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Saturday, December 30, 2006

Rosneft Joins Oil Pipeline Consortium

25/12/2006 - RZD News - The Board of Directors of Rosneft has approved the company's participation in the Burgas Alexandroupolis consortium. Transneft and Gazprom will also participate in the project. The company will contribute around RUR3mln (approx. $0.11mln) to the consortium's share capital, reports RBC.

Russia, Egypt Sign Agreements on Joint Oil, Gas Production

Egyptrussia27.12.2006 - MosNews - Russia’s state-controlled gas monopoly Gazprom said on Tuesday, Dec. 26, that it has reached an agreement with two Egyptian companies on joint prospecting, exploration and production of oil and natural gas in Egypt. During talks in Moscow, Gazprom, Rashid Petroleum Company and Egyptian Natural Gas Holding Company (EGAS) agreed to form working groups on prospecting, exploration, transportation and sales of Egyptian oil and gas, including liquefied natural gas. “The sides also discussed sales of Russian oil-and-gas equipment to Egypt,” the Russian company said in a statement that was quoted by RIA Novosti. Egypt has Africa’s third largest natural gas reserves after Algeria and Nigeria. The country’s reserves are estimated at 1.89 trillion cubic meters. The total length of Egypt’s gas pipelines is 4,700 kilometers (about 3,000 miles).

Shell signs 'secret' Sakhalin pact

28 December 2006 - Upstream onLine - Shell has signed a secret protocol with the Russian government as part of its deal to sell half of the Sakhalin 2 project to Gazprom, allowing Shell to boost spending but not as much as it wanted, it was reported today. Shell is now allowed to boost spending in the giant Sakhalin project to $15.8 billion from the previously approved $12 billion, the Vedomosti daily said. A Shell spokesman in Moscow said the protocol was confidential and he would not comment on it. He said details of project costs would be discussed in February at a meeting with the Russian government. Shell had initially asked the government to allow it to spend $22 billion. However, the government opposed the idea, saying the extra expenditure would delay the moment when the state starts getting its profits from the production sharing agreement. Under PSA legislation, all costs can be reimbursed. Vedomosti said Shell would spend an additional $3.6 billion on top of the approved $15.8 billion and this extra cost would not be reimbursed under the secret protocol. Earlier this month, Shell and its partners in the project, Japan's Mitsui and Mitsubishi, agreed to sell Gazprom half of the project for $7.45 billion.

Wednesday, December 13, 2006

Norway's Hydro, Statoil Remain Interested in Shtokman Project Despite Tougher New Terms

Hydro, Statoil’s logos13.12.2006 – MosNews - Norwegian oil and gas companies Hydro and Statoil said on Wednesday, Dec. 13, that they are still willing to join Gazprom’s multi-billion Shtokman gas project in Russia’s Arctic Barents Sea even on new terms offered by the Russian giant. As MosNews has reported, Hydro and Statoil were among five candidates that were short-listed by Gazprom to develop the massive Shtokman field. However, in October the Russian gas monopoly declared that it would develop the gas deposit on its own. Last week, however, Russian officials have reversed their opinion and said that Gazprom will welcome certain participation from the foreign partners but only in exchange for lucrative assets, which include access to downstream markets in Europe and the United States. Representatives of both Hydro and Statoil have attended a Moscow roundtable discussion on Wednesday. Discussion was dedicated to mineral and energy resources of the Russian Arctic shelf, where the Shtokman is located. Oivind Rekdal, commercial manager at Hydro Russia, told RIA Novosti: “Our company is looking forward to working on the Russian shelf, namely in the Kara and Barents Seas.” Rekdal said Shtokman was the most attractive project, and added that Russia would need Norwegian technology to implement the project. Hydro already holds 40 percent in the Total-led Kharyaga oil field in northern Russia. Rekdal said the Gulf Stream prevented the Shtokman field from freezing but ice remained to the north of the gas deposit all the year round, or at least seasonally. He therefore named thick ice, the field’s remoteness from the shore and environmental risks as the main problems to overcome in the project. Anatoly Zolotukhin, technology director with Statoil Russia, said the Norwegian companies’ expertise would definitely come in handy in the project, and added that Statoil and Hydro were in talks with Gazprom over various models of cooperation. “We are now waiting for some information or some decision,” Statoil’s representative said.

The Energy Shtokman Therapy

12–11–2006 Kommersant – The offers of western partners concerning participation in the Shtokman field’s development could be considered again, Russia’s President Vladimir Putin unexpectedly announced late past week. “During negotiations with potential partners, Gazprom was aiming at the access to end users of natural gas in Europe and in the United States in exchange for participation in development of this Europe’s biggest field. With no particular success, however. But the topic hasn’t been finally closed yet. It could be raised again if some interesting offers are received from foreign partners,” Russia’s President Vladimir Putin said when interviewed by Mexican publisher Mario Vazquez Rana. On the same day, Putin’s aide Igor Shuvalov in Washington and Industry and Energy Minister Viktor Khristenko in Moscow spoke about possible and desirable involvement of foreign companies in the Shtokman project “as suppliers of equipment” or “in some other forms”. But it looks like the standing of Russia’s authorities hasn’t gone through material changes. Russia will independently develop the first stage and provisions for joining the project have remained the same. No principal changes have happened for Shtokman so far, sources with Gazprom said off the record. More likely than not, the statements of president and other officials were targeted at reminding the western partners about the possibility of further cooperation and at softening the negative impression that the recent energy moves of the Kremlin generated in the West. Of five western bidders that reached the final stage of Shtokman tender in June of 2006, spokesmen of three companies (Total, ConocoPhilips, Statoil) confirmed they had noticed nothing new in the attitude of Russia’s authorities.

Such a Company

12–13–2006 Kommersant by Natalya Grib and Denis Rebrov
// Russian Authorities to Create a Megacompany To Take Over the Russian Shelf
On Saturday Russian President Vladimir Putin held a meeting of the Russian Security Council at which a new strategy that would give the government control of gas and oil extraction from the Russian shelf was discussed. It is hoped that the shelf will be Russia’s main energy resource base for the 21st century. To achieve this goal, the strategy calls for an end to joint-venture projects and a renewed focus on Russia’s home-grown strengths. To that end, the Russian gas and oil giants Gazprom, Rosneft, and Zarubezhneft may be combined into a single government monopoly that would take over the shelf, which would mean new inspections and headaches for foreign operators already working there. The reports for Saturday’s meeting were prepared by Natural Resources Minister Yury Trutnev and Industry and Energy Minister Viktor Khristenko. According to the Ministry of Natural Resources, the Russian shelf holds more than 100 billion tons of potential fuel, which by 2020-2030 will be the country’s main hydrocarbon source. The government is now concerned about how to consolidate its control over that wealth of energy resources. The first item on the agenda is a careful inspection of the basis and legality of all licenses previously issued for the development of the shelf’s fields, as well as a review of the degree to which the operators of those projects are following the conditions of their licenses. The main operators in question are the foreign owners of licenses for projects on Sakhalin Island where extraction has already begun. Rosneft, for example, holds only a 20% stake in the “Sakhalin-1” project: the rest of the shares are owned by ExxonMobil (USA), ONGC (India), and Sodeco (Japan). The operator of the “Sakhalin-2” project is Shell (55%); no Russian companies are involved in that project at all. All of the operators of these projects are now being warned that their extraction of oil and gas from the shelf is not compatible with Russia’s national interests. The second question concerns the consolidation of shares and licenses by large Russian companies. Gazprom already owns the license for the Prirazlomnoe and Shtokman oil fields, while Rosneft, in partnership with the Finnish company VR and Chinese and Korean companies, is developing the “Sakhalin-3,” “Sakhalin-4,” and “Sakhalin-5” projects. It is likely that the Security Council will charge Gazprom, Rosneft, and Zarubezhneft with creating a single government-owned company for oil and gas extraction on the Russian shelf. The question of the creation of such a company was first mooted in 2005, and the Natural Resources and Industry and Energy Ministries have often said that developing the shelf would be impossible without foreign investment but that Russian holdings have a hard time competing with foreigners on the Russian shelf. The megacompany would solve the problem by absorbing and channeling foreign participation in the development of the shelf. The third issue is the demarcation of boundaries with Norway in the North Sea, with Ukraine in the Sea of Azov, and in the Caspian Sea. In the opinion of specialists from the Norwegian companies Statoil and Hydro, the “grey zones” of the Barents Sea hold large reserves of oil and gas, but the lack of clear boundaries makes studying and developing them impossible for either side.

Europe's gas blackmail: bluff or reality?

13/ 12/ 2006 - MOSCOW. (RIA Novosti political commentator Boris Kaimakov) - Russian Foreign Minister Sergei Lavrov has reproached the West for resorting to unscrupulous competition. Speaking to the students of Moscow State University, unfamiliar with political correctness of diplomats, the minister did not try to conceal his concern about "ideologization of international relations." Feeling that the audience did not quite understand the wording, Lavrov switched to the language of economic negotiators. Speaking of the West accusing Russia of gas blackmail, he said, "Here transpires the West's intention to get access to Russian energy without giving anything in return." It is no secret that Moscow, having realized its aspiration to become an energy super power, is reviewing principles of relations with consumers of its energy. After the January price hike for Ukraine it became clear that the Kremlin was willing to sustain huge political losses in order to uphold its economic claims even to its closest neighbors. A price compromise with Kiev was found fairly fast, due to a large extent to pressure from Western consumers of Russian gas. Now Moscow is very likely to take up the price issue with Belarus as well. Perhaps Lavrov was not referring to Minsk when he spoke of the need to give something in return, but it is obvious that Gazprom does not agree to the Belarusian stand on pipelines. Minsk wants to restrict the role of the Russian monopolist exporter in managing its pipelines, which obviously irritates Moscow. It is now speaking openly of the need to increase gas prices for Belarus. The Kremlin's tough energy dialogue with its neighbors has led to a wave of accusations in the West. Russia is said to be blackmailing Europe because of its political ambitions. Apparently, the new economic reality has made some European countries return to the forgotten rhetoric of the Cold War. Of course, Russia's desire to diversify its energy policy, its tough tone and moves cannot but worry Western analysts. When Gazprom CEO Alexei Miller speaks of new potential gas markets in Asia Pacific and North America, it naturally raises concerns in Europe. Gazprom will soon sign an agreement with China and is seriously looking into LNG supply to the United States. All this is the new reality that requires thinking, not accusations of blackmail. Russia "is able to fully honor its obligations in Europe... and to simultaneously develop cooperation with companies in the Asia-Pacific region," Miller said. This is not empty rhetoric, which is proved by the great efforts to build the North European Gas Pipeline, which will connect Gazprom's gas network direct to European gas distribution systems. "This is our tangible contribution to ensuring energy security of European nations," Miller maintains. Given Gazprom's plans to build a new route to Europe via Turkey, through the Blue Stream pipeline, any talk of Russia re-orienting its gas exports eastward seems senseless. Yet even the fact that increasing gas supply from Russia increases Europe's dependence also causes concerns in the West. These fears first emerged in the early 1980s, when the construction of the Urengoi-Pomary-Uzhgorod gas pipeline was launched. At that time the West formulated the thesis of unacceptability of energy dependence on Moscow. Over 20 years have passed, and Russia has not given a single reason to doubt its reliability as a supplier, not only because it cares about its reputation, but for a number of objective reasons as well. Paradoxically, Russia is as dependent on Western consumers as they are on Russian supplies. Its economic well-being significantly depends on energy exports, so it is hard to imagine that Moscow would resort to political blackmail of Europe. In fact, any talk of political blackmail is a bluff. No one can explain convincingly how Western democracies can be blackmailed. Response to such a move would be similar to Moscow's response to Western demands that it should follow European democratic standards. Even during the Cold War, trade between the Soviet Union and European consumers progressed regardless of political trends. So we cannot but agree with the Russian foreign minister who told students that "we have much more in common with the West than disagreements."

Thursday, December 07, 2006

EC Worried by Forecasts of Russian Oil, Gas Production

05.12.2006 - MosNews - The head of the European Commission delegation in Russia Marco Franco expressed concern that in the future Russia won’t be able to fulfill its energy source export obligations. He spoke on Tuesday, Dec. 5, at the conference titled “Factors of energy stability of Russian economy”. Franco was quoted by RIA Novosti as saying: “Forecasts say that Russian energy source production will be insufficient to satisfy both the domestic demand and export deliveries.” The European Commission official declared that by 2030 the European Union will depend on energy imports to satisfy 70 percent of its needs. By 2020 the EU will need additional 200 million tons of natural gas in oil equivalent as compared with its current needs. Meanwhile, Franco noted, Russia’s energy strategy foresees that by 2020 export deliveries of gas will be increased by only 50 million tons of oil equivalent. “We have 150 million tons uncovered,” Franco said. He noted that the European Union plans to increase the energy efficiency of its economy, diversify the supply routes and concentrate on development of alternative energy sources. However, Franco believes that Russia too has to increase investments in production of energy resources. “The problem is not that monopolies invest insufficiently in new production, the problem is that the funds of outside investors have not been attracted,” said the representative of the European Commission. “It seems that in the future attraction of foreign financial resources in production, especially in gas production, will be a very important issue,” Marco Franco has said. In connection with this, he expressed his belief that the key issue for Russia is to ratify the European Energy Charter. At the same time he noted that Russia is trying to preserve its control over natural resources and said that “this is also natural”.

Russia to Give Equal Export Pipeline Access to All Domestic Oil Companies

07.12.2006 - MosNews - Russia will give domestic oil companies equal access to export pipelines - a move that is likely to be welcomed by smaller producers — a senior energy official said on Thursday, Dec. 7. “We would like to divide export lines in line with the (right) of equal access - each company should get a bucket in each destination,” Vadim Rybin, head of the oil department with the Federal Energy Agency, was quoted by RIA Novosti as saying in Shanghai, China. The Russian official said that the working group made up of specialists from the Federal Anti-Monopoly Service, Industry and Energy Ministry, the Federal Energy Agency and oil pipeline monopoly Transneft, is already working on a relevant document. “It will be an absolutely new system,” Rybin said. Within the framework of the new system, the companies will be able to retransfer their rights for oil export to different directions in accordance with their interests. “Of course, we won’t be able to do this right away, in one moment,” Rybin said, noting that the system will need three-four months for “fitting”, adding that in the end everything will turn out to be “honest and fair”. The government official said the measure was likely to please smaller companies, who have been complaining of being denied fair access to export pipelines in favor of larger market players. Speaking about new system, Rybin stressed: “This is not a revolution. This is about bringing the situation in line with law.” Russia is the world’s second-largest oil exporter after Saudi Arabia

Rosneft and Petronas set to link arms

PetronasDec. 6, 2006 - Upstream onLine - Russia's Rosneft and Malaysian state-run producer Petronas aim to settle an upstream and downstream alliance next year, a senior Rosneft official said today. Last month the companies reached a broad agreement on co-operation. "Petronas has great potential in liquefied natural has amd gas-to-liquids. It also has great experience in deep sea drilling...we can find lots of spheres in common," Sergei Goncharov told Reuters on the sidelines of third Sino-Russia-Kazakhstan Forum. "We have lots of licences to explore offshore," he said, adding that the exploration could be in Russia or a third country. The alliance is similar to one the Russian outfit has embarked on with Chinese companies after their share purchase in Rosneft's IPO. Rosneft formed an exploration and production venture with China National Petroleum Corporation to hunt for oil and gas in East Siberia. Rosneft has a similar, but more preliminary pact with Sinopec.

Kazakhstan targets Nations stake

kazakhstanDec. 7, 2006 - Upstream onLine - Kazakhstan looks set to take a controlling stake in assets belonging to Nations Energy before China International Trust & Investment Corporation (Citic) ties up its takeover of the Canadian player, an industry official said today. The government is awaiting a report by a panel of experts on what size holding it should take in the company, Ulan Baizhanov, head of the President's Administration at state-run KazMunaiGaz, told Reuters. "The expert group will give us the answer - to buy all the company, or part of it," he said through an interpreter. Asked how large a stake he thought authorities aimed to take, he said they were interested in controlling assets and management. "I can't answer for the government, but it looks like it could be more than 50%," he added. A government takeover would be a massive disappointment toCitic, a diversified investment vehicle with few oil interests. It announced the $1.9 billion deal in October and said it expected to close it in December, pending shareholder approval. But last month Kazakhstan's energy minister called for urgent steps to block the deal, Interfax agency reported, and some members of parliament have expressed concern over it. The former Soviet state has introduced legislation that aims to give it the right to buy foreign-held stakes in oil companies that are put up for sale and to limit property rights over "strategic resources", such as oil and gas. Some officials fear that neighbouring China may be gaining too much influence over the country's energy resources. Last year China National Petroleum Corporation bought another Canadian player, Petrokazakhstan, for $4.2 billion, but that deal only went through after the government threatened to use Kazakh law to block it.

Rosneft to Catch Up Global Rivals in Crude Output

Dec. 7, 2006 Kommersant - In the following five years, Rosneft intends to invest $20 billion in development and attain capitalization of roughly $160 billion. By 2020, the company hopes to catch up ExxonMobil and ?? in terms of the output. Rosneft President Sergey Bogdanchikov shed light on ambitious plans of the company during the interview to The Financial Times. By 2011, Bogdanchikov said, the company that costs $100 billion now will step up to $160 billion on investments of $20 billion (less new acquisitions). The daily production will go up from 1.8 million bbl to more than 2 million bbl in the following three years and to 3 million bbl by 2015. By 2020, Bogdanchikov emphasized, Rosneft will match the output of global leaders - BP and ExxonMobil. BP’s produced 3.816 million bbl a day in the third quarter, while ExxonMobil had 4 million bbl; the capitalization was $223 billion and $453 billion respectively. “The purpose of Rosneft is to reach operating activities in extent equal to the biggest world companies. But even if it happens, Rosneft will hardly catch up with them in capitalization,” said Troika Dialog analyst Valery Nesterov. Rosneft has low liquidity, as only 15 percent of its stocks are in the free float now and the country’s risks are high. Besides, efficiency also affects capitalization, Nesterov explained. Nowadays, BP generates $15 in net profit from a produced bbl, Exxon has $27, but Rosneft posts no more than $7, according to Nadezhda Kazakova from MDM Bank. Another concern of Rosneft is to acquire foreign assets and anchor on the markets of Asia. The company is completing elaboration of documents to set up a venture with Petrochina, Sergey Goncharov, who is in charge of Rosneft office in China, said in Shanghai yesterday during the China’s-Kazakh Forum. The venture will deal with refining and selling petroleum in China. “The partners have made very good offer and I think we will be able to start working in 2007,” Goncharov said. Rosneft’s cooperation with Petronas of Malaysia will begin next year as well, the official specified.

Russia to increase oil and gas exports

7 December 2006 RBC News – Russia will be increasing its gas exports until 2050, Economy Minister German Gref said at a meeting with Latin American ambassadors in Moscow on Wednesday. He said domestic demand for oil products and natural was growing, increasing by 7 percent over the past six months. “If we synchronize investment and the market, there will be no danger of interruption in gas supplies,” he said. Gref said Russia would also expand oil exports until 2020-2025, but the supplies would be reducing by about 1 percent a year after 2025 unless new reserves were discovered. “Russia will remain the world’s biggest supplier of oil and gas until 2050,” he stressed. The price of oil was expected to be between $45 and $55 per barrel in the medium term, the Economy Minister said. The price was unlikely to fall below $45 or rise above $60 per barrel, he noted. “If the price rises above $60, economic restrictions will come into effect. $60 to $70 per barrel would be an extreme price,” the Economy Minister added. “Russia wants to use all of its resources to provide the world with energy. This is in our best interests, allowing us to use the profits to diversify our economy,” Gref said. Gref said earlier that the price of natural gas on the domestic market would rise above $100 per 1,000 cubic meters by 2011. There will be no sharp price rises before the 2008 presidential elections, but industrial consumers will have to pay $90 per 1,000 cubic meters of gas in 2009.

Oil companies' gas prospects

oil-money-discussion7 December 2006 RBC News - Forecasts for oil and gas companies have been raised
Several investment companies have raised their share price forecasts for Russian oil and gas producers. Analysts attribute this to the government’s decision to raise domestic gas prices in 2007. NOVATEK, Gazprom, LUKoil and Rosneft will be the biggest gainers. According to the government decision, wholesale gas prices for industrial consumers will be raised by 15 percent in 2007 and by 25 percent in 2008. In 2009, the prices will be raised by 26 percent (twice by 13 percent), and they will also be raised twice in 2010 (by 13 and 12 percent). By 2011, domestic gas prices will have more than doubled to about $100 per 1,000 cubic meters, closing the gap between domestic and export prices. By that time, gas prices for industrial consumers will have been liberalized completely, and by 2015 for individuals. The forecast revisions reflect changes in the medium term gas prices, Artyom Konchin, an analyst at the ATON investment company, told RBC Daily. According to the government plans, the price of gas for industrial consumers will be brought to $100 per 1,000 cubic meters, against the previously planned $80, ATON said in its review. The new forecasts are also based on the expected Brent crude price of $50 per barrel in the long term. NOVATEK, an independent gas producer, will benefit the most from the price rise, Konchin believes. ATON raised its forecast for NOVATEK shares to $77.68. This company is largely oriented towards the Russian market, domestic sales accounting for almost 60 percent of its total revenue. ATON recommends buying NOVATEK stock. “Many oil and gas companies will get additional revenues due to the price increases,” agrees Dmitry Mangilev, at Prospekt investment company. He says Gazprom and NOVATEK will benefit the most. LUKoil and Rosneft, the largest gas producers among Russia’s oil companies, will also gain from gas price rises. “Their combined proven and probable reserves of natural gas amount to 7.9 and 6.6 billion barrels of oil equivalent, which will allow them to benefit the most from domestic price rises,” ATON’s review said. “Higher gas prices will boost the profits of LUKoil, Rosneft and Surgutneftegaz,” agrees Mangilev. Konstantin Gulyayev, an analyst at REGION Group, says the planned gas price hikes are not the only reason behind the forecast upgrades. He thinks high oil prices play a role, too. “The forecast revisions could have been triggered by rumors of mergers and acquisitions in the oil sector. In connection with this, some oil and gas companies are expected to show positive share price dynamics,” Gulyayev said. The fair price of Gazprom and LUKoil’s stock was being reviewed, he added.

Industry and Energy Ministry estimates Russia's proceeds from PSAs

RBC, 07.12.2006, Moscow 09:54:17.According to preliminary data, Russia's revenue from carrying out three projects on the basis of production sharing agreements (PSAs) (Sakhalin-1, Sakhalin-2, and the Kharyaginskoye oilfield) will amount to $250m in 2006, Olga Rybak, the deputy director of the Industry and Energy Ministry's department for investment and innovation policy said. According to her, PSA project operators have been requested to prepare additional data for conducting a more detailed study of their works planned for 2007.

Prosecutors find over 100 breaches in Sakhalin-II

VLADIVOSTOK, December 6 (RIA Novosti) - At least 100 violations of the environmental, migration and labor laws have been discovered in the Sakhalin-II energy project, local prosecutors said Wednesday. Sakhalin-II run by British-Dutch Royal Dutch/Shell has been under scrutiny since Russia's Natural Resources Ministry canceled its own 2003 approval of the project in mid-September. "It has been established that builders of the gas pipeline in six districts of the Sakhalin Region have caused serious damage to rivers where Pacific salmon spawn," the prosecutors said. Added to illegal tree felling, these account for tens of million of rubles of damage to the environment, the source said, noting that a criminal case had been opened and more criminal proceedings might follow. The Federal Agency for Water Resources said it had suspended 12 water resources licenses to for Sakhalin-II for violating Russia's Water Code. "We give them two months to correct the uncovered violations, otherwise the licenses will be annulled," the agency said. The Federal Service for the Oversight of Natural Resources has said it will present a final report on the Sakhalin-II project by mid-December, and added that its expert group identified a number of serious violations, some of which fall under the provisions of Russia's Criminal Code. The Natural Resources Ministry said earlier it was dissatisfied with the environmental measures taken so far by Sakhalin Energy, the project operator. The multibillion-dollar project has been accused of inflicting large-scale ecological damage on Sakhalin Island, including deforestation, toxic waste dumping and soil erosion. Checks have also uncovered the illegal routing of an oil pipeline through the territory of a national conservation area and environmental damage to the island's Aniva Bay. The Russian government and the Sakhalin administration signed a production-sharing agreement on Sakhalin-II in 1994. Alongside the environmental impact, the production-sharing agreement behind Sakhalin-II, which allows Shell to comfortably recoup all of its expenses before sharing any of its profit with the state, is hugely unpopular with the Russian government. Royal Dutch/Shell holds 55% in Sakhalin Energy, operator of the project, Japan's Mitsui controls 25%, and Mitsubishi 20%. Sakhalin-II comprises an oil field with associated gas, a natural gas field with associated condensate production, a pipeline, a liquefied natural gas plant and an LNG export terminal. The two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

CNPC, Rosneft to build oil refinery in China by 2010

SHANGHAI, December 6 (RIA Novosti) - China National Petroleum Corporation (CNPC) and Rosneft [RTS: ROSN] will build a joint oil refinery in China by 2010, the Russian state-run oil firm said Wednesday. The joint venture, one of two joint projects of the companies, will be located near Beijing and will refine crude, sell oil derivatives and operate a network of 300 gasoline stations around the refinery. "The plant will refine about 10 million metric tons of oil, and will be completed by 2010," Sergei Goncharov, head of Rosneft in China, said. Speaking at the third Russian-Chinese-Kazakh oil and gas forum in Shanghai, Goncharov said Rosneft, Russia's third-largest crude producer, would hold 49% in the joint venture, and China's subsidiary PetroChina would control 51%. Goncharov said the companies expected to launch the project next year. "We think we will be able to put the joint venture into operation next year," he said. Goncharov said Russia supplied about 10 million metric tons of oil, worth more than $6 billion, to its East Asian neighbor's rapidly growing economy in 2006, and would further increase deliveries next year. He said deliveries through the Kazakhstan-China pipeline from Atasu to Alashankou would be raised by one million metric tons, and that more oil would be pumped through the Sakhalin-I project in Russia's Far East. Rosneft President Sergei Bogdanchikov said early last month that the company was capable of increasing crude deliveries to China by 60% to 20 million metric tons against the 12-13.5 million metric tons expected this year. Rosneft and CNPC, China's top energy group, are also setting up the other joint venture - on Russian territory. Goncharov said it had already been registered in Russia as Vostok Energy Ltd. "It has been registered in Russia, and the partners have made the required contributions to the fixed capital," Goncharov said, adding that Vostok Energy would be controlled by Rosneft (51%) and would do geological prospecting and produce crude in Russia. Rosneft is also the main supplier in the East Siberia-Pacific pipeline project to China and other Asia-Pacific nations.

Monday, December 04, 2006

EU looks to Kazakh supplies

kazakhstan30 November 2006 - Upstream onLine - The European Union, wary of its dependence on Russian natural gas, sees Kazakhstan as a key potential energy supplier, EU Energy Commissioner Andris Piebalgs said today. Russia is the EU's biggest energy supplier but the bloc is trying to diversify its supplies to reduce the risk of disruption. Ex-Soviet states Ukraine and Georgia have each been left for a short period this year without Russian gas. Piebalgs told reporters in the Kazakh capital Astana late last night that construction of a proposed new Trans-Caspian natural gas pipeline could help EU efforts to diversify energy supplies away from Russia. "Russia is a good supplier but we saw what happened, say, in Georgia when the pipeline was exploded, which left Georgia in the dark and cold," Piebalgs said. "First of all, diversification helps avoid trouble. Secondly, it creates liquidity on the market." Georgia struggled with limited supplies of natural gas after two explosions in January hit a pipeline in Russia carrying supplies to the Caucasus republic. At the moment, the only way to export gas from Central Asia to Europe is via Russia's pipeline network, controlled by state monopoly Gazprom . Piebalgs said the European Union was in talks with Kazakhstan over a number of projects. "As for gas, the EU sees Kazakhstan as a potential supplier," he said. "We are working on several concrete projects. We have started examining a project linked to the possibility of gas transit across the Caspian Sea. It's a good start." Europe gets a quarter of its gas from Russia. Most Kazakh oil and gas deposits are in its part of the Caspian Sea, and its main concern is export routes. Kazakhstan is a close political ally of Russia but it also wants to avoid dependence on Gazprom's transit network as it seeks to raise its weight as a gas exporter on the global market. Kazakhstan has built an oil pipeline serving China and wants to export oil through the Baku-Tbilisi-Ceyhan pipeline that avoids Russia and runs from Azerbaijan to Turkey. It has supported EU proposals for a natural gas pipeline across the Caspian to link the Kazakh oil port of Aktau with the Azeri capital Baku. Russia is against that route.

Russneft plans bond double

30 November 2006 - Upstream onLine - Russian producer Russneft plans to place Series 2 and 3 bond issues worth 7 billion roubles ($266.2 million) each in the third and fourth quarters of next year, an official from the issue organiser said today. Andrei Boguslavski, deputy head of Gazprombank strategic client services, told Reuters that the bonds would have maturities of three and five years respectively. Russneft currently has one outstanding domestic bond worth 7 billion roubles and maturing in December 2010

Norway and Russia join forces

russianorway29 November 2006 Upstream onLine - President Vladimir Putin has confirmed plans for a strategic partnership between Norway and Russia, adding that the decision for Gazprom to go it alone at the massive Shtokman field does not shut Norway out of Russia's upstream sector.
The deal was confirmed by Norwegian Prime Minister Jens Stoltenberg's office last night. Putin and Stoltenberg met at the end of last week during an EU summit in Helsinki. Ingvard Havnen, director general of Stoltenberg's office, said: "Putin confirmed the strategic partnership when it comes to energy co-operation and also with regard to further development and co-operation. "Putin said that although no foreign companies would be involved directly in the ownership side of Shtokman, that did not in any way mean Norwegian companies would not be able to (participate) in the oil and gas sector in Russia."

Gazprom Shares Egypt with NOVATEK

EgyptNovatek [RTS ticker: NVTK], Russia's largest private natural gas producerNov. 29, 2006 – KommersantNOVATEK has sealed understanding memoranda with Egypt’s EGAS and Tharwa Petroleum to carry out geological survey and produce gas in the country. For NOVATEK, it is the first overseas project. The company managed to get it once it sold 19.9 percent to Gazprom, which plans specified the partnership with EGAS.
NOVATEK Board Chairman Leonid Mikhelson has sealed in Cairo the understanding memoranda with Egypt’s EGAS and Tharwa Petroleum. The documents spell out geological survey and subsequent production of gas in the western Egypt (close to border with Libya) and from the shelf of the Mediterranean Sea.
NOVATEK didn’t comment on the Egypt’s agreements yesterday, nor did Gazprom. But a source familiar with progress in negotiations said the parties will set up a venture to be launched in 2007. NOVATEK and its Egypt’s partners haven’t agreed on the shares and investments yet, the source specified.
For NOVATEK, the entry into the market of Egypt is the first overseas undertaking. Of interest is that, in March of 2005, Gazprom concluded a similar memorandum with EGAZ but that document didn’t lead to some definite agreement.
This time, Gazprom will share Egypt with NOVATEK, the analysts speculate. The monopoly will focus on exporting gas from Egypt, while its subsidiary will be stepping up gas production there.

Azerbaijan Pumps Oil from Russia

12–04–2006 Kommersantby Dmitry Butrin; Rafael Mustafaev, Baku
// Ilkham Aliev is ready to stop the transit to Novorossiysk
Azerbaijan might decline Transneft’s services
On the eve of Russian Premier Mikhail Fradkov’s visit to Baku, Azerbaijani authorities made it clear they are ready for a long-term conflict with Moscow. Azerbaijan’s President Ilkham Aliev ordered to his Cabinet to estimate the possibility of declining oil transit through Russia’s territory in response to the growth in prices of Gazprom’s gas supplies to Azerbaijan. The attempt to include Baku into the anti-Georgian bloc might be considered as failed. Russia’s energy policy in Transcaucasia is gradually going beyond discussing gas supply prices. On the eve of the visit of Russian Prime Minister Mikhail Fradkov to Baku which begins today, Azerbaijani President Ilkham Aliev ordered to his Cabinet to consider reducing or cease of pumping oil through the Baku-Novorossiysk pipeline. He made this decision after the conference of December 1 which discussed preparing Azerbaijan’s economy for the upcoming winter. The country’s main energy problems are the growth of price on natural gas supplied by Gazprom to Azerbaijan (up to $230 for 1,000 cubic meters since January), the planned reduction of gas supplies to the country, and the possible cut in electricity supply from Russia. A week before Aliev’s visit to Moscow, and then to Brussels, scheduled for November 10, the Kremlin saw its chief ally in Azerbaijani president for the upcoming “natural gas special operation” against Georgia. Gazprom supplies gas to Transcaucasia, including Armenia and Azerbaijan (around 4.5 billion cubic meters), via Georgian territory. Gazprom insists that Georgia and Azerbaijan should pay $230 for 1,000 cubic meters beginning from January 2007. Now the countries buy gas for about $110 for 1,000 cubic meters. Tbilisi takes it as the consequence of Russia’s intention to destabilize Georgia’s economy. The question about how to compensate to Azerbaijan the price growth of gas pumped via Georgian territory was to be discussed in Moscow on November 10. However, Ilkham Aliev preferred to visit Brussels first, where he held talks with EU and NATO top officials, and only then to go to Moscow – to make Vladimir Putin face the fact that Azerbaijan intends to lead a Kremlin-independent foreign policy. Yet, it turned out yesterday that Baku is ready for a long-term, and not just tactic, cooldown in relations with Moscow – concerning the Baku-Novorossiysk pipeline. Baku wants to cease pumping oil through it, but almost all Azerbaijan’s transit of oil on Russia’s territory is going via that pipeline. According to Azerbaijan’s State Oil Company, the country transported over 4.1 million of metric tons of oil through Russia in 2005. Nearly 3.6 million of metric tons of oil was pumped through the Baku-Novorossiysk pipeline in January-September 2006. The main competitor of the Transneft-controlled pipeline is the Baku-Tbilisi-Ceyhan Pipeline (BTC). Ilkham Aliev directly linked the possible reduction in oil pumping via the Baku-Novorossiysk pipeline (which will deprive Transneft of about $25 million of transit revenues a year) to the situation around gas supplies. He explained that Gazprom’s gas price growth and the expected cut in gas supplies to Azerbaijan require extra supplies of oil products for generating electricity. Baku admits it will follow the same strategy in winter 2006-07 as last winter: together with Iran, it will carry out exchange operations for supplying gas and electricity to Georgia in case of lack in its energy system, and import electricity from Georgia during peak periods in Baku. Last winter, this arrangement secured stable work for Georgia’s energy system during the breakdowns on export electric lines and gas pipelines on Russia-Georgia border, which Tbilisi thinks Russia organized. Back in summer 2006, Azerbaijani government was inclined to support Russia. Thus, head of the Center for Oil Research of Azerbaijan Ilkham Shaban said that the country’s government then asked BP to postpone the beginning of gas extraction from Shah-Deniz deposit from September 2007 to later time. Now, the opening of Shah-Deniz might occur earlier. Although Aliev said the final decision on the Baku-Novorossiysk pipeline will be made in “a week or two”, the issue must have already been decided upon. Azerbaijan’s refusal to pump oil via Russia has sense only if it is a strategic decision for the several upcoming years, which will deprive Transneft of growth in oil pumping, for the sake of the BTC. So, Fradkov’s visit to Azerbaijan cannot be easy in this situation. It will rather mark the beginning of the long-term chilldown in Baku-Moscow relations, regardless of whether the anti-Georgian “natural gas special operation” takes place.

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