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Wednesday, November 29, 2006

Kremlin to limit foreigners' access to strategic industries

27/ 11/ 2006 - MOSCOW (RIA Novosti political commentator Alexander Yurov) - The Kremlin may limit foreigners' access to some strategic industries if parliament approves a law on foreign investment in commercial organizations of strategic significance to Russia's national security. The document was drafted in the Ministry of Industry and Energy and has been forwarded for consideration to the government. After that, it needs to be discussed in both houses of Russia's parliament and signed by the president. The bill would restrict foreigners' access to the aerospace industry, railways, nuclear power generation, mining companies and companies producing materials for the defense industry. Some transactions involving these industries, such as the acquisition of controlling stakes (more than 50%) in strategic companies, would have to be approved by a special state commission. At the same time, the bill does not seem prohibitive. Its authors compiled a list of obligatory documents the potential investor must submit to the state commission. It includes letters of registration and association, the draft agreement disclosing the nature of the forthcoming transaction, information about the investor's sphere of operation, and information about the investor who controls the company that plans the acquisition. None of these requirements appears to be impossible. The idea of the bill was suggested 18 months ago, when the German corporation Siemens attempted to buy a major stake in Russia's Silovye Mashiny producer of power machines. Parliament viewed the potential deal as a threat to national security interests. As of now, Russian electricity monopoly RAO UES owns a blocking stake in SilMash. UES seems to be engaged in purely civilian projects, but SilMash turns out not only civilian commodities but also electrical appliances for Russian military hardware. In any case, the deal was blocked for reasons that were not very logical, and observers said the decision was influenced by the Russian officials' bias. Trying to prevent a repetition of such situations, the authorities decided to formalize clear-cut rules for such transactions. The leaders of the Industry and Energy Ministry refused to discuss the bill during its drafting, and its future is still uncertain now that it has been forwarded to the government. At the current stage, the ministries and departments whose operation could be affected by the bill should send their opinions and criticism to the government. After approval by the government, the bill will be sent over to parliament. There is still a long way to go, yet many foreign investors who are working or intend to work in Russia already say that it will be a good law. Clear-cut rules never hurt anyone, they say.

Monday, November 27, 2006

Russian resources 'remain Russian'

23 November 2006 Upstream onLine
BP chief John Browne said today that international oil companies should not expect to control Russia's natural resources.
"We have learnt about the importance of oil and gas for national security," Browne told the EU-Russia Industrialists' Round Table in Helsinki. Russian assets "will remain predominantly Russian assets" he added. While international investment can be "welcomed" to develop the resources, the issue of security means they will remain mainly Russian, which may not be understood internationally, Browne said. "Some people still seem to think that national assets in Russia will be sold off," Browne said. "That represents a profound misunderstanding of the Russian view of its precious resource base." The country's energy industries will generate one-third of national income this year and hundreds of thousand of jobs, he said. "We are delighted to have made these investments and to have been welcomed as international partners," Bloomberg quoted him as saying. Browne also praised Russia's role in "stabilising" world energy markets over the last four years when the war in the Middle East and civil conflict in Nigeria pushed prices up. "Without Russia, the world market would have been much more volatile, potentially causing great damage to the international economy," he said. "That important pre-eminent role looks set to continue" because of its oil and gas reserves and scarcity of cheaply producible resources elsewhere. Yesterday Browne met with Gazprom boss Alexei Miller and Sergei Bogdanchikov of Rosneft in Moscow. Browne and Miller discussed cooperating on projects and sales of liquefied natural gas, Gazprom said. BP and Rosneft will spend $700 million over the next five years to develop fields under the Sakhalin 4 and Sakhalin 5 projects through a venture they set up in 2003, Rosneft said after a meeting between Browne and Bogdanchikov. "Understanding of the context in which you are working is always vital to business success," Browne said. "That is particularly true in a country such as Russia."

Indian Energy Giant Sells its Sahkalin Share

22.11.2006 10:27 [] - Oil and Natural Gas Corporation has ruled out selling its share of crude oil from the rich Sakhalin oilfields in the open market, reports Business Standard. The company has instead decided to refine the entire crude at its subsidiary in Mangalore. ONGC, through its wholly owned subsidiary, ONGC (Q, N,C,F)* Videsh (OVL), holds a 20% stake in Sakhalin-I, which translates to a share of 50,000 barrels per day. This decision, however, could change if the price of crude oil in the international market falls further from the current 18-month lows as the transportation and logistic costs will come into play and it might look to sell crude in the global market. The first batch of Sakhalin crude will reach MRPL on November 30, 2006, while the second batch is expected by end-December, officials said. The first two cargoes will be almost 700,000 barrels each. Sakhalin-I is one of the six OVL projects which are already under production, out of the 26 projects that it partly owns across 15 countries. The producing assets yielded 6.34 million tonnes of oil equivalent (mtoe) in the last financial year, which are expected to go up to 7.5 mtoe in the current year.

Rosneft, BP to Jointly Develop Sakhalin-4, Sakhalin-5

23.11.2006 14:01 [] - Rosneft and BP have signed shareholder agreements with regard to the Sakhalin-4 and Sakhalin-5 projects, Rosneft's press office has reported. The shares of Rosneft and BP in these projects are 51 and 49 percent respectively. The projects would be operated by Elvari Neftegaz, a joint venture set up in Sakhalin in 2003. It is presumed, that BP will finance exploration on Sakhalin-4 fields until they are put into production. Rosneft will compensate BP for the expenses with its share in the revenue. The press office also noted that creation of a joint infrastructure for oil production and transportation will help bring down capital costs.

Friday, November 24, 2006

Russia Won't Ratify European Energy Charter - Foreign Minister

Sergei Lavrov / Photo from www.state.gov23.11.2006 MosNews - Russia will not ratify the Energy Charter in its current form, because it would damage the country’s economic interests, the president’s top adviser on EU affairs said Wednesday, Nov. 22. “Russia will not ratify the [Energy Charter] treaty and protocol in their present form, and the European Union knows this very well,” Sergei Yastrzhembsky said, quoted by RIA Novosti. The agreement is set to be a key sticking point at the upcoming EU-Russia summit, which begins Friday, Nov. 24, in Helsinki. Poland has vetoed EU plans to launch talks at the summit on a new cooperation agreement with Russia, demanding that Moscow first ratify the Energy Charter and end its ban on certain Polish food products. However, Moscow considers the charter to be skewered in favor of energy importers. The presidential adviser said: “We find it unacceptable that energy transit tariffs should be the same for domestic and foreign consumers. We cannot accept the loss of our natural advantage as a transit country with a unique, diversified pipeline system, over which we will effectively lose control if we ratify the treaty and the protocols as they stand now,” he said. The Russian Foreign Minister Sergei Lavrov also said Wednesday that Moscow has no intention of ratifying the charter, because it is flawed. Lavrov was quoted as saying: “The EU side is aware of the document’s flaws. The recent meeting of the Energy Charter signatories shows that our position is receiving more understanding.” The Energy Charter treaty came into force in 1998. Russia has signed it but refused to ratify the document over Europe’s demands for access to Russian pipelines for Central Asian states and other countries, which Moscow says will make their natural gas 50 percent cheaper than Russia’s when it arrives in Europe.

Thursday, November 23, 2006

'Choosy' TNK-BP waits on Yukos sale

21 November 2006 - Upstream onLine - Russian producer TNK-BP will bid only for selected assets of bankrupt Russian player Yukos, should there be state auctions, a company executive said today. "If the Yukos assets are sold in one big package, I would suspect that we are probably not going to be significantly interested," Tony Considine, TNK-BP's executive vice president, told a news conference. "If it is a fragmented package of assets, then no doubt we will bid if there is a process to bid," he added. Yukos, once Russia's largest oil firm, was brought to bankruptcy with back tax claims of over $30 billion, a process which the company's owners say was politically motivated. It lost its key production unit, Yuganskneftegaz, which is now controlled by state oil player Rosneft , but still has two smaller oil units and several refineries. A consortium of five companies will value the remaining assets by 19 January in a key step toward carving up the company. Creditors - who include tax authorities and Rosneft pursuing massive back-tax claims - are seeking at least $24 billion from Yukos. The receiver is trying to raise that cash by selling off the company's assets or re-floating its subsidiaries. TNK-BP has repeatedly said it was looking for more refining assets in Russia or neighbouring states, but many analysts expect that only gas monopoly Gazprom might become Rosneft's only serious challenger during the sale of Yukos assets.

Heritage unveils Russia venture

21 November 2006 - Upstream onLine - Canada's Heritage Oil is teaming up with TISE Holding to form a 50-50 joint venture to appraise and take on oil and gas prospects in Russia and elsewhere. The Calgary-based player said TISE is owned by Concord, Zarubezhneft, Gazprom subsidiary Zarubezhneftegaz, Technopromexport and Zarubezhstroimontazh. Financial terms were not disclosed, but Heritage boss Tony Buckingham said the partnership “substantially raises our profile in Russia, beyond our existing 95% interest in the Zapadno Chumpasskoye field.” As well as the Russian development site, Heritage has a producing property in Oman and exploration projects in Uganda and Congo, along with ventures in Iraq.

Wednesday, November 22, 2006

CNPC ties up $152m Turkmen deal

21 November 2006 - Upstream onLine - Turkmenistan has handed China National Petroleum Corporation (CNPC) a $152 million contract to help explore the South Yolotan field, a field Turkmen officials claim hold 7 trillion cubic metres of natural gas. President Saparmurat Niyazov said in an official decree that CNPC would get a three-year contract to help drill 12 gas wells at the South Yolotan field and other locations. State-owned CNPC was not available for comment. The contract was only for drilling and no further details were provided. Niyazov announced the discovery of the field earlier this month, describing it as "massive". Turkmenistan has not disclosed the results of an international audit of its reserves. If the find is confirmed, it would dwarf Russia's big Shtokman field. Russian media have quoted sources at Russia's gas export monopoly Gazprom as saying the company doubted the Turkmen assessment of the South Yolotan reserves. Turkmenistan produces about 60 billion cubic metres of gas per year. Gazprom buys most of the gas and controls Turkmen export routes.

BP finds common ground on Sakhalin

22 November 2006 - Upstream onLine - BP chief executive John Browne agreed terms for developing two blocks on Sakhalin Island with Russian partner Rosneft today, despite problems that have plagued other foreign oil companies on the island. Browne and Rosneft's president, Sergei Bogdanchikov, signed an agreement on developing the West and East Schmidt blocks, part of the Sakhalin-4 and Sakhalin-5 projects respectively, under which BP would finance exploration work including drilling six wells and Rosneft would reimburse it from production revenues,Reuters reported. "These agreements are the major step in the ongoing co-operation of our companies offshore Sakhalin," the text of the agreement read, a statement from Rosneft said. Rosneft said investment in West and East Schmidt so far exceeded $80 million and would amount to a further $700 million in the next five years. East Schmidt is estimated to contain 1.4 billion barrels of oil and 281 billion cubic metres of gas, while its western neighbour is thought to hold 3 billion barrels of oil and 255 bcm of gas. The visit by Browne, who also met the head of Russian gas monopoly Gazprom, contrasted with the less friendly receptions extended to BP's rivals ExxonMobil and Shell on Sakhalin in recent months. Both companies are leading projects on Sakhalin Island and both have been threatened with administrative measures and environmental checks that could delay or - in Shell's case - even derail a venture worth tens of billions of dollars. Analysts see the moves as part of a Kremlin strategy to reassert its control over the country's national resources. BP's Russian joint venture TNK-BP is also under pressure, with prosecutors threatening to withdraw operating licences from two valuable gas projects. But Shell and ExxonMobil's projects are majority foreign owned, whereas Rosneft owns 51% in both Sakhalin-4 and -5, while BP owns the remaining 49%. BP has also showed its support for Rosneft earlier this year by paying $1 billion for a stake of more than 1% in the company during its initial public offering of shares

Tuesday, November 21, 2006

Soros Warns Germany It�s Dependent on Russian Energy Sources

20.11.2006 - MosNews - Hungarian-born billionaire investor George Soros has warned Germany that the country is dependent on Russia for its energy sources but is in denial about this situation, the British Financial Times reported on Monday, Nov. 20. “(The Germans) don’t want to acknowledge the danger that it presents,” Soros told the FT’s sister newspaper, Les Echos. Germany is the world’s biggest customer for Russian gas exports. Soros said the government of Russian President Vladimir Putin is using energy as a tool in a bid to reclaim the country’s leading role on the international stage. Energy policy was also aimed at “enriching the top officials in Russia and to corrupt dictators in neighboring countries and take control of their natural resources”, he was quoted in the newspaper as saying. “Vladimir Putin is not a dictator because Russia has the trappings of a democracy, but the Kremlin seeks to concentrate power and it already dominates the Duma assembly, the opposition and the media,” Soros said. The comments came as an increasingly dependent European Union prepared to seek to rebalance its energy relationship with Russia and boost ties with other key suppliers at a series of major meetings this week. The 25-nation bloc hopes to lay the foundations for a balanced energy relationship with Moscow when Putin attends an EU-Russia summit in Helsinki on Friday, Nov. 24.

Monday, November 20, 2006

Russian energy policy too rigid - Swedish minister

Swedish Foreign Minister Carl Bildt warns
 OPINION MOSCOW. Nov 17 (Interfax) - Russia's energy policy lacks flexibility and this may affect importers of Russian energy, Swedish Foreign Minister Carl Bildt said in a radio program on Friday. There have been no flexible instruments in Russia's energy policy in recent years, Bildt told Ekho Moskvy radio. The European Union is seeking to build a transparent oil and natural gas market. However, Russia's market is controlled by monopolies while the EU would like as many actors as possible to be granted access to the sector, he said. Russia is showing a trend for stagnation, which is a sign of an authoritarian social system. The EU needs to understand which way Russia is moving, he said.

Minister - Kazakh energy resources can be exhausted in next 15-20 years

kazakhstan11-20-2006 Regnum News - In 2024, Kazakhstan is supposed to take the track of sustainable development. It is the main task of the concept of sustainable development approved recently by Kazakh President Nursultan Nazarbayev. In a interview to a REGNUM correspondent one of the document authors Nurlan Iskakov, Minister for Environment Protection, deputy chair of the sustainable development council, said that the concept will be the basis for preparing and adopting all governmental programs and legislation. The concept is supposed to establish balance of economic, social, environmental and political aspects of the republic’s development. According to the minister, under estimations by researchers, if the current situation does not change, the country’s energy resources can be exhausted within 15-20 years. “Really, such wasteful, irrational usage of natural resources can bring about such outcome. So, I want to say, even running ahead, that there is an instruction by the president and we have already started implementing it, ad it is also fixed in our concept on necessity to use renewable natural resources. Kazakhstan has great opportunities, potential in this field. We mean wind power electricity, solar and geothermal power engineering,” Iskakov said.

Gazprom Received Congratulations on New Deposits

11–20–2006 by Natalia Grib// The monopolist will keep absorbing Russia’s natural gas resources
Russian Cabinet of Ministers gave forecast for natural gas production in Russia by 2015. They predict that independent producers will have only 17-18 percent share in gas production, despite owning 24 percent of resource base. Gas production experts say this forecast will come true in one case – if Gazprom keeps overtaking major gas deposits of Russia, including those already belonging to private companies.
Deputy Premier Alexander Zhukov said on Friday that Russia will be extracting between 742 and 754 billions of cubic meters of natural gas by 2015. Such increase will be mostly due to developing the Shtokman deposit, deposits in Irkutsk region, including Kovyktinsk gas-condensate field, and a number of deposits in Far East.
Meanwhile, Gazprom member of board Andrey Kruglov said in London in October that the monopoly in that period would increase production up to 615 billion of cubic meters of gas. Thus, only 127-139 billion of cubic meters of gas, or 17-18.4 percent, remains for independent gas producers. In the next 9 years, they will be allowed to increase production very slowly.
Troika-Dialog experts remind that growth in gas production in Russia over the last 9 years (average -- 1.3 percent annually) was due not to Gazprom. Between 1998 and 2006, independent gas producers raised production up to 45 billion of cubic meters annually (four times more), while oil companies – up to 58 billion of cubic meters (two times more).
Gazprom now owns 29.1 trillion of cubic meters of gas in deposits, while independent companies own 11.5 trillion (24 percent), and 7.1 trillion more are still undivided. Gazprom will keep getting licenses for new deposits. However, even if the entire undivided fund becomes absorbed by Gazprom, its share of resources will grow up to 75.7 percent. Thus, the disparity between the volume of resources and extraction will remain. That is, independent companies will not be allowed to develop their resource base on their own.

Five large oil companies to remain in Russia in near future

RBC, 17.11.2006, Moscow 17:05:08. – In modern Russia there will be no more than five large oil companies, LUKoil President Vagit Alekperov said at the fourth International Oil Forum in Moscow. According to him, these companies will perform two main functions, the first being domestic deliveries and the second - strengthening Russia's position on foreign markets. Alekperov also noted that Russia was currently experiencing the strengthening and consolidation of oil companies, that the companies' oil and natural gas output was leveling out, and that they were buying new assets and cooperating with foreign companies on their own. As an example of this he gave LUKoil's cooperation with the American ConocoPhillips. According to different sources, there are currently 12 to 15 vertically integrated oil companies in Russia.

Urals plunges below $57 per barrel

RBC, 17.11.2006, Moscow 16:47:33.Urals oil has slid below USD57 per barrel today for the first time in the past three weeks. As of 3.35 p.m., Urals December futures were last trading at USD56.60 per barrel, which is 2.83 percent below the previous session's closing. The spread on deals ranged from USD56.25 to USD57.00 per barrel, with USD56.26 per barrel being the all-time low. Lower demand for Urals oil can be attributed to the closing of long positions in view of the global market situation where oil prices dropped almost 4 percent yesterday. Also, trading activity was higher than yesterday, with almost 200 deals drawn compared to less than 50 transactions yesterday. The trading volume topped RUR56m (approx. USD2.1m), three times as much as a day earlier.

Thursday, November 16, 2006

Russia Denies Plans to Create Gas OPEC and Blackmail Consumers

14.11.2006 - MosNews - Russia is not planning to set up a gas cartel like OPEC in order to blackmail consumers of Russian fuels, a source in the Kremlin has said on Tuesday, Nov. 14. “Russia is actively implementing the thesis of energy security which it initiated and made one of the main theses within the G8,” the source told Interfax news agency. He said that it was not Moscow’s intention “to blackmail its partners”. “We are just as dependent on them as they are on us, and have not set ourselves the goal of dictating our will to them,” the source said. He stressed that Russia advocated equal relations based upon the principles of a market economy. “Therefore there is no substance at all to assertions that Russia is trying to create a gas super cartel with other gas exporter states,” the source pointed out. On Monday, Nov. 13, Western media said a report had been circulated amongst NATO members stating that Russia planned to set up a gas super cartel and to get countries like Algeria, Qatar, Libya and the Central Asian states to join in, as a means of getting leverage over gas consumers. The Financial Times website quoted deputy Kremlin spokesman Dmitry Peskov as saying there was “no substance at all” to the suggestion that Russia was seeking a gas cartel.

Russia Threatens Sakhalin Energy with $15Bln International Lawsuit

14.11.2006 - MosNews - The Russian government is preparing a complaint with American lawyers to take Sakhalin Energy, the operator of Sakhalin-2 oil and gas project led by Royal Dutch/Shell, to the international arbitration court in Stockholm. “We are setting out our position with American lawyers, and I think that in two weeks we will have a document from New York which we will send to the Russian government”, said Oleg Mitvol, deputy head of the Russian environmental watchdog, Rosprirodnadzor. Mitvol was quoted by the AFX as saying that the Russian government could demand $15 billion in compensation from the Sakhalin Energy consortium, which comprises Shell, Mitsui & Co and Mitsubishi Corp. If the government decides to launch proceedings for “dissimulation of important information” leading to “environmental damages”, this will be done next year, Mitvol told journalists after a meeting with the U.S. Chamber of Commerce in Moscow.

TNK-BP, Sibur Holding set up JV for associated gas processing

MOSCOW, November 15 (RIA Novosti) - TNK-BP [RTS: TNBP] and a leading Russian petrochemical company said Wednesday they have set up a joint venture to process associated petroleum gas. The Russian-British joint energy venture and Sibur Holding said the new JV will process associated petroleum gas (APG) produced by TNK-BP and other oil and gas producers in the Nizhnevartovsk region, in Western Siberia. "The joint venture provides an ideal opportunity for TNK-BP to build a foundation for the APG processing business in the Nizhnevartovsk region. This foundation creates several ways to monetize the associated gas, and also facilitates a reduction in current gas flaring. Improving the gas utilization rate will also lead to a reduction of greenhouse gas emissions, which supports fulfillment of Russia's obligations under the Kyoto Protocol," TNK-BP Executive Director German Khan said. Under the agreement, Sibur will own 51% of the new venture and TNK-BP will hold 49%, and they will equally share management control, the companies said in a statement. Sibur Holding was established in December 2005 after Gazprom announced it would reorganize the Sibur joint stock company into a new entity, Sibur Holding, as the final step in "the reorganization of the petrochemical business." Sibur will transfer to the joint venture control of two gas-processing plants in Belozerny and Nizhnevartovsk, and the facilities to transport APG to them, the statement said. TNK-BP will provide long-term APG supplies to the enterprises. The joint venture will also purchase APG from other regional producers. As a result of associated petroleum gas processing, TNK-BP will receive 100% of dry lean gas, and Sibur will receive 100% of the liquid products, the statement said. "Natural gas liquids generated in the course of APG processing are the key feedstock for the petrochemical business. Establishment of this joint venture ensures we have guaranteed supplies from a reliable partner and incremental amounts of natural gas liquids in our value chain. The deal has a strong business rationale and an environmental advantage, and it is beneficial for all the stakeholders," said Alexander Dyukov, president of Sibur Holding.

Russia's Slavneft posts 70.6% RAS net profit drop in 9M06

MOSCOW, November 15 (RIA Novosti) - Slavneft [RTS: SLAV] said Wednesday its net profit calculated to Russian Accounting Standards (RAS) declined 70.6% year-on-year in the first nine months of 2006, to 9.2 billion rubles (about $342 million). The Russian oil producer said its gross profit fell 71.4% in the reporting period to 5.09 billion rubles (about $188 million), while sales profit shrank 68.75% to 3.87 billion rubles (about $143 million).

Thursday, November 09, 2006

Tarja Halonen - Russia will retain position of serious trade partner in energy sector

Tarja Halonen, president of Finland11–09–2006 Interfax – Helsinki will soon host the Russia-EU summit. Ahead of it Tarja Halonen, president of Finland that currently holds rotating chairmanship in the European Union, granted an interview to Interfax. "One of the objectives of the period of Finland's chairmanship is to agree on the beginning of talks on the new agreement between the EU and Russia," she said. She recalled that the current Russia-EU partnership and cooperation agreement expires in December 2007. "It has been jointly decided to prolong it until the execution of the new agreement," she said. "Probably it will take several years, even if talks on the new agreement begin at the beginning of next year, as Finland plans," Halonen said. She noted that the development of relations between EU and Russia is a priority of Finland's chairmanship. "The invitation of Russian President Vladimir Putin to the unofficial EU summit in Lahti was one of the manifestations of the great significance we attach to relations between the Union and Russia," Halonen said. Speaking of the possibility of setting up a free trade zone between the EU and Russia she said that the implementation of the idea "would benefit both sides." "However, it is possible to advance on the issue only after Russia becomes a member of the World Trade Organization," she said. Halonen hopes that provisions regulating cooperation in the energy sector will be included in the new basic treaty between the EU and Russia. "The definition of a legal groundwork mandatory for both sides for stable cooperation in the energy sector is a key objective of the energy dialogue," she said. "We hope that the new basic treaty between the EU and Russia will contain clear-cut principles regulating cooperation in the energy sector," she said. She said the other key objectives of energy cooperation are "the development of the openness of the market, equal competition, transparency and energy effectiveness." "During the period of its chairmanship Finland is working to deepen the energy dialogue between the EU and Russia." "There are excellent conditions for deeper EU-Russian partnership on energy questions," she said. "A quarter of the energy consumed by the EU comes from Russia and simultaneously the EU is the most important target of energy exports. We are convinced that together with growing demand for energy in the EU Russia will retain the position of a serious trade partner in the energy sector," Halonen aid. Asked whether Finland has any concerns about the construction of the North European gas pipeline she said: "The environmental impact review of the North European gas pipeline is only at the initial stage now." "Today it is too early to evaluate the impact of the project on the environment, however, it should not be underestimated before a thorough study either," Halonen said.

Russia to Sell 100% of Rosneft - Anonymous Kremlin Source

08.09.2006 MosNews - Russia’s state-controlled oil company RosneftIndependent, speaking on condition of anonymity. The source said that while this had not been the original intention, full sell-off is now the preferred option for Rosneft. The company, he said, should be 100 percent privatized within one year.
While the timescale appears highly improbable —only 15 percent of the company has been sold off and the remaining 85 percent could be worth $68 billion — the intention appears clear. According to the official, the Kremlin plans to keep the energy giant, Gazprom, in majority state ownership and with a monopoly on Russia’s energy exports.
But the idea is also to encourage more competition on the domestic market, with big, medium-size and small companies invited to compete for customers. A fully privatised Rosneft could be the flagship for that policy. The official admitted this was a change of strategy. The earlier intention was for Gazprom to buy a controlling interest in Rosneft and use it as its subsidiary company for Russian oil exports.
However, when Rosneft acquired the remains of Mikhail Khodorkovsky’s Yukos oil company for a knockdown price, the Kremlin recognised that the original plan was unsustainable. It would be economically and politically unsustainable for Gazprom to absorb Rosneft, not only because it was now a bigger company but because of the dubious circumstances — Khodorkovsky’s arrest for alleged tax evasion, widely seen as a political move to curb an increasingly dominant businessman.
In stressing that Gazprom would remain majority state-owned, and with a monopoly on Russian energy exports, the Kremlin official also revealed it was President Putin’s intention not to lose control of what were considered crucial strategic assets. A similar approach will also apply to the motor manufacturer, Avtovaz, and probably to the merchant shipping fleet. MosNews has reported recently that Putin’s aide Igor Shuvalov floated the idea of merging Novoship, Russia’s second-largest shipping company, and Sovcomflot, the industry flagman. It also emerged on Thursday, Sept. 7, that European countries buying Russian gas through Gazprom could face higher prices in the not-too-distant future. A senior Russian economist said with Russia’s energy consumption rising sharply over the past half year, the domestic market could in effect become a rival to European and other customers. While it was stressed that deals already signed would be honoured, it is likely the price will rise in when they come up for renewal and that the terms could be significantly revised.

Russian Prosecutors Launch Criminal Case Against Top Manager of TNK-BP Branch Rospan

Rospan’s logo09.11.2006 MosNews – Prosecutors in the Yamal-Nenets Autonomous Area, a region in the north of West Siberia, have launched criminal proceedings against the CEO of gas-producing Rospan subsidiary of Russian-British joint venture TNK-BP. MosNews has reported on Wednesday that the Prosecutor General’s Office decided to look into Rospan’s production activities in West Siberia, because the company was “violating nature conservation legislation”. The prosecutors have submitted a request to the Federal Agency for Management of Subsoil (Rosnedra), asking the agency to terminate Rospan’s rights to develop the deposit. On Thursday, the Prosecutor General’s Office said on its website that it charged Rospan International, 100-percent subsidiary of TNK-BP, with “carrying out its activity connected with developing deposits of hydrocarbons on the Vostochno-Urengoi and Novo-Urengoi license sites in violation of licensing terms.” The office said the Yamalo-Nenets environmental prosecutors are conducting a preliminary investigation into the matter. The closed joint stock company Rospan International was founded in 1992 to develop the Achimov gas deposits of the Vostochno-Urengoi gas and condensate deposit in the Yamal-Nenets Autonomous Area. Rospan is also entitled to develop the Valanzhinsk deposits. The company used to be owned by now-bankrupt Yukos Oil Company and one of Russia’s largest private gas producers Itera. Several years ago it was acquired by TNK-BP. TNK-BP said the company’s management is studying the materials on the situation. “We have been working in accordance with all legislative norms,” it said, quoted by RIA Novosti. While commenting on the prosecutor’s office’s report, TNK-BP said it had asked controlling bodies to extend the term for the submission of documents on facilities that could now result in a withdrawal of Rospan’s license, but received no answer. Russia’s authorities have been stepping up pressure in recent months on oil projects developed by foreign and domestic companies, raising speculations over the Kremlin’s alleged attempt to increase state control over the energy sector. TNK-BP’s other gas asset, Kovykta gas condensate field, which is being developed by Rusia Petroleum, is also in danger of losing its license. In September the Russian prosecutors warned TNK-BP that it could lose the license if it fails to address environmental protection issues and to start gasification of Irkutsk region by January 2007. Kovykta, with 1.9 trillion cubic meters of proven reserves, is highly important to the Russian government, which is pursuing an ambitious project to build a gas pipeline network to meet Asian nations’ energy needs and to diversify its export destinations.

Tuesday, November 07, 2006

Russia to Sign 17 Energy Contracts with China - Deputy PM

Alexander Zhukov / Photo: AFP07.11.2006 - MosNews - Russian Deputy Prime Minister Alexander Zhukov said on Monday, Nov. 6, that Russia and China would sign 17 agreements to build nuclear power plants and explore for oil and gas when Prime Minister Mikhail Fradkov visits Beijing this month. The contracts will also cover scientific cooperation, which will help the two countries increase trade to $60 billion by 2009, a year earlier than had been expected, Zhukov also said. “Our trade was up 25 percent year- on-year so far this year to $30 billion,” the Russian official said, quoted by Bloomberg news. “Our cooperation is going well across the board, especially in the trade of energy, oil and gas.” Despite competition in energy industries between the two countries, Russia will keep its promise to pipe crude oil and natural gas, as well as transmit electricity to China, Zhukov said. The Russian Deputy Prime Minister also pointed out imbalance of bilateral trade structure, with more than half of Russia’s exports to China being energy resources. He said he was disappointed at the decline in mechanical and electronic equipment exports to China, and called for an improvement. Russian Prime Minister Fradkov is scheduled to meet his Chinese counterpart Wen Jiabao in Beijing, and make an address at the closing ceremony of China’s Year of Russia on November 9. He will also visit the National Exhibition on Russia in Beijing, which is a high-level exhibition that covers a broad range of economic and industrial fields. On his visit Fradkov will be accompanies by several prominent figures from the Russian business community, who will also give press conferences in China to speak of cooperation between the countries. These include Alexander Livshits, deputy general director of the world’s third largest aluminium company Rusal and Sergei Bogdanchikov, CEO of state-controlled oil company Rosneft.

Russian Agency Warns of More Shutdowns in Country's Oil, Gas Pipeline System

Part of the Sakhalin-2 oil-pipeline under construction in the Ai region of Russia / Photo: AP03.11.2006 - Moscow News - Russian technical standards agency Rostekhnadzor warned on Thursday, Nov. 2, that almost all the country’s oil and gas pipelines were in a critical condition, a possible sign of more shutdowns after the closure of Druzhba link to Lithuania. “Russia’s pipeline transport is in an unsatisfactory state. Environmental damage caused by oil and gas pipelines is inexcusable,” Rostekhnadzor chief Konstantin Pulikovsky said in a statement, quoted by Reuters. He said pipeline safety measures conducted by pipeline owners were insufficient and Rostekhnadzor planned to strengthen its control over the pipeline system. Rostekhnadzor is an independent federal agency for ecological, technical and nuclear monitoring. It is in charge of industrial safety issues and reports directly to prime minister. Russia’s crude oil pipeline monopoly Transneft, the world’s largest pipeline operator, controls the vast majority of oil pipelines, while gas monopoly Gazprom owns all the gas routes. Rostekhnadzor said most pipelines in Russia were built in the 1960s and 1970s and more than 40 percent of the trunk pipelines are over 30 years old, making them prone to corrosion. More than 30 accidents have already happened this year, mainly due to exposure and corrosion, the statement said. In July, Transneft shut down a part of the Druzhba “Frendship” pipeline to Lithuania, disrupting crude exports to the Baltic country and forcing the region’s only refinery, Mazeikiu Nafta, to use more expensive sea supplies. Transneft blamed the shutdown on a leak but analysts said the move was likely a Kremlin attempt to punish Vilnius after it allowed Poland’s PKN Orlen to buy the refinery, a takeover target of several Russian oil firms. In October, Transneft cut pressure in part of the Druzhba export pipeline to Europe, reducing oil supplies to Belarus, again following a leak

TNK-BP Looking for Gas Pipeline Routes from Kovykta

11-07-2006 Kommersant -TNK-BP hasn’t abandoned the hope to export gas from Kovykta field, the Irkutsk region. Last week, the company presented for environmental assessment the projects that provide for constructing gas pipelines from Kovykta to China. But the export intention of TNK-BP is apparently not in line with the export plans of Gazprom. So, by presenting the projects, TNK-BP probably wanted to show that it would keep the Kovykta license.
Past week, TNK-BP held a round table with representatives of the world biggest environmental organizations, including WWF and Greenpeace. At the round table, TNK-BP came up with three possible routes for gas pipelines running from Kovykta field to China, said Evgeny Shvarts, environmental protection policy director at WWF.
The parties agreed to attract independent experts that would study the options presented by TNK-BP in view of their economic expediency. The final technical assignment and the strength of the expert task force would be agreed on before early December to have the conclusions by April 2007.
“So far, no one has recalled the decision for developing Kovykta and for exporting its gas,” representatives of TNK-BP news service explained. But despite all ecological effort of the company, even in TNK-BP, they explicitly say they won’t elaborate a feasibility study for the pipeline in the near future. The thing is that Gazprom that has guaranteed to ship 40 bln cu meters of gas to China in 2011 omitted Kovykta in calculation.

Turkmenistan�'s President Found 2 Schtokmans for Russia

11-07-2006 Kommersant – Turkmenistan’s President Saparmurat Niyazov has offered to Russia and Germany to construct a gas pipeline to Europe able to ship up to 40 bln cu meters of gas a year. Niyazov counts on Iolotan field to double gas output, as its reserves are estimated at 7 trln cubic meters, twice as much as in Schtokman. In the environment of strong competition with the European Union, Russia cannot ignore the initiative, and Gazprom is studying documentary confirmation of the reserve amount.
Saparmurat Niyazov first announced the reserves of Turkmenistan’s biggest field past Friday, when he was meeting German Foreign Minister Frank-Walter Steinmeier. Niyazov said the gas biggest well, South Iolotan, has blown out; the reserves are estimated at 7 trln cu meters.
Some time earlier, Niyazaov said that Russia made a contract of super profits and Gazprom will be the first foreign company admitted to produce from the continent. So far, all foreigners have been licensed only for the shelf production.
“Really, in time of our last meeting in Ashkhabad, Turkmen president spoke to me about Iolotan reserves,” Alexander Ryazanov, deputy chairman at Gazprom management committee, said yesterday. “We will look at their documentary confirmation. I think we will study it all and decide on expediency of joining the project before the end of the year.”
Gazprom is rather skeptical when it comes to Iolotan reserves. “Turkmenia has long promised to open exploration conducted by western companies, but has presented nothing of it so far. But the geological survey of Soviet time showed the greatest reserves were concentrated in Dovletobad, where the production is being carried out now,” a source with Gazprom specified.

NOVATEK steps up on rumors

Novatek [RTS ticker: NVTK], Russia's largest private natural gas producerRBC, 03.11.2006, Moscow 09:58:11.Over the past month, shares of Russia's largest independent gas producer, NOVATEK, have climbed up by 13 percent. According to market participants, it has been rumored that Gazprom insiders have been buying NOVATEK's shares, and analysts admit that the gas concern may wish to raise its stake in the gas company to 50 percent. Furthermore, on November 2 Italian mass media said that Gazprom may swap its stake in NOVATEK for a number of Eni's energy and manufacturing facilities in Europe and Africa. If this is true, it may be that NOVATEK's share prices are being stepped up in Gazprom's interests, analysts say. NOVATEK is traded on the RTS and the London Stock Exchange (LSE). Three major increases in its shares have been witnessed, for the first time when Gazprom purchased a 19.9-percent stake, then when gas prices were hiked, and now stocks are climbing for a third time.

Rosneft obtains largest loan in Russia's history

RBC, 03.11.2006, Moscow 09:34:34.Rosneft has found resources to finance the acquisition of everything that is left of YUKOS, RBC Daily said today. A syndicate of foreign banks has approved a credit worth $24.5bn. Analysts believe that the sum is sufficient for Rosneft not only to purchase YUKOS's oil refining facilities, but also to acquire its foreign assets. In October, Rosneft entered negotiations with a syndicate of foreign banks including ABN Amro, Barclays, Calyon, Citigroup, Goldman Sachs, JPMorgan, and Morgan Stanley over a loan of $24.5bn for acquisitions in Russia and Europe. In Russia, Rosneft was interested in YUKOS' assets. Rosneft's managers have repeatedly stated that the company is also interested in Bashneft and Tatneft assets. Traditionally, Rosneft kept the details of the negotiations secret. However yesterday Bloomberg said the largest loan in Russia's credit history had been agreed upon citing sources in banks syndicating the loan.

Wednesday, November 01, 2006

Sakhalin-2 Partners May Seek New Deal

Shell’s logoNovember 1, 2006 - Bloomberg - Shell and its partners in the $22 billion Sakhalin-2 oil and gas venture may seek to agree with Russia on a new accord, clearing the way for Gazprom to take a stake in the project. Shell plans to offer to sign a supplementary deal to the existing production-sharing agreement under which it operates Sakhalin-2, the Audit Chamber said Tuesday on its web site, citing British Ambassador Anthony Brenton. Audit Chamber head Sergei Stepashin discussed Sakhalin-2 with Brenton on Monday, the chamber said. The British Embassy declined to confirm or deny that any such proposals were being considered. An embassy spokesman who declined to be identified said the Audit Chamber statement was inaccurate. He did not say which parts of the statement were misleading. President Vladimir Putin said Oct. 22 that Russia and Shell should settle budget and environmental disputes that threaten to halt work on Sakhalin-2, the nation's largest foreign-owned oil and gas project. Gazprom suspended talks to take a stake in Sakhalin-2 after Shell sought last year to raise the spending plan for the project to $22 billion from $12 billion.

India Offers Strategic Partnership to Rosneft, Gazprom

India10-31-2006 KommersantSeeking access to Russia’s crude, India has suggested setting up a venture of Gazprom and ONGC to develop subsoil of Russia. In return, it has promised to annually buy 50 million tons of crude here, attract Russia’s companies to building refineries in India and a gas pipeline from Iran. But all proposals of India don’t look as attractive as the ones made by China, the analysts speculate.
Yesterday, India's Oil and Gas Minister Murli Deora met Russia’s Energy and Industry Minister Viktor Khristenko. India is willing to proceed to buying 50 million tons in Russia as soon as possible, spokesman of Indian Oil and Gas Ministry announced after the talks. India annually imports 110 million tons of crude and is targeted at attaining 200 million tons by 2015. Russia may cover 50 million tons of this growth, the official said.Yesterday, the energy ministers of India and Russia focused on potential participation of Russia’s companies in projects of India, the Indian bureaucrats said on condition of anonymity. In particular, the Russians are invited to widen refining capacity of Indian Oil Corp (IOC) from today’s 52 million tons a year. IOC intends to boost it by 30 million tons, including by constructing a new refinery, which will annually produce 15 million tons. India will maintain the majority stake in the project, the officials said. India has a few offers for Gazprom as well. Russia is invited to take part in constructing the Iran-Pakistan-India pipeline to begin with. What’s more, ONGC is in talks with Gazprom to set up a venture for bidding at tenders held for exploration and production activities in Russia. In essence, this proposal is very close to Vostok Energy, the recently incorporated venture of Russia’s Rosneft and Chinese CNPC set up to explore and produce from Russia’s subsoil. The main thing that prompted Deora to visit Moscow was exactly this venture’s creation, Indian analysts said. “India’s agitation is easy to understand. Chinese companies have recently created a venture with the access to Russia’s subsoil and got Udmurtneft,” explained Alfa Bank analyst Konstantin Baturin. “But China offered advantageous terms of cooperation to Russia. And the price paid for Udmurtneft was unthinkable.

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