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Tuesday, May 29, 2007

Prana Is Cleared as Buyer of Yukos Office, Trading Firms

Tuesday, May 29, 2007 - Moscow Times, Bloomberg, Reuters - The Federal Anti-Monopoly Service said Monday that it had approved the $3.9 billion sale of Yukos' headquarters and trading firms earlier this month to mystery firm Prana. The service said last week that it would investigate the firm through Aug. 2 amid concerns over its obscure ownership structure. Earlier attempts to contact the firm through the address it provided had failed. In a statement, the anti-monopoly service gave no reason for its turnaround, saying only that the decision was prompted by information provided by the company Friday. "They asked not to disclose who they are," a service official said. The service had threatened to block the deal if it failed to obtain more information about the winners. Speculation has been rife as to who lies behind Prana. In the May 13 auction, the lot included Yukos' office building in central Moscow and a trading firm believed to be sitting on up to $3 billion in cash. Prana battled a Rosneft subsidiary for three hours in the most competitive of the Yukos bankruptcy auctions, paying more than four times the starting price. Unitex, another bidder for Yukos assets, bought the firm's gas stations in Moscow on Monday after gaining antitrust clearance last week, Nikolai Lashkevich, spokesman for Yukos' bankruptcy manager, said in a statement Monday. Unitex beat TNK-BP and Shell with a bid of $483 million at the May 2 sale. Rosneft dropped out before the bidding started. Market sources have said Gazprom could have been behind both firms in the latest auctions, but Gazprom has denied any link to either Prana or Unitex. Representatives from Unitex and Prana declined to comment after the auctions. Yukos' bankruptcy manager, Eduard Rebgun, has raised more than $31.5 billion selling Yukos' assets.

KazaMunaiGaz gets Nations option

29 May 2007 - Upstream OnLine - Kazakhstan's state-run player KazMunaiGaz E&P has been granted the option to buy 50% of Citic Canada Petroleum , formerly known as Nations Energy which was bought by China's Citic Group last year. Citic granted the option to KazMunaiGaz E&P's state-owned parent, KazMunaiGaz, after the Kazakh government threatened to block the $1.9 billion sale of the formerly Canadian-owned company. Citic itself is lending the Kazakh company $805 million to pay for the shares, leaving KazMunaiGaz E&P to find $150 million. "If the option is exercised, $150 million of the acquisition price will be equity financed and entitled to receive certain priority return on investment, while the remaining balance will be debt financed without any recourse to the purchaser," Reuters quoted KazMunaiGaz E&P as saying in a statement. The company has until 1 September to exercise the option, although it can be extended by mutual agreement.

TNK-BP Faces Loss of Kovytka

May 29, 2007 - Kommersant - Moscow - Deputy director of the Federal Resource Use Supervisory Service (Rosprirodnadzor) Oleg Mitvol sent a proposal to the Russian Mineral Use Agency (Rosnedra) yesterday for the license for the development of the Kovytka deposit to be withdrawn. License holder Rusia Petroleum, which is controlled by TNK-BP, tried unsuccessfully to prevent the agencies' action by filing suit against them in arbitration court in Irkutsk. The Irkutsk court ruled that the case was not within its competence. If the company does not file an appeal today, the license may be cancelled on Friday. Kovytka is one of the largest natural gas deposits in Russia. It has reserves of 1.5 trillion cu. m. Mitvol told Kommersant yesterday that a second inspection by Rosprirodnadzor revealed that continuing violations by Rusia Petroleum in the volume of its production. In January, Rosprirodnadzor established that 33.8 million cu. m. of gas had been produced at the deposit in 2006, while the license set a production level of 9 billion cu. m. per year. The company was given three months to remedy the situation. That deadline expired on May 20. Rusia Petroleum executives said that it was impossible to fulfill the requirements of the license. Both Rusia Petroleum and the government called the results of the second inspection “predictable.” TNK-BP lawyer Gennady Ratnikov said that the company sent Rosnedra two requests to review the conditions of its license and received no reply. TNK-BP was granted a license to develop Kovytka in 1993 and, according to the company, it has invested $800 million in the deposit. Rusia Petroleum intends to fight its delicensing further in court. Industry analysts say that the fate of the license depends on the negotiations between TNK-BP and Gazprom, which have been going on since last year. “If Gazprom becomes a Rusia Petroleum shareholder, the problem with licensing conditions can be solved,” MDM Bank analyst Nadezhda Kazakova stated. Another analyst called the situation a contest of nerves. The progress of negotiations between TNK-BP and Gazprom is unknown.

Russian Government Presses BP

29.05.2007 - [] - The Russian government continued Monday to press its strategy of securing for the national gas monopoly Gazprom in order to threat an important investment by BP, with methods similar to those used last fall to force Royal Dutch Shell to sell a controlling stake in another energy development in the Russian Far East, the Sakhalin II project. Gazprom was also the beneficiary in that case. In the latest move, BP, which operates through a Russian joint venture, TNK-BP, slipped closer on Monday to losing its license to the Kovykta gas field when a Siberian court declined to hear its arguments. Kovykta is BP’s largest natural gas project in Russia and is valuable because of its proximity to the fast-growing gas markets in China. The project appears to be slipping out of BP’s grasp.

Winner of YUKOS auction pays for retail assets

RBC, 28.05.2007, Moscow 17:35:16.Unitex LLC has made a final deposit to YUKOS's account for its retail assets, Nikolai Lashkevich, the spokesman for the bankrupt company's receiver, told RBC today. He said that money was deposited on May 25, 2007. However, Lashkevich did not reveal the owners of Unitex.

Friday, May 25, 2007

E.ON shrugs off Yuzhno-Russkoye claim

Burckhard Bergmann23 May 2007 - Upstream OnLine - E.ON Ruhrgas has dismissed claims that problems have emerged during talks with Russian partner Gazprom about joint development of the Yuzhno-Russkoye gas field, in Siberia. E.ON has a 25% stake in the field. "There is nothing new, especially nothing new that would be negative," chief executive Burckhard Bergmann was quoted as saying by Reuters. He would not be drawn on a likely conclusion of the talks. Bergmann said there had been some procedural delays but they had not affected the essence of the talks. Yesterday, German daily newspaper Die Welt reported that Gazprom that Gazprom wanted to charge E.ON more for the stake. Last year, E.ON agreed to pay Gazprom €1.2 billion ($1.62 billion) and give Gazprom just under 50% of its Hungarian gas trading and storage units, as part of its strategy to produce as much as 20% of the gas it needs from its own sources.

Court upholds 2004 sale of Yukos core production unit

MOSCOW, May 23 (RIA Novosti) - A Moscow arbitration appeals court has thrown out a motion by bankrupt oil company Yukos [RTS: YUKO] to overturn the 2004 sale of its then core production unit, Yuganskneftegaz, a RIA Novosti correspondent reported from the courtroom Wednesday. A 76.79% stake in Yuganskneftegaz was sold by Russia's federal property fund on December 19, 2004, in lieu of Yukos' tax arrears for 2000 and 2001. A few days later, state-controlled crude producer Rosneft bought the asset from the winner of the auction, a previously unknown company called Baikal Finance Group. The group was widely believed to be a vehicle set up to enable Rosneft to cheaply acquire the stake. Yukos first challenged the auction in May 2005. The company claimed the sale of Yuganskneftegaz was conducted in violation of Russian and international law. Yukos lawyers also claimed the federal property fund had deliberately underestimated the initial value of the asset. The defendants in the case were the federal property fund, the Russian Finance Ministry, and several companies that participated in the auction. But a Moscow arbitration court rejected the lawsuit on February 16, after which Yukos challenged the ruling in the arbitration appeals court. The appeals court also rejected Yukos's compensation claim against the defendants, to the sum of 388.3 billion rubles (about $15 billion), for losses due to the sale of its core production unit. Yukos was declared bankrupt on August 1, 2006 following three years of litigation with authorities over the tax arrears.

Rosneft sells non-core Yukos assets

23 May 2007 - Upstream OnLine - Russia's Rosneft said it will sell off some of the Yukos assets it bought in a series of bankruptcy auctions, as they are not essential to the state-run oil producer's operations. Rosneft boss Sergei Bogdanchikov told Russian news agency Interfax: "We bought a lot of assets and we don't have a need for everything, we are selling those assets that are not core to our activities, that are in isolated regions, and those that do not fit in with our strategic plans." However, Bogdanchikov denied any agreement with Gazprom on the sale of Yukos assets in eastern Siberia. Profits from the asset sales will be used to reduce debt, he said. Rosneft bought five of the 11 lots of Yukos assets that have been put up for auction since the end of March, for almost $21 billion.

LUKoil to spend $1bln on associated gas processing facilities

KAZAN, May 21 (RIA Novosti) - LUKoil [RTS: LKOH], Russia's largest independent oil company, will spend $1 billion over the next 10 years on associated gas processing facilities, the company's chief executive said Monday. Part of the funds will come from a loan from the European Bank for Reconstruction and Development (EBRD). The bank signed a $300 million loan agreement with LUKoil on May 21 to finance the company's environmental program. "We will use these funds to reduce atmospheric emissions, to build purification facilities at our oil refineries, and also to process associated gas," CEO Vagit Alekperov said at a forum organized by the EBRD in the Volga city of Kazan. Alekperov said next year LUKoil would build associated gas processing facilities at a deposit of its subsidiary Geoilbent in Western Siberia. These facilities will be able to process 600 million cubic meters of associated gas, the chief executive said. Alekperov urged all domestic oil companies to process associated gas, rather than flaring it, to prevent emissions of harmful gases into the atmosphere, and said that the gas could be used to generate thermal power. LUKoil alone annually flares about 450 million cubic meters of associated gas, while oil deposits in Western Siberia cumulatively burn a total of about 6 billion cubic meters of the gas each year, Alekperov said.

Pair silent over Yuzhno-Russkoye claim

21 May 2007 - Upstream OnLine - Russian gas giant Gazprom and German utility E.ON have declined to comment on media reports the Russian company wants to charge E.ON more for a stake in the Yuzhno-Russkoye gas field. A spokesman for Gazprom said the two companies had signed a preliminary contract giving E.ON a stake in Yuzhno-Russkoye, but the details still have to be finalised. E.ON said in an emailed statement both sides want to reach an agreement but did not elaborate. In a report published this morning, German newspaper Die Welt cited unnamed people within E.ON and Gazprom as saying that Gazprom wants to increase the price for the 25% stake, changing the company's preliminary agreement from last year. The Russian company wants stakes in E.ON power stations, unnamed people within E.ON said, according to the paper. Gazprom argues that higher natural gas prices have increased the value of the field, Die Welt reported. Last year, E.ON agreed to pay Gazprom €1.2 billion ($1.62 billion) and give Gazprom just under 50% of its Hungarian gas trading and storage units, as part of its strategy to produce as much as 20% of the gas it needs from its own sources. E.ON, which has an agreement to acquire a stake of almost 35% in the field, had agreed to all major points of the deal, a spokesman said today.

Lukoil ties up $300m EBRD loan

21 May 2007 - Upstream OnLine - The European Bank for Reconstruction & Development (EBRD) has granted Russian oil giant Lukoil a $300 million loan to support the company's environmental and safety work. The loan will help Lukoil make investments in pipeline replacement, reduce gas flaring, modernise its facilities and improve worker safety, the EBRD said in a statement. The EBRD will be the lender of record on the full loan, half of which has been underwritten by Calyon and will be syndicated to a consortium of banks.

Barents neighbours 'nearing deal'

norwayrussia18 May 2007 - Upstream OnLine - Norway and Russia are nearing agreement over a small part of their long-disputed Barents Sea border zone, an area potentially rich in untapped oil and gas resources, sources familiar with negotiations said today. A Norwegian government source told Reuters a deal could soon be signed demarcating ownership of a swathe of sea near the coast - a step forward in negotiations over an area half the size of Germany which have dragged on since the 1970s. "There has been progress in regards to a small area in the vicinity of our coast," said the source, who asked not to be named. "It is reasonable to expect that an agreement will be reached quite soon." The source stressed that the expected deal would not necessarily lead to a breakthrough on the entire disputed area, but said "the drawing of any boundaries is a benefit because it provides predictability and clarity." Foreign ministries in Oslo and Moscow declined to comment. Some estimates suggest up to a quarter of the world's undiscovered oil and gas deposits lie in the Arctic region. Petroleum has been found both to the east and west of the disputed zone off the northern tip of Europe. Norway's claim to at least part of the area would attract interest from oil majors struggling to replace oil and gas reserves in a world growing nationalistic over resources. A private-sector source said the time may be right for Russia to strike a wider border deal with Norway as it seeks to overcome bad publicity over energy disputes with neighbours that have shaken European confidence in its biggest energy supplier. It would also be the last chance for President Vladimir Putin to directly oversee the deal before his term ends in 2008. "We are hearing that something is on the cards," said the source. "It may be the right time for Russia to make a deal now and show how well it's co-operating with its northern neighbour." Norway and Russia have been deadlocked over the roughly 175,000-square-kilometre area since a change in international sea law in the 1970s extended rights to petroleum finds further away from coastlines. The disputed region has been off limits for drilling and both countries in the 1980s agreed to stop taking seismic surveys there to pinpoint where hydrocarbons may be found. Still, old seismic maps of the seabed, taken mainly by Soviet vessels, have been in circulation for decades and some have been re-analysed using new computer technology. "Some people have (a) very strong belief that there are interesting finds in this zone but we don't know for sure until more exploration activity takes place," Arild Moe, deputy head of the Fridtjof Nansen Institute in Oslo, told Reuters. Norway has seen output from its North Sea fields decline and is struggling to find major new hydrocarbon deposits. Its Arctic exploration has yielded a handful of economically viable deposits, the largest of which is Statoil's Snoehvit gas field in the Barents Sea which will start LNG production later this year. Analysts say, however, that the eastern part of the Barents Sea looks more promising. Sources say Oslo wants a deal for the entire disputed area before allowing new seismic scans or drilling, arguing that more information about the location of potential deposits would make a final decision even harder. It has also reportedly rejected Russian attempts for joint exploration and possibly production.

Hopes rise at South Festivalnoye-5

18 May 2007 - Upstream OnLine - Russia-focused explorer Imperial Energy said today that the South Festivalnoye-5 well, spudded in March, hit "very promising" hydrocarbon reservoirs. "The well encountered 18.2 metres of oil in the Bazhenov formation at a depth of 2791 metres," Imperial Energy said in a statement. "This formation is not a typical reservoir in the Tomsk region and based on analogies with the Khanty Mansik region this discovery is very promising," it said.

Kremlin acts to protect Rosneft

On a Side
Rosneft Becomes Strategic
22.05.2007 The St. Petersburg Times - MOSCOW — Russia's inclusion of Rosneft in its list of strategic companies will protect the state-controlled oil firm from bankruptcy and keep the state’s share at no less than 75 percent, analysts said Friday. The government said Thursday that it had added Rosneft, the country's biggest oil company, to its list of strategic companies that are protected because they provide research or resources crucial to national defense. “Strategic status offers special conditions for bankruptcy, and makes the liquidation process more difficult," said Caius Rapanu at UralSib. "Furthermore, under this status, the Russian government's 75 percent stake in Rosneft may not be reduced until Rosneft is included in a privatization plan.” Including Rosneft in the strategic list could lead to a re-rating of its debt, said Steven Dashevsky at Aton brokerage. Rosneft had debt of $13.8 billion at the end of 2006 and earlier this year it arranged an additional $22 billion credit to finance its purchase of assets from the bankrupt oil firm Yukos. “Investors may find comfort in the state’s enhanced support of the company’s debt obligations, expressed through special bankruptcy procedures and perceived potential link between the country’s and the company’s credit ratings,” he said.
18 May 2007 - Upstream OnLine - Russia's inclusion of Rosneft in its list of strategic companies will protect the state-controlled oil producer from bankruptcy and keep the state's share of the company at no less than 75%. Late last night Russia's government said it had added state-controlled Rosneft to its list of strategic companies that are protected because they provide research or resources crucial to national defence. "Strategic status offers special conditions for bankruptcy, and makes the liquidation process more difficult," Caius Rapanu at UralSib bank told Reuters. "Furthermore, under this status, the Russian government's 75% stake in Rosneft may not be reduced until Rosneft is included in a privatisation plan." Including Rosneft in the strategic list could lead to a re-rating of its debt, said Steven Dashevsky at Aton brokerage. Rosneft had debt of $13.8 billion at the end of 2006 and earlier this year it arranged an extra $22 billion credit to finance its purchase of assets from the bankrupt player Yukos. "Investors may find comfort in the state's enhanced support of the company's debt obligations, expressed through special bankruptcy procedures and perceived potential link between the country's and the company's credit ratings," he told Reuters. Rosneft has bought the bulk of Yukos' assets in a series of auctions held by the state to recover the bankrupt company's debt of over $26 billion. Earlier this week, Rosneft published weak 2006 financial results despite rising oil prices. Analysts said the results were affected by rising interest on the firm's outstanding debt. The government sold around 15% of Rosneft's shares during an initial public offering last year. The sale raised $10.6 billion. The government has said it might sell more Rosneft shares but that will be harder to achieve now it is a "strategic" company. "In our view, the government's decision eliminates the risk of a stock overhang," Pavel Kushnir from Deutsche UFG said. The addition of Rosneft to the list reflects the Kremlin's strategy of strengthening the state's position in the strategic sectors, including energy, analysts told Reuters. "We believe this to be a logical development given the Russian state's current policies and Rosneft's informal status as the national oil champion," Kushnir said.

Thursday, May 17, 2007

Total wins $120m Vankor pay-out

 16 May 2007 - By Upstream OnLine - French giant Total will receive $120 million in compensation from Russian state-controlled player Rosneft after winning a court ruling over the disputed Vankor field, in East Siberia, according to reports. Moscow-based business daily Vedomosti cited sources close to one of the companies as saying a Brussels court had upheld a demand from Total that Rosneft pay it compensation over the rights for Vankor. Total had had a deal with the Anglo-Siberian Oil Company that included an option to buy 60% of Taimyrneft, the unit that owned rights to Vankor. Rosneft bought Anglo-Siberian in 2003 and decided not to exercise the option. Independent audits have valued Vankor's reserves at $9.3 billion, and Total has demanded a payment of at least $700 million from Rosneft, Vedomosti said. The court in Brussels upheld a much smaller claim, said the newspaper. Rosneft declined to comment on the report.

'Kovykta licence still at risk'

15 May 2007 - Upstream OnLine - BP's Russian venture, TNK-BP, is still at risk of losing its licence to operate the huge Kovykta gas field despite winning the right to a court hearing, Russia's Natural Resources Minister Yuri Trutnev said today. The company gained a reprieve against the threatened withdrawal of its licence for the East Siberian field by persuading a court in the Irkutsk region to clarify its licence obligations at a hearing set for 23 May. Asked whether he still expected the licence to be withdrawn, minister Yuri Trutnev said "I think so, yes. They are not fulfilling their licence agreement. "Irkutsk arbitration court is not the highest court. The final decision will be taken by (Russian environmental agency) Rosprirodnadzor (RPN)," Trutnev told Reuters. "I am sure the final decision will be fair." RPN is a body within Trutnev's ministry and has been at the forefront of campaigns against several foreign companies. Its activities have often been interpreted as an attempt to put pressure on companies to sell up to Russian state-controlled enterprises. Trutnev wants to withdraw the Kovykta licence on the grounds that production at the field is far below the amount stipulated in its licence terms. But the company said Gazprom has refused to let it export the field's gas to China, forcing it to supply the far smaller local market instead. State officials have said the company is making poor excuses for failing to meet licensing terms. But their criticism of the company has widely been seen as the stirrings of a Kremlin attempt to take over the project. Gazprom and TNK-BP have been in talks over Kovykta for years and TNK-BP has said it would be prepared to see Gazprom take control of the project. The Irkutsk regional administration, which has a minority stake, agrees. "We would be very glad if Gazprom entered the project," Sergei Voronov, deputy head of the regional administration, told Reuters on the sidelines of a conference in Moscow. "The most important thing for us is that the dispute over Kovykta is resolved at last," he said, referring to the dispute between TNK-BP and RPN. "The situation is ridiculous right now. We're sitting on gas and we can't use it." Gazprom has said Kovykta's gas won't be needed for exports until 2015. But Voronov said it would be required before then. "I have absolutely no doubt that Kovykta's potential will be in demand both for exports and domestic use," he said. "All we can do now is wait for the central government's decision because the regional authorities have no influence in federal government decisions." The Kovykta licence is held by Rusia Petroleum, 62.9%-owned by TNK-BP. The regional government has 10.8% and Russian investment player Interros has 25.8%.

Rusia fights for Kovykta

14 May 2007 - By Upstream OnLine - TNK-BP unit Rusia Petroleum has won the right to challenge in court a threat to its licence to operate the huge Kovykta gas field in East Siberia, TNK-BP said today. "Rusia Petroleum, as the project operator, is seeking legal clarification of its licence obligations to develop the Kovykta gas field," TNK-BP spokeswoman Marina Dracheva told Reuters. Rusia Petroleum, 62.4%-owned by TNK-BP, which itself is half-owned by BP, is under threat of losing the licence to operate Kovykta because the field is not producing as much gas as stipulated in the licence terms. State officials have said the company is making poor excuses for failing to meet licensing terms. But their criticism of the company has widely been seen as the stirrings of a Kremlin attempt to take over the project. In late February, Russia's Natural Resources Ministry said Rusia Petroleum had three months to increase production more than five-fold to meet the target of 9 billion cubic metres of gas per year specified in its licence. Rusia said it cannot comply because local customers do not need so much gas, while its plans to export gas to China are on hold due to the opposition of gas export monopoly Gazprom . Gazprom is seen as the key driver behind Kovykta's troubles as it needs new gas reserves for its own ambitious plans to pump gas to China. It plans to participate in Kovykta and both it and TNK-BP have said they are in active talks on co-operation. Analysts said there was still a high chance of the licence being revoked but the court's decision to hear the case was a positive signal for TNK-BP. The threat to Rusia's licence was on hold while the court hears its case. "We believe that this situation will help show the market that TNK-BP has a positive relationship with the authorities. Perceptions of negative relations are currently considered the main weakness of the company," Dmitry Loukashov at Alfa-Bank told the news agency. Russia has vastly increased state control of energy assets in the last three years and many market participants believe Kovykta is next on the Kremlin's shopping list, possibly followed by TNK-BP itself. TNK-BP, a joint venture between BP and a group of Russian billionaires, is the only big energy project in Russia which has no state shareholder and is not majority controlled by Russians. Apart from TNK-BP, the shareholders in Rusia Petroleum are Interros, an investment company controlled by Russian metals billionaires Vladimir Potanin and Mikhail Prokhorov, with 25.8%, and the government of Irkutsk region with 11.2%. TNK-BP holds Rusia Petroleum separately from its interest of around 95% in TNK-BP Holding, so any threat to Kovykta has no direct impact on the listed company.

Rosneft subsidiary buys Yukos non-core assets for $70 mln

MOSCOW, May 16 (RIA Novosti) - Neft-Activ, a subsidiary of state-controlled Rosneft oil company, bought Wednesday the latest lot of Yukos non-core assets for 1.8 billion rubles ($70 million). Neft-Aktiv and two other companies were on the bidding list for service and IT assets of the bankrupt oil company. A total of eight bids were made during the auction, which lasted about five minutes. The initial lot price at the 14th Yukos auction was 1.7 billion rubles (about $66 mln), with a bid increment of 16.7 million rubles (over $648,500). At the latest Yukos auction on May 11, an a previously unknown company Prana made a bid that exceeded the starting price by almost five times outstripping its only rival in the auction, Neft-Aktiv, which has already snapped up the bulk of Yukos assets in previous auctions. Prana bought Yukos office and research assets for 100 billion rubles ($3.87 billion). Yukos, whose founder Mikhail Khodorkovsky is serving an eight-year prison term in Siberia after being convicted of tax fraud in May 2005, faces a total of 709 billion rubles (about $27.6 billion) in claims from creditors. The previous 13 auctions netted more than 800 billion rubles (over $31bln).

Sunday, May 13, 2007

Rosneft stumps up $6bn for Samara

10 May 2007 - Upstream OnLine - Russian state-run producer Rosneft has become the country's largest oil outfit after winning Yukos' Samaraneftegaz unit at auction today, tabling a winning bid of 165.531 billion roubles ($6.43 billion). Rosneft beat the only other bidder, a company called Versar, to clinch its widely-expected purchase of the assets. Versar was unheard of until it bid unsuccessfully in a previous Yukos auction, for the bankrupt company's electricity assets. The lot, which had a starting price of 154.1 billion roubles ($5.99 billion), comprises some of Yukos' most attractive assets, including three refineries with total processing capacity of 400,000 barrels per day and a 200,000 bpd oil production unit.

Rosneft Denied House

// The company did not have enough money for buying YUKOS office
May 12, 2007- - The 13th auction for selling YUKOS assets changed the course of the company’s bankruptcy. The bidding went on for nearly three hours, the lot’s cost grew by nearly five times, and Rosneft did not become the winner. Unknown company Prana prevented it from moving into YUKOS headquarters. Prana did not only set the world record in real estate deals’ cost, but also raised the capitalization of asset-stripped YUKOS. The company’s shares grew by 1.5 times after the auction, giving hope to investors to return at least some money. The auction for the 13th lot of YUKOS was not expected to bring surprises. The lot’s key asset was YUKOS headquarters on Dubininskaya street in Moscow. Its initial price was 22 billion rubles. After three-hour bidding, the price grew by nearly five times, reaching 100.09 billion rubles ($3.87 billion). Prana company became the winner. Experts estimate the real cost of YUKOS real estate at not over $550 million. Until yesterday, no one in the world has ever paid almost $4 billion for a building. Meanwhile, neither experts nor YUKOS claimers know who stands behind Prana. The generous buyer also rendered quite a service to YUKOS shareholders. The company’s quotations increased drastically, by 49 percent, on expectations that at least some money will go to the shareholders, and not to creditors, since there already is enough for settling YUKOS debts.

Gas for Oil

// Kazakhstan proposes expanding the CPC in exchange for not building a gas line across the Caspian
May 11, 2007 - - by Dmitry Butrin
There are two competing projects in Russia and Kazakhstan's joint action plan approved by the countries' presidents for the thermal and electric complex this year and next. They are the explanation for the contradictory statements made by Russian President Vladimir Putin and Kazakh President Noursultan Nazarbaev after their meetings. Kazakhstan is proposing that Russia give up its full monopoly on the transit of Central Asian oil and natural gas. Russia is prepared to do that, but it intends to pay for Kazakhstan and Turkmenistan's moderation in their encroachment on Gazprom and Transneft. In spite of the full agenda for the presidents' meeting, the only significant agreement reached was the approval of a plan for Russia and Kazakhstan's joint action in the thermal and electric complex this year and next. The plan, as laid out in a joint statement, is not noteworthy for its specificity, but the key points for future negotiations are seen. Kazakhstan, which owns a 19-percent share in the Caspian Pipeline Consortium, is most interested in oil issues. It is lobbying in Russia (owner of 24 percent of the CPC) for the approval of a project to expand the pipeline's capacity in exchange for a guaranteed supply to another pipeline, the Burgas-Alexandroupolis line, of 17 million tons of oil annually. That is the only figure that Nazarbaev cited accurately in relation to the CPC, when he said that the pipeline's capacity had to be raised from 23 million to 40 million tons per year. The pipeline already pumps 31 million tons per year, and the expansion project foresees increasing that to 67 million tons annually by 2012. Seventeen million tons, that is, half of the planned increase in transport through the CPC, is being offered to the Burgas-Alexandroupolis line, in which Russia has a 51-percent share. Technologically, the project to expand the CPC implies no less growth in volume. In essence, Kazakhstan is suggesting that Russia exchange the expansion for a guarantee of participation in Burgas-Alexandroupolis. The rest of the oil will be transported by different routes, including the Odessa-Brody pipeline, a competitor of Transneft. It follows from comments made by the Russian side that Russia is offering Kazakhstan the opposite choice – an increase in oil shipments to the EU through Russia. Putin made exactly the same proposal to Nazarbaev concerning gas from the Prikaspiiskoe deposit. In April of this year, during his visit to Moscow, new President of Turkmenistan Gurbanguly Berdymukhammedov proposed that Russia participate in the Transcaspian gas pipeline, an alternative to the Prikaspiisky. There is a principle difference between the two. The Prikaspiisky pipeline, which does not cross the Caspian Sea, would connect to Gazprom export pipelines, while the Transcaspian, which crosses the Caspian but not Russia, would connect to the Baku-Tbilisi-Erzurum line. In the first case (only), Russia retains control over the gas flow to Europe. The Prikaspiisky pipeline is of interest to Kazakhstan and Turkmenistan, which plan to increase their combined gas export by 30 billion cu. m. by 2010, only if they are guaranteed a large share in the profit from sales to the EU. Considering the way another agreement, on processing gas condensate from the Karachaganak deposit in Orenburg, was reached yesterday Russia is prepared to share money from gas exports to Europe with Kazakhstan and Turkmenistan. Kazmunaigaz vice president Zhaksybek Kulikeev stated yesterday that the gas processed in Orenburg would be sold in Europe not by Gazprom, but by Kazrosgaz, a joint enterprise of Gazprom and Kazmunaigaz. The delivery price at the Russian-Kazakh border is to be $140-145 per 1000 cu. m. Kazrosgaz is expected to sell about 15 billion cu. m. of gas annually. It is not known yet whether Gazprom will let another 30 billion cu. m. of Kazakh and Turkmen gas into Europe to be sold by a trinational joint enterprise. But the alternative is Gazprom's losing control over that gas in Azerbaijan, and then Turkey and the EU. Al things considered, the compromise between Russia and Kazakhstan will be for Russia to give in in oil issues and Kazakhstan in gas. But Turkmenistan has to be included in that formula. Berdymukhammedov may let his views be known about how and how much Russia should pay for Turkmenistan not to participate in projects that are unprofitable for Gazprom. The solution to that problem may come today at the summit of CIS and Eastern European leaders in Warsaw. An agreement among Russia, Kazakhstan and Turkmenistan on oil and gas is unprofitable for that group as a whole.

Obscure co. buys Yukos office, research assets for $3.87 bln

MOSCOW, May 11 (RIA Novosti) - An obscure company, Prana, has bought the office and research assets in an auction of now bankrupt oil giant Yukos [RTS: YUKO] for 100.091 billion rubles ($3.87 billion), a RIA Novosti correspondent said Friday. Prana, whose beneficiaries are unknown, made a bid that exceeded the starting price by almost five times outstripping its only rival in the auction, Neft-Aktiv, a subsidiary of state-controlled Rosneft, which has already snapped up the bulk of Yukos assets in previous auctions. "We did not expect the price to jump so high and competition to be so fierce," said Nikolai Lashkevich, press secretary for the Yukos bankruptcy receiver. The initial lot price, that included the former 22-story Yukos central office in Moscow, was 22 billion rubles (about $855 million), with a bid increment of 110.36 million rubles (about $4.3 million). Yukos was declared bankrupt August 1, 2006, after three years of litigation with tax authorities over the company's tax arrears. Yukos, whose founder Mikhail Khodorkovsky is serving an eight-year prison term in Siberia, faces a total of more than 700 billion rubles (about $26.9 billion) in claims from creditors. Khodorkovsky, arrested in 2003 and found guilty of fraud and tax evasion in May 2005, financed opposition forces in Russia and was believed to nurture political ambitions. Once one of the richest people in Russia, Khodorkovsky said his persecution was orchestrated as punishment for such ambitions and as part of a campaign to bring the mineral sector under Kremlin control. In 2004, Rosneft bought a little known company three days after it won an auction to buy Yukos' main production asset, Yuganskneftegaz.

Wednesday, May 09, 2007

Russia tempts India with Rosneft stake

08 May 2007 - Upstream OnLine - The Russian government has offered India a 1% equity stake in state-run oil outfit Rosneft, according to reports. The stake is worth about $1 billion, Indian newspaper the Financial Express reported, citing an unnamed source. The Indian government may ask a consortium led by Oil & Natural Gas Corporation’s foreign investment arm, ONGC Videsh, to pick up the stake, the paper said.

Iraq slams debt write-off for oilfield offer

03 May 2007 - Upstream OnLine - Russia wants access to a major Iraqi oilfield in return for writing off the country's debt - but Baghdad has slammed the offer, with Iraqi Finance Minister Bayan Jabor calling it "unacceptable". Jabor, in Sharm el-Sheikh for an international conference on Iraqi stability and reconstruction, said Iraq's creditors were all keen to gain access to its oil wealth and the nation could not agree to such a link. "The Russians are hesitant. They want investment in the Rumaila oilfield in return for eliminating the debt," Jabor told Reuters. Moscow has forgiven Iraq much of the debt it owes, but not the entirety. The world's top oil companies have been manoeuvring to win a stake in oilfields in Iraq, but are awaiting passage of its oil law, expected within weeks, and a return of law and order. The North and South Rumaila oilfields in the south of the country make up the bulk of Iraq's crude exports, which run at about 1.5 million barrels per day. Iraq's oilfields are suffering from decades of wars and sanctions, but the Rumaila fields could sustain production of around 1 million bpd with the help of foreign investment, analysts said. Russian producer Lukoil also wants to revive a deal for the 600,000 bpd West Qurna oilfield that was scrapped by the government of Saddam Hussein at the end of 2002. Jabor did not name the oilfield concerned.

Turkmen welcome mat for Chevron

04 May 2007 - Upstream OnLine - Turkmenistan's President Gurbanguly Berdymukhammedov has invited US supermajor Chevron to step into the country's Caspian Sea play. Berdymukhammedov met with senior Chevron officials, and told them the Central Asian nation was interested in acquiring modern technology for the oil and gas sector and was ready to discuss areas of co-operation with Chevron, the Turkmen government said on its website. Turkmenistan is a major natural gas producer, with the government claiming reserves of 2.8 trillion cubic metres, although this has not been independently verified. The size of Turkmenistan's Caspian reserves is not known.

Russian oil exports surge

02 May 2007 - Upstream OnLine - Russian oil exports jumped by more than 6% in April to their second highest level ever despite a decline in output, as higher oil prices and refinery maintenance prompted producers to send more crude abroad. Energy Ministry data released today showed that oil exports via pipeline monopoly Transneft rose by 280,000 barrels per day from March to 4.69 million bpd, just short of the previous record of 4.76 million bpd set in May last year. "There could be another jump in May this year as people will try to evacuate more crude before export duties jump from June making exports less profitable," a trader with a Russian company told Reuters. Russia revises oil export duties every two months after tracking global prices and will increase crude export duties to over $200 per tonne from the current $156.4 per tonne. One tonne of oil is about 54 barrels. Transneft has already set a bigger oil export schedule for May with shipments expected to rise by at least 80,000 bpd. The jump in April exports came amid reduced domestic refinery runs with Lukoil's Volgograd having half of its capacity slashed by a fire in March and Surgut's Kirishi putting one of its primary distillation units on an upgrade. April production declined by 50,000 bpd or 0.6% to 9.82 million bpd from the previous all-time high of 9.87 million bpd in March.

Rosneft takes Yukos prize

03 May 2007 - Upstream OnLine - Russian state-run player Rosneft won an auction for Yukos' East Siberian assets today with a bid of 175.70 billion roubles ($6.83 billion). The Tomskneft oil production unit and two refineries were up for grabs in the sale. Rosneft faced only one other bidder in the auction, the little-known Yunitex. The starting price was 166.3 billion roubles ($6.46 billion). After the sale, Rosneft said: "The acquisition is a significant step in Rosneft's development which will accelerate improvements in the company's operational and financial performance via improved vertical integration, resulting in earnings growth particularly from the attractive downstream market in Russia." Its statement made no mention of any intention to share the assets with other parties. Market players have said Rosneft might split the assets with gas monopoly Gazprom .

Tuesday, May 08, 2007

Itera boosts quarterly net profit

RBC, 08.05.2007, Moscow 13:02:15 – Itera's net profit under Russian Accounting Standards (RAS) surged 78.5 percent to RUR951.212m (approx. USD36.95m) in the first quarter of 2007 compared to the same period a year earlier, the Russian oil and gas company's press office reported. Itera attributes the increase in net profit to higher natural gas prices, which have pushed sales revenue up from RUR7.092bn (approx. USD275.52m) in Q1 2006 to RUR8.158bn (approx. USD316.94m) in Q1 2007. At the same time, the cost of sales grew a mere four percent. As a result, the company was able to boost sales profit by RUR469.678m (approx. USD18.25m) to RUR1.28bn (approx. USD49.73m) in the period in question.

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