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Sunday, July 29, 2007

Transmeridian ‘unaware of Gasha charges’

Exploration Inc.
27 July 2007 - Upstream OnLine - Houston-based Transmeridian Exploration has received no official notification from Russian authorities of environmental violations at its 50%-owned Gasha field in Dagestan, it said today. The company was responding to statements today by Russia’s environmental watchdog today that it was seeking to withdraw Transmeridian’s licence to operate the field due to breaches of environmental regulations. The Rosprirodnadzor agency said a recent check of Transmeridian's unit DNK, developing the Gasha field in the southern region of Dagestan, had found "serious violations of the licensing agreement". The agency said Transmeridian had failed to get proper approvals for the project and had failed to maintain abandoned wells on the field. It also said the company had failed to provide documents showing it had paid taxes on time. Transmeridian said it had undertaken a preliminary study of environmental damage at the field caused by previously development work at the field under Soviet rule between 1950 and 1975. It said it had handed authorities a plan to remediate the existing damage and to manage future contamination in terms of the licence. The company said it was in the early stages of evaluation at the field. It said it had booked no reserves at the field, which is not producing.

New Turkmen export routes 'still far off'

turkmenistan26 July 2007 - Upstream OnLine - Turkmenistan will remain dependent on Russia as the main conduit for its gas exports and alternative routes to China and Iran are still a long way off, an executive at Russia's gas monopoly Gazprom said today. "It is Gazprom's view that Turkmenistan's new export regions, China and Iran, won't happen in the near future," the official told Reuters on condition of anonymity. Top Turkmen officials visited Beijing last week to sign deals to bring closer their shared goal of exporting 30 billion cubic metres of gas per year eastward to China within the next three decades. The Gazprom official was speaking ahead of a round of talks with Central Asian gas companies in early August to review strategic pipeline options. Representatives from state-controlled Gazprom, Kazakhstan's KazMunaiGas, Turkmengas and Uzbekneftegas will focus on two major gas pipelines at the meeting in the Kazakh capital Almaty. The Trans-Caspian pipeline, which would bypass Russia, would take Turkmen gas under the sea to Azerbaijan and then overland to Europe. The link, with annual capacity of 30 Bcm, is scheduled to go on stream in 2010-2011. The official declined to comment on the viability of the Trans-Caspian project, but analysts have said that Gazprom might want to kill it off as it poses a threat to Russia's monopoly control over Central Asian gas exports to Europe. A second pipeline will also be discussed that would supply 10 Bcm per year of Kazakh and Turkmen gas around the eastern side of the Caspian Sea to Russia. "The main focus of the meeting will be the future of these pipelines and we will of course consider the economic benefits to Gazprom," the official, who has a marketing role, said. Turkmen gas exports are expected to increase substantially over the next three years. After 2010, around 100 Bcm of natural gas will be exported from the former-Soviet country, with most ending up in Russia, he said. Turkmenistan has previously said it plans to increase its sales to Russia - its largest customer - by a quarter this year to 58 Bcm, but has plans to diversify its export routes.

Moscow court delays Bashkir hearings

25 July 2007 - Upstream OnLine - A Russian court has postponed the last in a set of hearings that could hand the state full control over $7 billion of Bashkir oil assets by ousting regional players from six energy companies. Today the Moscow Arbitration Court rescheduled to 15 August a hearing into the last of four key suits by the Federal Tax Service against one of the current owners of the Bashkir oil assets, due to the absence of an arbitration judge. But with two suits already upheld by the court and a hearing into the third suit set for 31 July, the Kremlin may bring the assets back under its control as early as the middle of next month, further strengthening its grip over the energy industry. "State consolidation of oil and gas assets is continuing, and the Bashkir energy sector won't escape a takeover," Alexander Razuvayev of Sobinbank told Reuters. "We think the assets will be divided between state companies with the biggest part to go to Rosneft." The assets include mid-sized oil producer Bashneft, refineries Novoil, Ufimsky, Ufaorgsintez and Ufaneftekhim and retailer Bashkirnefteproduct . Bashneft produces 240,000 barrels per day. The assets were initially controlled by the government of the region in the Urals, on behalf of the Russian Federation, but they have changed hands many times in the past few years. Owners have included companies close to Ural Rakhimov, son of veteran Bashkortostan President Murtaza Rakhimov, although the current ultimate beneficiaries are unknown. At present the owners are four companies - Agidel-Invest, Inzer-Invest, Yuryuzan-Invest and Ural-Invest - which each own around 15% in each of the six Bashkir companies. The tax service has sued all the investment companies, saying all transactions involving shares were null and void, and earlier this month it won suits against Yuryuzan and Ural, which must now return the shares to the state. The hearing into Inzer will take place on 31 July and will be followed by the hearing into Agidel on 15 August. One of Russia's two leading bourses, RTS, halted all transactions in Bashkir oil shares on Tuesday, and analysts say trading is unlikely to resume before the suits are over. Apart from the firms being sued, diversified conglomerate Sistema has around 25 percent in each of the Bashkir oil firms. "We see the suspension as negative for minorities in the short term as they will be unable to trade stocks for an indefinite period of time. Most likely trading will be interrupted until law enforcement proceedings have finished," Alfa-Bank said in a research note on Wednesday.

Gutseriyev 'to cede Russneft control'

24 July 2007 - Upstream OnLine - Mikhail Gutseriyev, the owner of Russian oil producer Russneft, will cede control in his company to a Kremlin-friendly outfit after months of state pressure, sources close to talks claimed today. Gutseriyev will also step down as Russneft's president following a string of back tax claims brought by state officials. "I think the company will have another president within a week," one source told Reuters. Vedomosti business daily reported that Gutseriyev would sell the company to Russia's second richest man Oleg Deripaska, a close ally of President Vladimir Putin, for around $6.5 billion. However, Russneft spokesman Eduard Sarkisov denied Gutseriyev would quit or sell the company. In a subsequent statement, Russneft called reports of an impending sale a "provocation". " Russneft states officially that it has held no talks about a sale and will not hold any. Russneft is not for sale," it said. A second industry source told Reuters that state-controlled oil giant Rosneft was also looking at Russneft, which produces 300,000 barrels per day, has two refineries and recoverable reserves of around 4.6 billion barrels. "I can't imagine why this asset should escape from Rosneft's control. Rosneft has amassed all important assets in Russia over the past years," one source told the news agency. Deripaska's investment vehicle Basic Element denied it was in talks to buy Russneft. Analysts said Russneft was poised to end up under state control. "Russia may be one step closer to boosting state control over oil production to above 50%," Reuters quoted Oleg Maximov from Troika Dialog brokerage as saying. Tax officials have brought a string of tax claims against Gutseriyev, threatening to nationalise Russneft's shares. Yesterday, Moscow's Arbitration Court upheld a first $134 million tax evasion claim against Russneft. Gutseriyev is himself charged with "illegal activities committed by an organised group on a grand scale". Russian media reported Gutseriyev had fallen out of Kremlin favour by buying assets from rival oil company Yukos before its bankruptcy last year. "I think Gutseriyev didn't learn any lessons from the Yukos affair," Ivan Mazalov, who helps manage $4.5 billion worth of assets at Prosperity Capital Management, told Reuters. Yukos, once Russia's largest oil producer, was brought to its knees by a $30 billion back tax claim. Its founder Mikhail Khodorkovsky called it politically motivated, as he accused the Kremlin of seeking to punish him for his political activities. Khodorkovsky is now serving an eight-year prison term in Siberia for tax evasion and fraud, while the assets of Yukos are now almost fully controlled by Rosneft. Russneft was set up five years ago from scratch when Gutseriyev, formerly the head of state-controlled oil player Slavneft, bought some Slavneft assets at knock-down prices soon after its privatisation. Gutseriyev repeatedly denied any wrongdoing in those transactions, some of which were done with the financial help of Swiss-based oil trader Glencore.

Saturday, July 28, 2007

Imperial stands its grounds over reserves

24 July 2007 - Upstream OnLine - Imperial Energy said today its reserves and resources estimates which were signed off by DeGolyer & MacNaughton (D&M) are credible, adding that that it sees no valid ground for a Russian government working group to report to London Stock Exchange and Financial Services Authority. Reports published yesterday said a working group formed by Russia's Natural Resources Ministry to examine the differences between the D&M and the GKZ reserve estimates has sought a revision to Imperial Energy's estimates, Thomson Financial reported. The explorer said today that two wells, not one, have been tested at the Kiev-Eganskoye field and that both showed oil at the equivalent of commercial flow rates. Imperial added that only five wells seem to have been taken into account at the Snezhnoye field, but that it has nine wells on the field, all fracced with good commercial oil flows, Thomson reported. The company said it is confident that all concerns regarding its reserves can be answered satisfactorily and that it will be writing to the FSA on "certain matters regarding its share trading and share price". In a separate statement, Imperial said its new Zavyalova pipeline is processing all production from the Snezhnoye field and that it has spudded the Nulginskoye 403 well on Block 85. The company added its drilling and exploration prospects are in line with expectations and that it is on track for key production targets and further material progress in the fourth quarter of 2007.

JKX splashes out on Russian play

JKX24 July 2007 - Upstream OnLine - UK-based energy explorer JKX Oil & Gas said today it had agreed to buy a Russian gas field for $50 million. JKX said independent oil and gas consultants Miller and Lents had estimated that remaining proved gas reserves in the field were 114 billion cubic feet and proved and probable gas reserves were 216 bcf. JKX said the deal would increase its proved and probable oil and gas reserves by approximately 85%.

Court backs Russneft tax evasion charge

23 July 2007 - Upstream OnLine - A Moscow arbitration court today upheld a 3.4 billion rouble ($134 million) lawsuit against Russneft for tax evasion, adding to state pressure on the embattled oil company. Lawyers for the company told reporters outside the court that they would appeal the decision. The hearings have been closely watched by analysts and market players for signals the private company could become the Kremlin's next target as the state seeks to increase control over the energy sector. Market players have speculated state-controlled oil major Rosneft could become the owner of mid-sized Russneft's assets should the state decide to go ahead with the firm's nationalisation. A close ally of the Kremlin, metals billionaire Oleg Deripaska has been also cited as a potential contender for the assets of the embattled company. In total, the Federal Tax Service has brought eight suits against 11 companies that are or previously were shareholders in Russneft. Russian media reported that the country's tax service claimed Russneft's shares were sold at knock-down prices to evade taxes and should therefore be nationalised, Reuters reported. Russneft produces 300,000 barrels per day of oil and is controlled by Russian businessman Mikhail Gutseriyev, with personal wealth of $3 billion according to Forbes magazine. In May he was personally charged with illegal activities and tax evasion.

ConocoPhillips share in Lukoil net profit up 23% in 1H07, $782 mln

MOSCOW, July 25 (RIA Novosti) - The share of U.S. ConocoPhillips in the net profit of Russia's oil major LUKoil [RTS: LKOH] grew 23% in the first six months of this year, to $782 million, the company said Wednesday. It also said its share in Lukoil's net profit in the second quarter of 2007 grew 35%, to $526 million, year-on-year, from $387 million in the same period last year. LUKoil is a vertically integrated oil company based in Moscow, with upstream operations concentrated in western Siberia. It accounts for roughly 1.3% of world oil reserves, about 2.1% of world production, and 18% of production and refining in Russia. Outside Russia, LUKoil has three refineries in Europe and runs a network of nearly 800 gas stations in the U.S., bought last year from ConocoPhillips, which holds a 20-% stake in LUKoil. ConocoPhillips is a major player on the liquefied natural gas (LNG) market.

Saturday, July 21, 2007

Halliburton moves on Burservice

20 July 2007 - Upstream OnLine - Halliburton is set to buy Russian directional drilling services player Burservice after strikig a definitive agreement with the company's shareholders. The US giant will buy all Burservice's share capital, subject to regulatory approval. Burservice was founded in 2004, and is based in Usinsk, Republic of Komi. The company has about 100 employees.

Trutnev dampens tax break hopes

17 July 2007 - Upstream OnLine - Russia played down hopes that it would offer tax breaks to develop offshore fields, and said Russian state players may want to team up with Western partners to tap new blocks. Resources Minister Yuri Trutnev said he saw no reason to cut mineral extraction tax or export duties for companies preparing to extract large offshore reserves. "I believe the Russian state should remain in control of its offshore deposits. Then it will be up to Russian companies whether or not to invite foreign partners," Reuters quoted him as telling foreign investors at a meeting. "For now, I see no reason whatsoever to reduce taxation in the resources sector." His comment followed a ministry announcement yesterday that it may revive an old idea to award tax breaks on offshore fields, following a landmark deal to bring in France's Total to develop Gazprom's Shtokman gas field. Russia said last year it would limit tax breaks to the frontier oil region of East Siberia, which is dominated by state-controlled energy companies Gazprom and Rosneft .

Imperial Energy rejects estimate of its Russia oil reserves

MOSCOW, July 16 (RIA Novosti) - Imperial Energy, a British company focused on oil exploration and production in former Soviet republics, rejected Monday Russian authorities' estimate of its oil reserves in the country, and stood by its own figures. Last Friday, Yuri Trutnev, Russia's natural resources minister, said his ministry would soon send its data on Imperial Energy's oil reserves to foreign supervisory bodies and the company, due to a considerable discrepancy between the figures and a report published by the British firm. "Imperial maintains the correctness of data supplied to its internationally reputable independent reserve auditors, DeGolyer and MacNaughton," the company said in a statement. Imperial Energy said it had invested $600 million in the development of its oil deposits in Russia. According to Imperial Energy's reserve audit data as of December 31, 2006, the company's "proven plus probable" (2P) reserves amount to 802.6 million barrels. Imperial Energy plans to produce 10,000 barrels per day by late 2007, 25,000 bbl/d by late 2008, and 35,000 bbl/d by late 2009.

Sakhalin Energy starts drilling first offshore gas wells in Russia

MOSCOW, July 9 (RIA Novosti) - Sakhalin Energy, the operator of the Sakhalin II oil and gas project off Russia's Pacific Coast, said Monday it had started drilling the first offshore gas wells from the Lunskoye-A platform. The platform is Russia's first gas-producing offshore platform located at the Lunskoye gas and condensate field, 15 kilometers (9.3 miles) off northeastern Sakhalin. The platform is designed for year-round operation in harsh weather conditions, and is able to withstand high seismic activity, the company said. "The commencement of drilling of the first wells from Lunskoye-A platform is a major development milestone. Lunskoye-A will provide the main volume of gas for LNG [liquefied natural gas] production, opening the new energy markets in Asia-Pacific and North America for Russia," Sakhalin Energy's CEO Ian Craig said.
The $20 billion Sakhalin II project is developing the Piltun-Astokhskoye and Lunskoye oil and gas fields on the island's northeastern shelf, with recoverable reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of gas.
The project's shareholders are Russian energy giant Gazprom (50%), Royal Dutch Shell (27.5%) and Japan's Mitsui (12.5%) and Mitsubishi (10%).

Saturday, July 07, 2007

Igor Sechin re-elected Rosneft board chairman

MOSCOW, June 30 (RIA Novosti) - Igor Sechin, a deputy head of the presidential administration, has been re-elected as Rosneft board chairman, the chief executive of the Russian state-controlled oil company said Saturday. The decision was approved at an annual shareholders' meeting. Owners of as much as 96.45% of the company's shares registered to vote on decisions. "Igor Sechin has been elected as chairman of the board of directors," Sergei Bogdanchikov told a news conference following the meeting. The shareholders also re-approved the other members of the board of directors. Yukos bankruptcy receiver Eduard Rebgun and his aide Sergei Tregub, forwarded by the oil company, were voted down. An auditing commission was elected as well. The shareholders decided to pay over 14 billion rubles ($538 million) in 2006 dividends, which is 6.7% higher than in 2005. The sum will represent over 15% of the company's U.S. GAAP net profit in 2006. The meeting approved Rosneft's annual performance report and accounting statements. The company's net profit was 213.2 billion rubles ($8.2 billion) in 2006, of which 199.12 billion ($7.7 billion) will be earmarked for investment, production and social development. The shareholders also determined the remuneration to be paid to the company's three independent directors. VTB Bank Chairman Andrei Kostin and Hans-Joerg Rudloff, chairman of Barclays Capital, will be paid $200,000 each. Alexander Nekipelov, vice president of the Russian Academy of Sciences, will receive $185,000.

Tuesday, July 03, 2007

Tatneft raises glass to profits

29 June 2007 - Upstream OnLine - Russian oil company Tatneft said today its 2006 net profit rose 15.3% to $1.13 billion from $981 million a year earlier. The company said in a statement its consolidated revenues for the period were $12.09 billion, up 15.8% from $10.44 billion in 2005. The results were prepared to US Generally Accepted Accounting Principles, Reuters reported. Mid-sized player Tatneft, which produces mostly high-sulphur crude in Russia's Volga region of Tatarstan, said its proved oil reserves were estimated at 5.91 billion barrels as of 1 January 2007. Total proved reserves of natural gas were estimated at 1.30 trillion cubic feet, the company said. The reserves audit was carried out by Miller and Lents.

Sunday, July 01, 2007

TNK-BP, BP to Contribute $1.5-Billion Assets to Venture with Gazprom

TNK-BP co-owner Viktor VekselbergJune 25, 2007 - Kommersant - Having lost Kovykta under Friday agreement with Gazprom, TNK-BP and BP have won the access to other assets of monopoly. The parties will create a venture worth roughly $3 billion, it is known already, though the actual size of their contributions is yet unclear. TNK-BP stands ready to share with monopoly its last gas asset, Rospan, that operates in Urengoi fields, and Gazprom will probably provide the stakes in Achimgaz and Arktikgaz. According to analysts, TNK-BP will materialize Rospan potential only in partnership with Gazprom. Gazprom, BP and TNK-BP sealed Friday a cooperation agreement, whereby Russia’s gas monopoly will buy out from TNK-BP 62.89 percent in Rusia Petroleum for $700 million to $800 million. Rusia Petroleum is the license holder for Kovykta gas condensate field and has 50 percent in Vostochno-Sibirskaya Gazovaya Kompania (VSGK - East Siberian Gas Company), which is gasifying the Irkutsk region. Under the counter option mentioned in the agreement, the parties will set up a $3-billion venture during a year. “We don’t restrict geography. Both Russia’s assets of TNK-BP and BP’s foreign assets could be contributed to certain ventures,” explained Viktor Vekselberg, who co-owns TNK-BP. “We are ready to establish the asset list. A special committee will analyze proposals of all parties in the near term.” According to BP Vice President James Dupree, today’s must is to open markets to Gazprom under cooperation agreement. At the same time, the agreement will enable BP to step up investments in Russia, Mr Dupree emphasized. Gazprom is targeted at long-term contracts for selling natural and liquefied gas, at stakes in underground storage facilities and at energy assets of the British company, a source with the company said on condition of anonymity. It will be the power plants in Britain and Spain, the source specified. In Gazprom, they refused to comment on the list of potential assets. The agreement with TNK-BP provides for the company’s optional return to Kovykta, as a minor holder of a blocking stake. But Kovykta is by far not the sole choice for being contributed to the venture, said Gazprom's Deputy Chief Executive Alexander Medvedev. “The project has been launched not to sit on the assets as a dog in the manger, we will be creating an international alliance,” Medvedev pointed out. TNK-BP has already determined what it wants from monopoly. The company is willing to contribute to the venture with Gazprom its last gas asset, Rospan International that operates in Yuzhno Urengoi and Vostochno Urengoi fields with the aggregate reserves of 950 billion cu meters. “We have agreed that Rospan could be contributed to the venture from our party,” Viktor Vekselberg said. In return, TNK-BP expects Gazprom to provide assets of companies operating in that region. A year ago, Mr Vekselberg already suggested creating a consortium of three companies licensed to develop the Urengoi fields – Rospan, Arktikgaz (owned by EniNeftegaz, while Gazprom has two-year option for buying out over 51 percent) and Achimgaz (venture of Gazprom and German Wintershall). That trio has the following shares in the Urengoi fields: Achimgaz – 50 percent, Arktikgaz and Rospan – 25 percent each. The prospects of Rospan are very good despite the production decline from 2.7 billion cu meters in 2006 to 1.5 billion cu meters in 2007, said TNK-BP Vice President Sergey Brezitsky. Rospan is capable of surging annual production to 10 billion cu meters should the respective investments in infrastructure be made, the top manager predicted, confirming the need to create infrastructure along with other companies operating in those fields. As to the industry’s analysts, they are far from unanimous about the attractiveness of such venture to Gazprom. Troika Dialog analyst Valery Nesterov, for instance, views this idea quite logical, evaluating the market worth of Rospan between $2.5 billion and $3 billion and emphasizing that “the field is being developed already and has excellent potential.” “Once the issue of access to the unified system of gas supplies is solved, the production may go up several fold, which will be profitable to Gazprom as well,” Nesterov speculates. But BCS analyst Maxim Shein isn’t equally optimistic. Shein evaluates Rospan worth at $3.5 billion to $4 billion and says that Gazprom doesn’t have to contribute Arktikgaz and Achimgaz to the venture with TNK-BP, as foreign partners with progressive technology and desire to work are represented in the neighboring block already.

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