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Monday, April 30, 2007

TNK-BP Buys Severnoye

28.04.2007 (10:34)- RZD News - TNK-BP bought 66 % of a Siberian oil and gas producer, the company said Friday. TNK-BP Holding acquired the shares Thursday, gaining 88 % of the voting rights at Severnoye, the company said, without disclosing the price. Severnoye previously belonged to Russneft, the country's eighth-largest oil producer, Interfax reported, reports The Moscow Times, referring to Bloomberg.

Russia Considers Building Oil Refinery, Storage in Philippines

24.04.2007 - MosNews - Russian Ambassador to the Phillipines said on Tuesday, April 24, that Russia is laying the infrastructure to become a major oil supplier to Asian countries and is considering proposals to build an oil refinery and storage facilities in the Philippines to serve Southeast Asia. Southeast Asian countries have expressed interest in Russia’s plans to become an important energy provider in the region and Moscow should carefully plan how it could assume that crucial role, Ambassador Vitaly Vorobiev told foreign correspondents. “The countries of Southeast Asia ... they’re waiting for further explanation of Russian intentions,” Vorobiev said, quoted by the Associated Press. “There should be some kind of concept how to position Russia in this respect. We didn’t pay much attention to this area and we started to change our mind-set only in 1990s,” he said. Russia would be interested not only in “buy and sell operations” but could invest in oil refineries and storage. Many energy-hungry Asian economies have long been dependent on Middle Eastern oil, but fears of supply disruptions due to sporadic conflicts in the volatile region have prodded countries like the Philippines to turn to possible alternative sources like Russia. An ambitious project, involving the construction of an oil pipeline from East Siberia to Russia’s Pacific coast, could bring larger volumes of oil — possibly at cheaper prices — to Asian countries, Vorobiev said. Backed by the Kremlin, the 2,550-mile pipeline could be completed in three to four years, he said.

Moscow gets the upper hand in the fight for Central Asian gas

MOSCOW. (Igor Tomberg for RIA Novosti) - During his first visit to Moscow, the new president of Turkmenistan, Gurbanguly Berdymukhammedov, guaranteed President Vladimir Putin that his country's 2003-2028 contract with Gazprom would remain unchanged. Russia has thus scored points in the contest to control Caspian gas. In any event, this is what one would assume from the Kremlin's optimistic press release about the talks. But Russia does not yet have an answer to the main question: by what routes will Turkmen gas be supplied? This year, Turkmenistan is planning to increase its gas exports by a quarter - up to 58 billion cubic meters - and wants to diversify supplies. But right now, the only existing export routes for its gas are Gazprom's pipelines and a low-capacity pipeline to Iran. It is vital for Moscow to keep control over Turkmen gas supplies. To do so, it could provide its partner with more transit capacity. At the same time, the death of Saparmurat Niyazov, the previous Turkmen president, has encouraged the United States to step up its efforts to diversify energy supplies to Europe. It is trying to involve Central Asian countries, primarily Turkmenistan, in the building of oil and gas pipelines bypassing Russia through the southern Caspian Sea. The U.S. has come up with a plan for a Trans-Caspian pipeline on the bottom of the Caspian Sea with a capacity of 30 billion cubic meters a year. It could transport natural gas to the Baku-Tbilisi-Erzurum pipeline (put into operation in 2006) and then on to Europe through the Nabucco pipeline (to be built by 2010). If the Trans-Caspian pipe is built, Turkmen gas will travel to Europe without going through Russia and will compete with Gazprom's gas. The results of the presidential meeting show that for the time being Russia seems to have outdone the West in the battle for Central Asian gas. At any rate, the Turkmen president reacted positively to a proposal by his Russian counterpart to expand the existing Central Asia-Centre pipeline and to build a Caspian pipeline with a capacity of 30 billion cubic meters a year on the Caspian Sea's eastern shore. It is very important that there are now grounds for counting on Turkmenistan's adhering to its contracts with Gazprom and agreements on bigger gas supplies. Berdymukhammedov confirmed the readiness of his country to honour agreements that make Russia the main importer of Turkmen gas until 2028. He also promised to abide by the September 2006 agreements giving Russia all Turkmen gas exports in 2006-2010 - 50 billion cubic meters a year. In early 2006 this deal also raised the purchasing price of Turkmen gas from $44 per thousand cubic meters to $100. However, even if the two presidents had discussed prices, they could not have resolved the problem. Quite rightly, Turkmenistan is displeased that Gazprom is selling Turkmen gas to Ukraine for $100 per thousand cubic meters while exporting Russian gas to Europe for almost $300. It is clear that sooner or later Turkmenistan will demand a fair price for its gas. When the Turkmen president was in Moscow, the Russian business newspaper RBK Daily quoted a reliable source as saying: "Turkmenistan believes that its dependence on Russia for gas transit is depriving it of profits. In effect, they are giving us an ultimatum: either we buy their gas at near-European prices or help them sell it to Europe. Otherwise, they will build alternative routes." It is worth paying attention to the idea that sooner or later there will be a joint venture like RosUkrEnergo (a Russian-Ukrainian consortium set up to facilitate the delivery of Turkmen gas to Ukraine and Europe). It will supply Turkmen gas to Europe but at a much higher price than now. It is understandable why the Turkmen president was evasive on the proposed Trans-Caspian route. He expressed interest in Putin's suggestion for a pipeline around the Caspian Sea (on Kazakh and Russian territory) but remarked that Turkmen experts would have to conduct a feasibility study on it. So, without questioning the previous agreements, Berdymukhammedov conspicuously avoided giving a definite answer to a question of vital importance to Russia: what routes will Turkmenistan use for its future gas exports? The media hope that during Putin's reciprocal visit to Ashgabat, the Turkmen capital, in May, the Trans-Caspian saga will come to an end. But the situation is not that simple. On the day before the Turkmen president's visit to Moscow, Turkmen Foreign Minister Rashid Meredov said during a trip to the United States that his country would not mind sending gas to Azerbaijan. From there, the gas could be sent on to the proposed Nabucco pipeline, which will supply it to Europe bypassing Russia. This is why the Turkmen authorities are listening to proposals without making any commitments. Turkmenistan has two bargaining chips in its price negotiations with Russia: future alternative gas routes to Europe and access to the Chinese market. But these alternatives are hypothetical, which gives Moscow the time to adopt a clear-cut and streamlined policy towards Turkmenistan and other Central Asian countries. Turkmenistan was not the first to discuss a price increase; another Gazprom supplier, Kazakhstan, is demanding $160 per thousand cubic meters of gas. Moscow has picked a good time to make its new pipeline proposals. They will make the U.S.-lobbied Trans-Caspian project look like even more of a pipe dream. Dr. Igor Tomberg is a senior research fellow with the Centre for Energy Studies, at the Institute of World Economy and International Relations, the Russian Academy of Sciences.

Repsol and Lukoil take Zhambai bite

27 April 2007 - Upstream staff - Spain's Repsol YPF and Russian player Lukoil have bought 25% stakes in Zhambai, a Kazakh holding company which is developing the South Zhambai block in the caspian Sea, Kazakhstan's state-run company KazMunaiGaz said today. Lukoil bought its share through a joint venture with Mittal Investments called Caspian Investment Resources. Financial terms were not disclosed. "Today in Astana, KazMunaiGaz, Caspian Resources and Repsol signed new versions of the founding agreement and articles of association of Zhambai LLC," it said in a statement. KazMunaiGas said the deal was originally agreed in November 2006. According to data cited by Moscow brokerage Aton, the Zhambai oilfield is estimated to hold reserves of 6.8 billion barrels of oil equivalent.

Shell to cough up Sakhalin fees

26 April 2007 - Upstream OnLine - Shell and its partners have agreed to pay an annual dividend to the Russian government as part of a deal to salvage its Sakhalin-2 project, according to a newspaper report The dividend will be paid from 2010 onward and linked to the price of oil, the Wall Street Journal quoted an unidentified person familiar with the situation as saying. "It's going to be something under a billion dollars every year," the person was quoted as saying. Shell declined comment. Shell and the partners this month ceded control in the $22 billion venture to state-controlled Gazprom, at what analysts considered a knock-down price, after more than a year of pressure on the project from the Kremlin. Analysts said the production sharing agreement that Shell had negotiated in the 1990s offered the world's second-largest, non-state controlled oil company more favourable terms than most other nations had agreed in the past decade. A renegotiation of the PSA would have been a complex legal matter and the newspaper said the dividend allowed the terms to be changed without such complications. However, the payments "won't have a material impact on the economies of the project," another person familiar with the terms was quoted in the newspaper as saying.

Rosneft declares itself a 'world leader'

26 April 2007 - Upstream OnLine - Russian state-controlled oil producer Rosneft today claimed it was the world leader among public companies in oil reserves after booking a 6.1% increase in its hydrocarbons reserves in 2006. The company said it had estimated net proved reserves of 20.089 billion barrels of oil equivalent, including 15.963 billion barrels of oil and 24.758 trillion cubic feet of gas, according to the Society of Petroleum Engineers classification. Rosneft's proved oil and gas condensate reserves rose by 7.3% in 2006, while its gas reserves increased by 1.5%. The company said its hydrocarbon reserve life was 27 to 30 years for oil and 51 years for gas. "In 2006, Rosneft became the world leader among public companies in proved liquid hydrocarbon reserves under both SPE & Security Exchange Commission (SEC) life-of-field classifications," said Rosneft, which pumps 1.75 million barrels per day. Rosneft's main Russian competitor Lukoil has oil reserves of 15.3 billion barrels, while its total reserves are bigger that those of Rosneft at 20.36 billion barrels of oil equivalent. US supermajor ExxonMobil's total proven reserves are even bigger at 22.7 billion barrels of oil equivalent, but the company said they are split about evenly between liquids and gas. Rosneft said the increase in proved reserves was mainly due to further exploration at Yuganskneftegaz, Rosneft's main production unit in West Siberia, which previously belonged to bankrupt oil producer Yukos. Further exploration at East Siberia's Vankor field also contributed to the increase.

Rosneft hunts Yukos Siberian fields

25 April 2007 - Upstream OnLine - Russia's state-controlled Rosneft has submitted a bid to buy the East Siberian assets of bankrupt oil company Yukos at a court-enforced auction next week, a Rosneft source said today. The starting price for the lot, which comprises Yukos's Tomskneft oil production unit and two refineries in Angarsk and Achinsk, is set at 166.3 billion roubles ($6.45 billion). The source said Rosneft vehicle Neft-Activ would bid on behalf of the company, Reuters reported. Yukos has denounced the state-forced auctions, which are being held to recover its back tax debt, as a Kremlin plot to destroy what was once Russia's largest oil company and punish founder Mikhail Khodorkovsky for political activities. Khodorkovsky is now serving an eight-year jail term in Siberia. Rosneft has so far benefitted the most from the demise of Yukos as it already controls its former top oil production unit Yugansk. It has also bought a chunk if its own shares, which were controlled by Yukos, at an auction this year at a discount. State-controlled gas export monopoly Gazprom has also grabbed a chunk of Yukos's former property when it bought the company's gas assets in tandem with Italy's Eni and Enel. Yukos will virtually cease to exist in May after the sale of its East Siberian assets and another auction, at which the state will sell the company's Samara oil production unit and its three refineries in the same region. Analysts have said Rosneft will most likely win the Samara lot, but competition could be high for East Siberian assets as they could be of interest to Gazprom, which has large gas operations in Tomsk. However, a Gazprom source said today the company has no plans so far to bid for East Siberian assets. A source at Russia's third-largest oil company TNK-BP, half owned by UK supermajor BP, said the company also had no plans to bid. BP put in a rival bid during the auction of Yukos's minority stake in Rosneft but dropped out of the competition quickly despite having said it was there to win. At least two bids are needed to make the auction valid and analysts have said BP's move, which followed a meeting between its chief executive John Browne and Russian President Vladimir Putin, might turn into a broader tie-up at the next auctions. Gazprom has said the US'a Chevron had also expressed interest in some Yukos's assets. Chevron and BP declined to comment today. Tomskneft produced 220,000 barrels per day, but can quickly increase production due to its large crude reserves. Angarsk and Achinsk can refine over 500,000 bpd.

MOL looks east

MOL24 April 2007 - Upstream OnLine - Hungarian oil and gas company MOL said it had bought a Russian oil production and exploration block with small proven reserves and production. MOL said in a statement to the Budapest Stock Exchange it had bought Matjushkinskaya Vertikal from private individuals and has received regulatory approval for the purchase, Reuters reported. The company holds exploration rights in the Tomsk region of Western Siberian on an area covering 3231 square kilometres. Its proven and probable reserves are 6 million barrels and current daily production is around 550 to 600 barrels. The Russian company's exploration licence is valid until 2010 and its production licence expires in 2029. Financial terms were not disclosed. MOL set out in 2006 to triple its upstream output to 300,000 barrels of oil equivalent per day and to lift its proven reserves to 900 million barrels of oil equivalent from just under 300 million. It said it expected to make several upstream acquisitions in Russia as well as the Middle East to fulfil its targets.

LUKoil plans to become second-largest gas producer in Russia

MOSCOW, April 24 (RIA Novosti) - Russia's largest crude producer LUKoil [RTS: LKOH] plans to become the country's second-largest gas producer, the company vice president said at a 2006 company reporting presentation Tuesday. "We hope to become producer number two after Gazprom [RTS: GAZP]," Leonid Fedun said. LUKoil commercial gas production in 2006 was 13.6 billion cubic meters. The share of gas in the aggregate hydrocarbon production volume grew from 5% to 10% in the period, and will in the future be brought to 33%, in line with strategic plans. By 2016, LUKoil plans to increase gas production five-fold - to 70 billion cubic meters. LUKoil said earlier Tuesday its net income increased 16.2%, year-on-year, in 2006 to $7.48 billion, whereas earnings before interest, taxes, depreciation and amortization (EBITDA) increased 18.2% to $12.3 billion and sales grew 21.4% to $67.7 billion. LUKoil CEO Vagit Alekperov said at a presentation in London that his company plans to start industrial production of gas at its projects, whose maximum production level is assessed at 10 billion cubic meters annually, in Uzbekistan in late 2007. He said a level of 3 billion cubic meters could be reached in 2008. Alekperov said the gas would be sold at a price negotiated between Gazprom and Uzbekistan, $100 per 1,000 cubic meters. A consortium of investors said in August 2006 that they signed a production-sharing agreement to prospect and develop oil and natural gas fields in Uzbekistan. Exploration conducted by Uzbekneftegaz, the Central Asian state's national petroleum corporation, proved the Aral Sea holds vast hydrocarbon reserves, and work has started on two of the eight gas condensate fields discovered there in the last few years. The consortium, made up of Uzbekneftegaz, Malaysia's Petronas, Russia's LUKoil Overseas Holding Ltd., South Korea's KNOC and China National Petroleum Corporation, was established in September 2005. Uzbekistan is the former Soviet Union's second natural gas producer, behind Russia, with an annual gas output of 55 billion cubic meters.

North Russia oil field to come on stream by early 2008 - LUKoil

LONDON, April 24 (RIA Novosti) - LUKoil [RTS: LKOH] is planning to commission an oil deposit in northern Russia in late 2007 or early 2008, the largest Russian crude producer's president said Tuesday. The Yuzhno-Khylchuyuskoye deposit, developed jointly with U.S. energy giant ConocoPhillips, holds 500 million barrels in proven reserves. Output at the deposit is expected to reach a projected 7.5 million tons (150,000 bbl/d) in 2009. Vagit Alekperov said at a project presentation in London that the company is building a 160-kilometer (100-mile) pipeline to the site and a transportation terminal with a capacity of 16 million tons (117 million bbl). LUKoil owns 70% in the project.

Tuesday, April 24, 2007

Turkmens throw in lot with Russia

24 April 2007 - Upstream staff - Russia won a valuable ally in the battle for the control of global gas supplies when Turkmenistan's President Kurbanguly Berdymukhamedov today personally endorsed long-term gas co-operation with Russia set out in deals running until 2028. The announcement came after talks in Moscow with President Vladimir Putin ended on a positive note for the Kremlin. "We'd like to work with you in all areas for further consolidation of our co-operation first of all relating to the distribution of Turkmen gas," Berdymukhamedov said. "Yesterday we discussed many options and you gave many good proposals and we will work with these proposals in the future," Reuters quoted him as saying. The two-day meeting focused on shared energy interests, with Russia keen to discourage Turkmenistan from shifting its vast gas exports to the European Union or a new US-backed Caspian pipeline. Berdymukhamedov assumed office earlier this year after the sudden death of Saparmurat Niyazov, who had ruled the country for 21 years. Until now, the precise political loyalties of the new leader had not been clear. Niyazov's death in December triggered a new push by the US and the European Union, keen to loosen Moscow's hold on gas supplies, to persuade Turkmenistan to ship gas past Russia via the proposed pipeline under the Caspian Sea. China is also lobbying for some of Turkmenistan's gas exports to fuel the massive expansion of its economy. But Berdymukhamedov endorsed the current export system, which sees his country's gas sold mostly to Russian gas monopoly Gazprom in a contract not set to expire until 2028. Exported Russian gas can then be sold on to European customers at a rate two and half times more than paid to Turkmenistan for its imports. Turkmenistan plans to raise sales by a quarter this year to 58 billion cubic metres and has been examining various pipeline options. In statements issued today, both sides emphasised their willingness to continue co-operation, particularly in the gas sector. "I'm glad to welcome our reliable and traditional partner. We've established pragmatic but warm relations," Putin said. "The main theme of our contact is oil and gas and yesterday we fully discussed with the president the current and future possibilities for work in this area." Russia has sought to strengthen its position as the monopoly importer of Turkmenistan's gas and to discourage the construction of a new pipeline around its territory, Deutsche UFG bank wrote in a research note.

Lukoil sees profits rise by 16%

24 April 2007 - Upstream OnLine - Russian oil producer Lukoil has unveiled a 16% rise in 2006 net profits, slightly missing a forecast by analysts. The company said its profits rose to $7.48 billion from $6.44 billion in 2005. Analysts polled by Reuters had expected the company to report a profit of $7.87 billion. Revenues rose 21% to $68.11 billion from $56.22 billion, on the back of stronger oil and gas output, which Lukoil said had risen by 12.2% last year to 2.145 million barrels of oil equivalent. Analysts had expected the revenues to amount to $68 billion. "The increase in net income was due to favourable market conditions, increase in hydrocarbon production and refinery throughputs, cost control and refining margins growth," Lukoil said in a statement. "The net income growth was held back by strengthening of the rouble against the dollar and growth of the tax burden. The company's tax expenses totalled $24.4 billion, up 30.4% year-on-year." It also said earnings before interest, tax, depreciation and amortisation (EBITDA) rose 18% to $12.30 billion from $10.40 billion in 2005, also slightly missing a forecast of $12.62 billion.

Novatek cranks up bottom line

23 April 2007 - Upstream OnLine - Russia's second-biggest gas company, Novatek , said profit rose 2.8% in 2006 while revenue soared 27%. Novatek, in which gas giant Gazprom has a 19.4% stake, said profit attributable to shareholders rose to 14.08 billion roubles ($546.6 million) from 13.70 billion roubles. A Reuters poll of eight analysts showed investment banks expected net profit to total $533 million. Revenue rose to 48.81 billion roubles ($1.90 billion) in 2006 from 38.48 billion roubles. A Reuters poll showed analysts expected revenue to rise to $1.83 billion. The earnings were prepared in accordance with international financial reporting standards. Sales of natural gas increased by 10.9% in 2006 to 30.31 billion cubic metres from 27.33 billion cubic metres. "Overall growth in production was achieved through the efficient exploitation of our existing producing asset base," Novatek said in its accounts. "We expect our total production volumes to continue growing, primarily as a result of the development activities at our existing producing fields and by exploring and developing other oil and gas fields in our asset portfolio," the company said.

Monday, April 23, 2007

'Shtokman won't be on stream until 2035'

Bellona17 April 2007 - Upstream staff - Russia's huge Shtokman gas field in the Barents Sea will probably not be on stream before 2035 - two decades later than planned, Norwegian environmental group Bellona claimed today. Bellona chief Frederic Hauge told foreign journalists that Russia does not have the technology to develop the field by itself and must rely on foreign know-how. he made the claims during a briefing on environmental issues in the Arctic region. Hauge said potential foreign partners for Shtokman, while displaying interest in public, were privately growing wary of entering long-term deals in Russia after the Kremlin had muscled in on other petroleum projects, he said. "I don't believe Shtokman will be up and running before 2035," Reuters quoted Hauge as saying. Bellona has close links to the Norwegian oil industry, which helps to fund the group and draws on its advice. It has long been sceptical of developing Shtokman and has criticised Russia's environmental record in the Arctic. Hauge said foreign companies faced uncertainties over Shtokman that included the use of untested offshore technology, an unclear tax regime and still unspecified gas export routes and transit costs. Industry analysts have also said Russian gas giant Gazprom would struggle to complete the $20 billion project by itself. Located 550 kilometres off the coast of Russia's Kola peninsula, Shtokman has reserves of more than 3.7 trillion cubic metres of gas. Gazprom is reportedly in talks with France's Total , US supermajor ConocoPhillips and Norway's Statoil and Norsk Hydro to set up a joint operating company for Shtokman, which would own some infrastructure but not the gas. Last year Russian rejected bids by foreign companies to become equity partners in the field, saying Gazprom would develop Shtokman alone and foreign companies could be contractors. Discovered in the 1980s, the field was meant to come on stream in 2003 but the start up is now expected around 2013 to 2015.

Kazakhs run rule over contracts

kazakhstan17 April 2007 - Upstream OnLine - Kazakhstan's government announced an audit of all energy and mineral resources contracts today, but said it had no intention of seeking unilaterally to revise any existing deals. "Our subsoil policies should be aimed at diversifying the economy so I am ordering the energy ministry to conduct an audit of all contracts in the subsoil sector to see whether or not they solve the tasks we have set ourselves," Reuters quoted Prime Minister Karim Masimov as telling a government meeting. He gave no details but the government has been seeking both to diversify the economy and to process raw materials inside the country where possible in order to maximise the economic benefit it gets from exports. "This means that we will again analyse whether contract conditions in the subsoil sector are being met," Energy Minister Baktykozha Izmukhambetov told Reuters. "We will in future pay attention to the necessity... of expanding and building refining and enriching factories and plants," he said. "There is no question of revising the contracts. Any change to a contract would have to be agreed by both sides."

LUKoil completes Caspian Investment deal

RBC, 23.04.2007, Moscow 17:15:04. Russian giant LUKoil and India's Mittal Investments have completed a $980m deal on the sale of a 50-percent stake in LUKoil Overseas-controlled Caspian Investment, LUKoil said in a statement today. The two companies have also set up a joint venture on the basis of Caspian Investment with equal shares. The Indian company has also committed to take on one half of Caspian Investment's debt worth some $175m.

Russia, Turkmenistan may expand gas cooperation - Putin

NOVO-OGARYOVO, April 23 (RIA Novosti) - Russia and Turkmenistan may expand cooperation in the gas sphere, the Russian president said Monday. Vladimir Putin said during his first meeting with Turkmen President Gurbanguly Berdymukhammedov that Russia "had launched a new leg of the gas pipeline system along the Caspian Sea and was currently pumping more than 5 million cubic meters of gas through it daily." He said the two countries could expand activities in this sphere. Turkmenistan possesses the world's fifth-largest reserves of natural gas and substantial oil resources. On September 5, 2006, after Turkmenistan threatened to cut off supplies, Russia agreed to raise the price it pays for Turkmen natural gas from $65 to $100 per 1,000 cubic meters. Two-thirds of Turkmen gas goes through Russian energy giant Gazprom. A Kremlin source said ahead of Berdymukhammedov's visit: "LUKoil, Zarubezhneft, Itera, Stroytransgaz, Soyuzneftegaz have plans to implement promising projects in Turkmenistan." A number of Russia's large companies, such as Power Machines, Vyborg Ship Building Plant, Zvezda-Energetika, tractor plants in Cheboksary and Chelyabinsk, Volgaburmash, Kamaz and AFK Sistema are active in the Turkmen market. The two countries' trade in 2006 amounted to $307.5 million, against $300.7 million in 2005. Russian exports accounted for $228.6 million and imports stood at $78.9 million, as compared to $223.5 million and $77.2 million, respectively. In the first two months of 2007 bilateral trade reached $45.7 million. At a Thursday meeting with co-owners of AFK Sistema in Ashgabat, Berdymukhammedov invited the Russian leading consumer services firm, which owns a number of oil producing and refining assets in Bashkortostan, to develop oil and gas deposits at offshore sites on the Caspian Sea. Russia is the second foreign destination after Saudi Arabia and the first CIS country on the new Turkmen leader's itinerary. Berdymukhammedov assumed power February 11, 2007 in the first contested election in Turkmen history, following the 21-year rule of Saparmurat Niyazov, the country's first president. Since the inauguration of the new Turkmen leader several Russian delegations have visited Turkmenistan. An agreement was reached to diversify bilateral relations between Russia and Turkmenistan during Russian Primer Mikhail Fradkov's visit to the country. In early April, Russian Foreign Minister Sergei Lavrov held negotiations with the Turkmen leader and his counterpart in Ashgabat, during which Berdymukhammedov confirmed his adherence to energy cooperation and partnership diversification with Russia.

Tuesday, April 17, 2007

Mysterious U.S. Company Buys Yukos' Energy Assets

17.04.2007 - MosNews - Mysterious company Monte-Valle, founded by unnamed U.S. citizen has won the fourth auction for sale of property of bankrupt Yukos Oil Company. The auction held on Tuesday, April 17, sold stakes in Russian energy companies previously owned by Yukos. Monte-Valle offered 3.563 billion rubles (about $138 million) for the lot. Yukos, once Russia’s largest private oil company, was declared bankrupt on Aug. 1, 2006, following three years of litigation with tax authorities over the company’s tax arrears. The state has already sold Yukos’ gas assets to consortium of Italian energy companies Eni and Enel and a 9.4 percent stake in state-controlled Rosneft Oil Company to Rosneft itself. The third auction, including Yukos’s research and development assets, was called off due to a lack of bids. The fourth round of Yukos auction saw four firms bidding for energy assets in Tambov and Belgorod regions in Central Russia. Initial price of the lot was 2.64 billion rubles (about $102.2 million), with the bid increment of 26.39 million rubles (about $1.02 million). Monte Valle and another company, called Financial Agency, were the main bidders at the auction. Neft-Aktiv, a structure of Rosneft, offered five bid increments while Versar offered none. Several hours after the auction Prime-Tass news agency reported that Monte-Valle LLC was registered in August 2003. Its general director is Steven Patrick Lynch, while the sole founder is an unnamed U.S. citizen.

Friday, April 13, 2007

Chevron 'bows out of Shtokman race'

04 April 2007 - Upstream onLine - Russian gas monopoly Gazprom has narrowed the list of potential partners in the giant Shtokman gas development after US supermajor Chevron apparently "lost interest" in the project, a Gazprom source said today. The source told Reuters Gazprom was still talking to France's Total, US supermajor ConocoPhillips and Norwegian players Statoil and Norsk Hydro on setting up a joint operating company for Shtokman. The operating company would own production and transportation facilities, with at leasst 51% of the outfit remaining in Gazprom's control. The Russian giant will also be the sole owner of gas produced, but foreign partners could in theory book reserves of Shtokman as shareholders of the operator, the source said. "As they (foreign partners) will be involved in production and all technological aspects, they will be able to book reserves if they manage to get it confirmed with the (the US Securities & Exchange Commission)," he added. The comment follows a meeting between Gazprom's boss Alexei Miller and Total's Christophe de Margerie to discuss Total's role in Shtokman. Miller has had similar meetings with ConocoPhillips' chief executive James Mulva. Last year Gazprom stunned all five companies by scrapping a year-long bidding process and saying it would develop Shtokman without any foreign equity partners. Analysts interpreted the move as a Kremlin response to US criticism of Moscow's energy policies. Many energy-rich countries are seeking to tighten their grip over resources amid record prices for oil and gas. Some industry analysts said Gazprom would struggle to complete the $20 billion project, under the stormy and iceberg-strewn Barents Sea, without foreign know-how. After ditching the shortlist, Gazprom said it would use foreign contractors but would not offer them any equity in the project, which envisages piping some Shtokman gas to Europe and liquefying the rest for shipping to the US. Shtokman, located 550 kilometres off the coast of Norway and Russia, has reserves of more than 3.7 trillion cubic metres of gas - enough to meet global consumption for over a year. Discovered in the 1980s, the field was meant to be put on stream in 2003, but the start up is now not expected before 2013-2015.

Russia's 2006 profit share at Kharyaga PSA set at $107 mln

MOSCOW, April 9 (RIA Novosti) - Russia's share of profit from a Total-led oil project in the northern Russia Kharyaga oilfield in 2006 has been established at $107 million, the Industry and Energy Ministry said Monday. State revenues from the operation of the Kharyaga oilfield, in Russia's Yamal-Nenets autonomy, which the French energy giant is developing under a production-sharing agreement (PSA) with the Russian government, have been set at $169.1 million, thus substantially exceeding its amount of investment in the project. A joint committee on the Kharyaga PSA set operator's reimbursable costs at over $119 million. Total holds a controlling 50% stake in a consortium set up to run the Kharyaga project, which also includes Norway's Hydro (40%) and the Nenets Oil Company (10%), controlled by the regional government. The Kharyaga field, with total reserves of 160.4 million metric tons, is one of three production-sharing agreements in Russia. The other two are Sakhalin I and Sakhalin II.

Tatneft, Libya sign Exploration and Production-Sharing Agreement

MOSCOW, April 4 (RIA Novosti) - Tatneft [RTS: TATN] and the National Oil Corporation (NOC) of Libya have signed an Exploration and Production-Sharing Agreement (EPSA) on three large areas covering some 16,000 square kilometers (10,000 square miles) in Libya, the Russian oil company's press service reported. Tatneft obtained the areas, which hold probable oil reserves of some 1 billion metric tons (7.35 billion bbl), through an open tender held in December 2006 among 46 oil companies from around the world. Under the 30-year contract, Tatneft, which is controlled by the government of the Republic of Tatarstan, in the Volga Region, will drill 16 wells and carry out seismic surveys in Libya. During the negotiations, CEOs Shafagat Takhutdinov of Tatneft and Shokri Ghanem of the NOC also considered establishing a joint venture with Tatneft's managing company, TNG Group, in Libya. In December 2005 Tatneft signed another EPSA on Libya's Block 82-4, where exploration is still underway. As soon as seismic surveys, which were launched in March 2007, are completed, the first exploratory well will be drilled later this year. Libya's annual oil output is 80.1 million metric tons (588.7 million bbl), with consumption standing at about 12 million tons (88.2 million bbl) and the remainder meant for export, mostly to Europe (about 90%). Libya's proven reserves amount to about 5.5 billion tons (40.4 billion bbl) of oil. Tatneft accounts for over 80% of crude output in Tatarstan and produced 25.3 million metric tons (509,000 bbl/d) of oil in 2006, the same as in 2005. Tatneft also refines and markets oil and petrochemicals, and holds stakes in the banking sector. Tatarstan owns 36% of Tatneft's authorized capital and the golden share. Tatneft is carrying out exploration in five Russian regions, and has launched production tests in the Orenburg, Ulyanovsk and Samara Regions, as well as in the Republic of Kalmykia, in southern Russia. The oil company plans to buy new areas, expand exploration and increase oil production in the above regions in the next few years.

Italy's Eni, Enel to bid for stake in Yukos - ambassador

MOSCOW, April 2 (RIA Novosti) - Leading Italian energy companies Eni and Enel will be among the bidders for assets of the bankrupt oil giant Yukos that will be auctioned April 4, Italy's ambassador to Russia said Monday. Yukos' 20% stake in Gazprom Neft [RTS: SIBN], formerly known as Sibneft, will go under the hammer Wednesday, as a second lot in a three-round auction, which began last Tuesday. The starting price for the lot, to also include several stakes in gas companies, is $5.5 billion, and the assets are widely expected to be won by Russian gas giant Gazprom. But Ambassador Vittorio Surdo is hopeful the Italian companies will come out the winning bidders. "Obviously it is all about trading and competition, they could win or lose, but I hope they win," he said. Business daily Vedomosti said Monday that independent Russian gas producer Novatek was also planning to bid at Wednesday's auction. Once Russia's leading crude producer, Yukos was declared bankrupt last August, following the conviction of its former chief Mikhail Khodorkovsky on fraud and tax evasion charges and the levying of billions of dollars in back tax bills. In the first, March 27 round of the Yukos bankruptcy auctions, the company's 9.44% stake in Russia's leading state-run crude producer, Rosneft, was sold off along with promissory notes in Yuganskneftegaz, formerly Yukos's core production unit, now controlled by Rosneft. RN-Razvitiye, a 100% Rosneft subsidiary, won the bid, overcoming its only challenger, the British-Russian joint venture TNK-BP's Samotlorneftegaz. Surdo said that Eni and Enel will be making their bids for Yukos assets against the backdrop of growing Russian-Italian trade. "Our [economic] relations have developed more than effectively in recent years, and turnover has topped 21 billion euros. Judging from statistics, we are Russia's second or third largest trading partner," he said. Surdo said Enel is equally interested in buying into Russia's electricity generation systems, which are now being privatized, and could spend 4 to 5 billion euros for new acquisitions in the sector. "Speaking of investment in energy, we could become a major investor in the next five to six years... We have been given access to deposits in Russia while [Russian natural gas giant] Gazprom can now enter Italy's market." According to the ambassador, humanitarian cooperation between the two countries is making good progress as well, and the governments could soon sign a child adoption agreement, the first such accord to be signed at international level. "Italy has many families wanting to adopt children, and in this sense, Italy is looking with hope to Russia as well as other countries," Surdo said. "But we need to ensure those children are placed into a good family environment. The level of protection guaranteed by Italian legislation is recognized as being higher than that provided by major Western European partners." Under Italian law, married couples applying for international adoption should gain permission from a domestic court of justice first. The permit can be given only after a thorough inquiry into the applicants' potential ability to foster adopted children. Under the new intergovernmental agreement, Italian parents adopting a minor from Russia will be obliged to update Russian authorities on the progress of his or her personal development and integration into the community through the age of 18. The citizenship of Russian foster children adopted into Italy can not be altered until they come of age. Russia's authorities have been seeking tighter control over foreign adoptions following several high-profile scandals involving Russian orphans in foster care abroad, notably the killing of a 2-year-old girl from Siberia by her adoptive mother in the United States. The woman, Peggy Sue Hilt, was sentenced to 25 years in prison last May after a court in North Carolina convicted her on second-degree murder charges. In an effort to protect Russian children eligible for adoption, the government then moved to ban foreigners from adopting outside officially registered agencies.

LUKoil interested in auction of Yukos assets in south Russia

MOSCOW, April 2 (RIA Novosti) - LUKoil [RTS: LKOH] is interested in participating in the auction of Yukos's assets in southern Russia, the company's president said Monday. Yukos, once Russia's largest oil company, was declared bankrupt August 1, 2006, after three years of litigation with tax authorities over the company's tax arrears. A string of auctions has ensued as the company faces a total of more than 700 billion rubles (about $26.9 billion) in claims from creditors. "We are interested in this lot," Vagit Alekperov said. The committee of Yukos creditors formed the lot of Yukos's subsidiaries in the Krasnodar Territory in late March, and a source close to the committee said the starting price of the lot would be 3.7 billion rubles ($142 million). Alekperov said although LUKoil, currently Russia's largest crude producer, was interested in the region's enterprises, no final decision has been made whether they would bid or not. It was earlier reported that bids could be submitted between April 2 and 28, and that the auction could be held in early May.

TNK-BP, Sibur Holding start associated gas processing

MOSCOW, April 2 (RIA Novosti) - TNK-BP [RTS: TNBP] and a leading Russian petrochemical company said Monday they have started processing associated petroleum gas in a joint venture set up in late 2006. In November, the Russian-British joint energy venture and Sibur Holding announced the establishment of a new JV to process associated petroleum gas (APG) produced by TNK-BP and other oil and gas producers in the Nizhnevartovsk region, in Western Siberia. Sibur owns 51% and TNK-BP 49% of the joint venture, which comprises two gas-processing plants in Belozerny and Nizhnevartovsk, and the facilities to transport APG to them. 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 synergy gained from our project will simultaneously boost APG processing, ensure stability in petrochemical supplies and improve the environmental situation in the region by reducing gas flaring," a joint news release quotes Sibur President Dmitry Konov as saying. Sibur Holding was established in December 2005 after energy giant 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." "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 Russia's obligations under the Kyoto Protocol," TNK-BP Executive Director German Khan said in November.

Wednesday, April 11, 2007

Lukoil counts on Kremlin in Iraq

02 April 2007 - Upstream onLine - Russian oil producer Lukoil signed a partnership deal with the Russia's Foreign Ministry today, saying it counted on its support as it prepares for talks to revive a giant oil deal in Iraq. Lukoil and the ministry said in a statement that the deal, the first of its kind in Russia, aims to support Lukoil's projects abroad, defend the company's interests by diplomatic means and facilitate its meetings abroad. Lukoil will in turn consult the ministry on energy issues. "Our company is entering new regions, including politically unstable regions. We will especially need support of the ministry in Iraq," Interfax news agency quoted Lukoil chief executive Vagit Alekperov as saying at a signing ceremony which was closed to reporters from foreign media organisations. Alekperov said last month his company was optimistic about the prospects of reviving a Saddam-era deal to develop Iraq's giant West Qurna deposit after the Iraqi Cabinet approved a draft oil law. The $4 billion deal to develop West Qurna is expected to be complicated by the fact that it was scrapped by the government of Saddam Hussein just before he was toppled in 2003. Iraq's parliament still has to pass a hydrocarbons law, aimed at setting out the framework for foreign companies investing in Iraq after decades of sanctions under Saddam and years of violence since the US-led invasion. Alekperov said Lukoil will send a delegation to Iraq for more talks in March or April. Alekperov is a major shareholder in Lukoil. US supermajor ConocoPhillips holds a 20% stake in Lukoil.

Rosneft sets sights on Yukos gas assets

02 April 2007 - Upstream onLine - Russia's state-controlled oil producer Rosneft has confirmed it will bid for Yukos' gas assets when they go under the hammer on Wednesday. Rosneft spokesman Nikolai Manvelov said Rosneft's affiliate NeftTradeGroup had registered for the auction on 4 April. Russia will sell Yukos gas companies Arcticgas and Urengoil, as well as the bankrupt producer's 20% in Gazprom Neft, the oil arm of Russian gas exports monopoly Gazprom. The starting price for the lot has been set at 144.8 billion roubles ($5.57 billion). Gazprom itself as well as Russian independent gas producer Novatek and a consortium of Italy's Eni and Enel had been previously seen as the front-runners at the auction, Reuters said. Rosneft and Gazprom have been top rivals at almost all big Russian auctions and assets sales since their failed merger two years ago. Rosneft already controls Yukos' top production unit Yuganskneftegaz and last week it bought back a 9.44% stake of its own shares from Yukos at a similar bankruptcy auction.

Surgut numbers plunge 33%

04/03/2007 – Upstream onLine - Russian producer Surgutneftegaz posted a 33% drop in earnings last year and has been forced to cut its dividend after a difficult fourth quarter. Surgut reduced the dividend on its ordinary shares to 0.53 roubles ($0.02) from 0.80 roubles, and on its preferred stock to 0.71 roubles from 1.05 roubles, after its net profit under Russian accounting standards fell by one-third to come in at 77.1 billion roubles. Sales increased by 17% to 500.5 billion roubles, indicating a sharp contraction of net profit margins despite booming oil prices. Surgut said a combination of inflation, appreciation of the rouble and a higher tax load had "exerted a serious influence" on its financial performance, as did higher operating costs. "The results of the fourth quarter had a fundamental impact on the year's results," it said in a statement, adding that falling oil prices had slashed 30 billion roubles from revenues while export duties were ramped up by 6 billion roubles. Surgut does not publish results under international accounting standards and its ownership structure, in which management effectively controls a large tranche of treasury stock, has raised investor concerns about the company's earnings power. Analysts polled by Reuters last month had on average forecast that Surgut would pay a 0.64 rouble dividend on its ordinary shares and 0.92 roubles on its ordinaries. One brokerage had forecast that net profits for the year would total 100 billion roubles. Surgut's earnings for the first nine months of 2006 totalled 74.2 billion roubles, indicating the company barely turned a profit in the fourth quarter.

Sunday, April 08, 2007

Russian Oil Fund Rose

03.04.2007 10:23 [] - The oil fund rose to $108.1 billion in March as the world's biggest energy exporter benefited from high oil and gas prices. The Stabilization Fund rose 3.8 percent in the month from February, the Finance Ministry said on its web site Monday. The fund held $46.75 billion, 35.45 billion euros and 5.47 billion pounds April 1.

BP Heads To Solve Russia's Ploblems with Putin

22.03.2007 14:14 [] - Lord Browne and Tony Hayward, his designated successor as head of BP, will meet Russian president Vladimir Putin tomorrow in order to try to head off potential problems in the country, a Russian spokesman for BP said. While the spokesman declined to say what the three men would discuss, sector watchers said the future of the BP-TNK joint venture, which has been driving production growth for BP, would be bound to figure large in the discussions. The meeting comes amid persistent speculation that the authorities in the country are manoeuvring for BP's Russian partners in the TNK-BP venture to sell out to a state-controlled firm like Gazprom or Rosneft. While TNK-BP and the partners in the venture have denied that they want to sell out, Gazprom has said it would buy into the operation if it got the chance. After welcoming international firms with open arms in the last century when the then heavily-indebted country was desperate to attract expertise, the Russian authorities have been keen to increase their share of the wealth generated from the country's vast reserves. During an official visit to Moscow in February, Industry Minister Alistair Darling said he had urged Russian ministers to respect the sanctity of foreign investments, and had raised concerns about the treatment of BP and Shell's ventures in the country. TNK-BP has come under pressure from officials over the giant Kovykta gas field for failing to produce the agreed volumes of gas. Russia threatened to revoke the Kovykta licence in May, a move which analysts have said may be part of an attempt to force the Russian partners out of TNK-BP. However, Robert Dudley, chief executive of TNK-BP, has repeatedly denied suggestions that the venture could be under threat.

Russia reveals energy industry investment estimate till 2020

RBC, 05.04.2007, Moscow 12:33:09.According to the Russian Industry and Energy Ministry's estimates, investment in the development of the energy sphere in Russia should amount to $420bn till 2020. This figure is foreseen in the industry's general development strategy, Vyacheslav Kravchenko, Director of the ministry's department of structural and tariffs policy in natural monopolies, told reporters today. Kravchenko pointed out that most of the funds would be spent on the construction of the unified national energy system and electricity distribution networks. He also said that the industry would require high investment in 2016-2020.

Where will Turkmen gas flow?

MOSCOW. (Alexei Malashenko, member of the RIA Novosti Expert Council) - Saparmurat Niyazov, the late president of Turkmenistan, left his heirs numerous problems. If resolved successfully, these could bring benefits to the country or, at least, its elites, but at present they are giving the government a headache.
In 2005, Russia signed a gas supply contract with Turkmenistan for the next 25 years, establishing control over the country's gas exports. However, Niyazov managed to raise the price of gas supplied to Russia from $44 to $100 per 1,000 cubic meters as soon as 2006. Simultaneously, he signed a 30-year supply agreement with China and was in talks on a similar contract with India.
The real size of Turkmenistan's gas reserves is unknown. Figures range from 2.8 trillion cu m (proven reserves) to 40 trillion cu m. The government in Ashgabat, the Turkmen capital, has so far refused to allow independent experts to check the true reserves in, for example, the recently discovered field in Iolotan, hailed as "unprecedented" (1.7 trillion cu m). It is from here, from the Sag Kenar block, that Turkmenistan plans to supply gas to China. Sooner or later someone will have to tell the truth about the country's gas might.
The current leadership has not yet announced its gas-production plans for the near future. According to official sources, output will amount to 120 billion cu m by 2010 and climb to 250 billion cu m by 2030. However, independent experts are certain that the output will still be the same in 2010 as it is now and may reach 120 billion cu m only in 2030. Last year, the country's gas production grew by a mere 1%. If the experts are correct, then the contract with China either will not be honored or Turkmenistan will have to re-orient its supplies from their traditional destination, Russia, to the unknown Far East.
So the agreement signed with Russian gas giant Gazprom in 2006 turns out to be a myth, and the new government will have to explain all this to Russia. Relations with the latter are a priority for Turkmenistan, as President Gurbanguly Berdymukhammedov, elected in February 2007, told Russian Prime Minister Mikhail Fradkov. Many experts believe that they will remain so until the eastern gas pipelines have been built. But then it is unclear what to do about the gas exports promised to the West, which European countries are extremely interested in and which are supported by Turkey and the United States. As gas to Europe will flow at the "real" European price, will there be enough political will, or even gas itself? The issue of liquefied gas shipments also remains open. It is not too relevant now, but it will gain importance in the future.
This is the background against which the new Turkmen state will evolve, an evolution that is expected to liberalize it a bit. The earlier label, "totalitarian," will be replaced by "toughly authoritarian." At the same time, we will soon witness a struggle for the sympathies of local elites, who, in fact, will make the final decision on pipeline routes. Given all that, the influence of external factors on the country's domestic situation will be as strong as ever. What strategy will these external factors pursue? There are two possibilities. The first one is to work equally with all Turkmen elites, becoming a cautious mediator between the factions within it. The other is to consider the possible outcome of a domestic confrontation and to side with the future winner. Each option has its own risks and costs, but also its advantages.
Russia and China have opted for the first possibility. Other countries are quite likely to choose favorites from among the more Western-leaning politicians. Moreover, after a split in the Turkmen establishment, each group will be looking for a sponsor abroad.
There is also another sensitive issue, but it is for Europeans and Americans to decide: should they insist on the spread of democracy, defense of human rights and the solution of other humanitarian problems? So far, these matters seem of little interest to competitors for Turkmen gas, just like under Niyazov. (This puts the position of Western countries at the same level as that of China and Russia.)
Still the heirs of the late president cannot be compared to a rich bride who has to choose only one groom, either from China, Russia or Europe. Ashgabat can always pursue a multi-directional policy, developing economic ties with different parties without making a final commitment.

Iraq claims largest oil reserves in the world

BEIRUT, April 7 (RIA Novosti) - Iraq has oil reserves that are estimated at over 300 billion barrels, making the country the world leader in this sphere, the Iraqi oil minister said Saturday. In his interview with the Lebanese Al Mashrik newspaper, Hussain al-Shahristani did not specify, though, whether this figure referred to confirmed oil reserves or to a general estimate. According to official data, Iraq's confirmed oil reserves total about 112 billion barrels and the country has another 200 bln barrels in undiscovered reserves. Saudi Arabia is considered the current global leader in confirmed oil reserves with 262 bln barrels, followed by Iraq (112 bln barrels) and Venezuela (about 80.8 bln barrels). The Iraqi minister also said that his country could export up to 1.9 million barrels of oil per day, but the current unstable situation in Iraq, especially frequent terrorist acts at oil production and transportation facilities freeze the export level at 1.6 million bbl/d.

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