YUKOS from selling off its foreign assets to take effect, similar verdicts have to follow from Dutch and Lithuanian courts, an analyst told RBC commenting on allegations that the U.S. court had prohibited the crippled company's management from disposing of its foreign property. To secure the ban, YUKOS' supervisory manager Eduard Rebgun would need to file suit in a court in Lithuania where YUKOS' largest foreign asset Mazeikiu Nafta is registered, and a court in Holland where YUKOS International UK B.V., the holder of a 53.7-percent stake in the Lithuanian refinery, is registered. Until such decisions are made, the deal for the sale of YUKOS' Lithuanian asset is still in effect, the expert noted. If, however, such suits are filed, then the abovementioned courts will most likely side with the New-York court's ruling in their verdict. Another analyst said the Mazeikiu Nafta deal could drag on now that a fourth figure, YUKOS' court-appointed trustee in bankruptcy Eduard Rebgun, has come into play over the long-disputed refinery sale, joining YUKOS, Lithuania, and a potential buyer of YUKOS' stake in Mazeikiu, each pursuing its own interests.

Ministry approves Rosneft IPO schedule - Gref

MOSCOW, April 17 (RIA Novosti) - The Russian Economic Development and Trade Ministry approved the schedule and procedure for the upcoming IPO of state-owned oil company Rosneft at the end of last week, the head of the ministry said Monday. German Gref confirmed that the IPO, through which Russia's No. 2 crude producer could float shares worth $3bln in Russia and $12-billion on the London Stock Exchange, would take place in the third quarter of 2006, but did not specify details. At the meeting, the ministry agreed on the date, share numbers, and other details of the IPO, which must now be confirmed by the Rosneft board of directors, Gref said. "Everything remains in force," he said. Rosneft plans to sell some of its stock to repay a $7.5-billion loan it took to buy 10.74% of shares in Gazprom and thereby increase the state's share in the energy giant to a controlling block. The company, which has reported its market value at more than $25 billion, could float up to 30% of its stock, which would be Russia's biggest IPO to date.

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