Thursday, January 25, 2007
Surgut Share Report Spooks More Banks
January 25, 2007 Moscow News - Simon Shuster - A report that Surgutneftegaz managers covertly hold 72 percent of the secretive oil firm sparked a flurry of speculation among banks Wednesday and led Deutsche UFG to conclude that the firm's shares had been widely diluted. Managers control the firm through a tangle of puppet organizations set up over the last five years, Vedomosti reported Wednesday. Deutsche UFG, which had held off longer than some banks on marking down Surgut stock, slashed its target price for the company's shares by 40 percent Wednesday to $1.03, and downgraded the stock from "buy" to "sell." "For three or even four years, this stock was traded on a false assumption of the number of shares," Deutsche UFG analyst Pavel Kushnir said. UFG had raised its estimated number of outstanding shares from just less than 26 billion to the "market consensus" of 43 billion, he said. This implies a 40 percent dilution in the value of the stock. Surgut fell 2.24 percent Wednesday. Citing the national company registry, Vedomosti followed the paper trails of 23 noncommercial entities and their assets to the management board of Surgut. Surgut general director Vladimir Bogdanov reportedly headed nine of these organizations, which had been established by two direct Surgut subsidiaries: Invest Zashita and Riel. Though these nine companies were each founded with 11,000 rubles ($420) in early 2002, by 2003 their joint assets had grown to more than $10 billion, and by the end of 2005 to about $19 billion, the paper reported. This growth closely mirrored that of Surgut, the paper said. Vedomosti also reported a more intricate chain of ownership, in which a bizarre Surgut-connected "ring" of seven companies owned 14 other organizations, which in turn owned four more organizations, whose combined assets had grown at nearly the same rate as Surgut to reach more than $7 billion in 2005. The four firms at the end of this chain had the same telephone number listed in the national registry, which was answered by a receptionist at Surgutneftegaz, the daily reported. Last week, Vedomosti reported that 37 percent of Surgut's stock looked to have been transferred from a subsidiary to the company's pension fund. Alfa Bank downgraded the stock to "sell," and marked Surgut down to $1.13. Renaissance Capital, which reserved judgment last week and advised investors to "buy," said its new outlook on Surgut would come out Thursday. MDM Bank remained optimistic with a target of $1.25 for common shares and a "buy" status for preferred shares. MDM analyst Nadya Kazakova said the bank was counting on a state buyout, either directly or through Rosneft. Aton's Steven Dashevsky said that although he doubted a buyout, the management could be replaced next month when a planned labor strike is set to take place. "But nothing is obvious. [Surgut] still remains as murky as it was," he added. Aton told investors to "hold" and set a target price of $1.24. Alfa Bank chief strategist Chris Weafer dismissed the takeover theories, however. "Bogdanov is considered to be very close to the Kremlin," he said. "We know for sure ... that he fiercely guards his independence."
EU Official Vents Frustration at Russia�s Gas Cooperation with Algeria
25.01.2007 - MosNews - The EU Energy Commissioner Andris Piebalgs told his colleagues on Wednesday that Russia is trying to build a gas cartel in Europe by linking up with Algeria. Speaking in Berlin, Piebalgs claimed that if Russia and Algeria agreed to cooperate in the production and distribution of gas to Europe, “they could create a kind of cartel”. Russia provides 25 percent of European gas supplies and Algeria 10 percent. Norway and other European producers provide the rest. Piebalgs said such a concentration of resources could hinder competition when the commission is trying to break up some of the biggest European energy companies by separating production, transmission and distribution to give consumers greater choice. “Our worries are the development of the contacts between Russia and Algeria,” Piebalgs was quoted by the International Herald Tribune. MosNews has reported on Russian Energy Minister Viktor Khristenko’s recent visit to Algeria, where he was accompanied by representatives of state-controlled gas giant Gazprom and Russia’s largest private oil company Lukoil. In the course of the visit, Gazprom and Sonatrach, Algeria’s state-owned petroleum corporation, agreed to deepen their cooperation. “We, Europe, are their biggest customers,” the EC Energy Commissioner said. “We want to have a fair price. This is not only about commercial interests. It is about transparency, too.” According to the Interfax news agency, Gazprom is seeking support from Sonatrach in the joint marketing of gas to Europe, and in the setting up a forum of gas-exporting countries — which EU officials fear could develop into a cartel. In return for cooperation, Russia is offering Sonatrach participation in the construction of a liquefied natural gas terminal in St. Petersburg. “The context of these meetings between Russia and Algeria makes us nervous,” Pielbalgs said. Energy analysts said attempts by Russia to create what could be a gas cartel similar to OPEC should be met with maximum resistance by EU members. “This would be extremely dangerous for Europe,” said Claudia Kemfert, an energy expert at the German Institute for Economic Research. “Europe must quickly react by diversifying its energy resources. Apart from making more use of renewable energy, the Europeans should focus more on buying liquefied natural gas from other countries, particularly Qatar.” Other analysts said that two powerful non-European companies working together could end up controlling nearly 40 percent of European gas needs. “That could have a price impact,” said Christian Egenhofer, an energy expert at the Center for European Policy Studies in Brussels. “At the moment, it is hard to say what the real reasons are for growing cooperation between Algeria and Russia. This could be a serious attempt by Gazprom to build up a global cartel and therefore increase its leverage, or else President Putin is raising the stakes in order to tell the European Union that Russia has leverage too.” The European Union has been pressing Russia to ratify the bloc’s energy charter, which would allow foreign companies access to Russian pipelines to transport gas across Russia to its markets in Europe. Putin has repeatedly said that he would not be willing to ratify the charter.
Russia 'may sell' 25% Rosneft stake
23 January 2007 - Upstream onLine - Russia could sell off another 25% of state-controlled oil company Rosneft in a share offer, it was reported today. The Interfax news agency quoted Valery Nazarov, the head of Russia's state property agency, as saying: "We think it's enough if Russia keeps a controlling stake in Rosneft. The most likely option for distributing more Rosneft shares would be to carry out the second stage of the public offering on the market. "Up to 25% of Rosneft's shares could be distributed. When exactly this will happen depends on the market situation and a decision by the government," Nazarov said. Last year, Rosneft's initial public share offer, in which the government sold about 15% of the shares, raised $10.6 billion, making it the fifth-biggest IPO ever, Reuters reported.
Tengiz production takes a fall
23 January 2007 - Upstream onLine - Oil production at Kazakhstan's Tengiz oilfield fell to 13.3 million tonnes in 2006 from 13.6 million tonnes a year earlier, the field's operator said today. The Chevron-led Tengizchevroil (TCO) consortium gave no reason for the drop in output, which fell short of a target of 13.5 million tonnes. The company gave no forecast for 2007. Production is expected to nearly double after 2008 when the consortium has completed "second generation" improvements to its infrastructure and a gas re-injection project, Reuters reported. Chevron holds 50% in TCO, while national oil company KazMunaiGas has a 20% stake, ExxonMobil has 25% and Russia's Lukoil has 5%.
Tatneft predicts 2% revenue increase
23 January 2007 - Upstream onLine - Russian oil company Tatneft expects its revenues under Russian accounting standards to increase by 2% year-on-year in 2006 to 173 billion roubles ($6.52 billion), the company said today. Tatneft said its pre-tax profit was likely to stay flat in 2006 at 50 billion roubles ($1.89 billion). The company did not give the forecast for its net profit, which amounted to 36.5 billion roubles ($1.38 billion) in 2005. It did not say why its sales and pre-tax profits would stay largely flat in 2006, despite much higher global oil prices and bigger profits across the Russian industry. Tatneft, which produces mostly high-sulphur crude in Russia's Volga region of Tatarstan, said its oil output increased by 0.2% to 25.4 million tonnes last year.
Zarubezhneft denies eyeing Kharyaga
23 January 2007 - Upstream onLine - Russian state-owned oil company Zarubezhneft denied a report today that it wanted to take a stake in the Kharyaga oil project, which is operated by Total of France. "Zarubezhneft is not planning to take a stake in the project to develop the Kharyaga field," a company spokesman said. Russia's Kommersant newspaper earlier cited unnamed sources as saying that Zarubezhneft wanted to take a 20% stake in Kharyaga, based in Western Siberia. Total has 50% of the project and Norway's Norsk Hydro has 40%. The remaining 10% is held by the local government. Russia has also an option to take another 20% in the project and had earlier granted it to Lukoil. However, the company has never taken the stake, saying it saw little profit from participating in the field. Kharyaga is one of Russia's three production sharing agreements. Russia has put all three under pressure during the last year by threatening to withdraw licences for failing to comply with contract terms and sending officials to inspect sites for possible breaches of environmental and safety rules. Analysts say the campaign of pressure is designed to persuade the foreign companies involved in the PSAs to agree to less favourable terms and allow state-owned companies into the projects, Reuters reported.
Oslo, Russia 'should tap Arctic together'
22 January 2007 - Upstream onLine - Norway should develop plans to tap Arctic oil and gas resources jointly with Russia, even though Moscow rejected its companies for work on the massive Shtokman gas project, Norwegian Oil and Gas Minister Odd Roger Enoksen said today. Russia's Gazprom turned down bids from Norway's Statoil and Norsk Hydro, as well as from three other foreign companies, last year to help develop the Shtokman field in the Barents Sea, which has enough gas to supply the world for a year. "For some, the story of co-operation with Russia ended with its decision in October last year to develop the Shtokman field without foreign participation," Enoksen told a seminar on the future of the Arctic today, Reuters reported. "This shows, in my opinion, a lack of perspective," he said in the far northern Norwegian town of Tromso. "It is in both countries interest to develop an ever-closer co-operation to ensure sustainable management of the natural resources in the Barents Sea." Gazprom's decision effectively delayed Shtokman's start-up for years, analysts said, since Norwegian companies will now be reluctant to provide breakthrough proprietary technology in future. It also derailed hopes for a quick solution to bilateral issues ranging from access to various parts of the Arctic to shipping and uniform environmental protection standards. Studies show that a quarter of the world's undiscovered oil and gas deposits could be in the Arctic, with new drilling technology and receding ice cover making access easier.
Russia 'looking to India' for Sakhalin 3
22 January 2007 - Upstream onLine - Moscow wants Indian companies to invest in its Sakhalin 3 oil and gas deposit, Russian defence minister Sergei Ivanov said on a visit to India today. Moscow is "interested in the participation of Indian capital in the development of the Sakhalin 3 project," Russia's Itar-Tass news agency reported Ivanov, who is also a deputy prime minister, as saying. He also said Indian companies could invest in the Vankor field in Siberia, Reuters reported. US supermajors ExxonMobil and Chevron were part of a consortium which originally won a preliminary bid to develop the Sakhalin 3 field, off Russia's Pacific coast. But that consortium was dissolved and Russia is seeking to re-auction the deposit. Russia has awarded rights to develop smaller fields within the Sakhalin 3 deposit. A consortium of China's Sinopec and Russia's state-owned Rosneft has started exploratory drilling on one of those smaller fields. India's state-owned Oil and Natural Gas Corporation (ONGC) agreed several years ago to buy 20% of Sakhalin 1, a $17 billion oil and gas development led by ExxonMobil and involving Rosneft. Russian media have reported that the inclusion of ONGC in Sakhalin 1 was part of a broader agreement involving a multi-billion-dollar deal to supply Russian weapons to India, though this has never been confirmed. Vankor, in eastern Siberia, has estimated reserves of 2.5 billion barrels. It is operated by Rosneft.
TNK-BP gains Kovykta drilling approval
22 January 2007 - Upstream onLine - Russia's technical standards agency said today it has approved a drilling programme by BP's Russian venture TNK-BP at the Kovykta gas field, but the decision is unlikely to ease state pressure on the project. RosTekhNadzor, a part of the Ministry of Natural Resources, said it had approved the plan of Rusia Petroleum, the TNK-BP subsidiary operating the Kovykta licence, to drill 18 production wells and to build a gas processing unit. The agreement, valid for five years, allows the company to carry out its obligations to supply gas to consumers of the Irkutsk region in eastern Siberia where the deposit is situated, RosTeckhNadzor said. TNK-BP was planning to use the $10 billion Kovykta project to supply the Chinese market but the plan was blocked by the gas monopoly Gazprom, which had said Kovykta would not be needed for exports until 2015. Gazprom's decision has restricted Kovykta's output to local market needs of no more than 2.5 billion cubic metres a year, down from 9 Bcm provided by the licensing agreement, and put the company under state pressure due to underproduction. Russia's Natural Resources Ministry said last week it had started checks on whether TNK-BP was fulfilling the terms of its agreement. Russia's subsoil agency, RosNedra, which is also a part of the ministry and is in charge of giving and withdrawing licences, said last year that Rusia Petroleum could have its licence taken away because it was not producing enough. Analysts say RosTekhnadzor's decision to let Rusia Petroleum go ahead with its drilling plan should not be interpreted as a softening of the ministry's stance on Kovykta, Reuters reported.
State players carve up Russia play
22 January 2007 - Upstream onLine - Russia will equally split all new offshore oil and gas fields between state-run players Rosneft and Gazprom, further limiting foreign and private access to its energy play, according to local media reports. Moscow-based business daily Vedomosti quoted government sources as saying the decision was taken at a meeting of President Vladimir Putin and government officials last week. Gazprom and Rosneft declined to comment when contacted by Reuters. Vedomosti said Russian officials had decided that all undistributed offshore fields would be offered only at closed auctions, which reduce chances of collecting maximum money to state coffers but guarantee no surprise winner. Analysts told Vedomosti the move was largely expected as it was part of a wider Kremlin drive to increase control over natural resources, which has seen the virtual re-nationalisation of about one-third of Russian oil production.
Lukoil cranks overseas taps
19 January 2007 - Upstream onLine - Russian oil giant Lukoil said it produced 39.6 million barrels of crude in its international operations in 2006, up 51% year on year. The company said the production at its foreign operations represented 5.5% of its total oil production. Lukoil said it produce 1.75 billion cubic metres of natural gas (11% of its total gas output) at its international operations. Much of the production was achieved at its projects in Kazakhstan, Lukoil said in a statement. The company also has operations in Uzbekistan, Iran, Saudi Arabia, Colombia, Venezuela and Cote d'Ivoire. Lukoil said it was preparing to invest after signing memorandums of understanding with Angola and Algeria.
Russian duo spend up big in Algeria
22 January 2007 - Upstream online - Russian state-run oil producer Rosneft and the country's pipeline player Stroitransgaz plan to invest $1.3 billion in oil production in Algeria, Rosneft's vice president Nikolai Borisenko has revealed. A Rosneft and Stroitransgaz alliance has taken a 60% stake in the Block 245 South exploration project in Algeria, he said last night. The remaining 40% interest is being retained by Algerian producer Sonatrach. As part of the project, the Russian companies have explored two fields with confirmed oil reserves of 26.8 million barrels. Next month, the Russian duo will start preparing an application for a production licence from the two fields, Reuters quoted Borisenko as saying. He added Rosneft and the Algerian Energy Ministry had agreed to continue discussing new projects in Algeria.Russian state-run oil producer Rosneft and the country's pipeline player Stroitransgaz plan to invest $1.3 billion in oil production in Algeria, Rosneft's vice president Nikolai Borisenko has revealed. A Rosneft and Stroitransgaz alliance has taken a 60% stake in the Block 245 South exploration project in Algeria, he said last night. The remaining 40% interest is being retained by Algerian producer Sonatrach. As part of the project, the Russian companies have explored two fields with confirmed oil reserves of 26.8 million barrels. Next month, the Russian duo will start preparing an application for a production licence from the two fields, Reuters quoted Borisenko as saying. He added Rosneft and the Algerian Energy Ministry had agreed to continue discussing new projects in Algeria.
Karachaganak output holds steady
19 January 2007 - Upstream onLine - Crude output from Karachaganak, one of Kazakhstan's biggest onshore oilfields, reached 10.4 million tonnes in 2006, barely changed from 10.317 million tonnes the previous year, a project shareholder said. Natural gas production from the field increased to 11.9 billion cubic metres from 11.5 billion a year earlier, said Russia's Lukoil, which is a shareholder in the operating consortium. The UK's BG Group and Italy's Eni each hold 32.5% in the project, while Chevron holds 20% and Lukoil 15%, Reuters reported.
Yukos assets 'worth more than $22bn'
19 January 2007 - Upstream onLine - A Russian bankruptcy receiver said today that initial valuation estimates showed the assets of bankrupt oil company Yukos might be worth more than $22 billion. Nikolai Lashkevich, spokesman for Yukos receiver Eduard Rebgun, said that a consortium of five valuers had valued 180 of 193 Yukos' enterprises, Reuters reported.
Saga takes full control of Promgeotek
19 January 2007 - Upstream onLine - Norway's Saga Oil has paid a final installment of $10 million to become the sole owner of Russian subsidiary Promgeotek and its Rodnikovsky licence. Saga said that well 102 on the licence is currently in a clean up phase and is shut-in as the company is establishing the reservoir properties. It added that well 106 is progressing towards its planned start of production.
Natural Resources Ministry to Press Russia's BP JV
19.01.2007 - [Neftegaz.ru] - Russia has stepped up pressure on TNK-BP, as the natural resources ministry said it was launching checks into whether the Anglo-Russian joint venture was fulfilling the licensing terms of one of its biggest assets, the Financial Times reported. The move had been signalled by the Russian authorities last year, but comes amid speculation that Moscow may pressure BP PLC to cede some of its 50 pct stake in the joint venture, handing control to the Russian side, the article added. Some analysts have speculated Russia may seek to take advantage of the discomfiture of Lord Browne, the BP chairman who was an architect of the venture in 2003, but who announced last week he would step down 18 months earlier than planned. The Russian probe follows last month's deal by Royal Dutch Shell PLC and two Japanese partners to sell a controlling stake in the 20 bln usd Sakhalin-2 project to Gazprom, the Russian natural gas giant.
National geo-exploration company to appear in Russia
01-24-2006 RBC News - The Russian ministries have agreed on the creation of a national geological exploration company to operate on Russia’s continental shelf, a source in the Russian government told RBC. The issue was discussed at President Vladimir Putin’s meeting with government ministers and representatives of Russian oil companies on 16 January 2007. The new company will incorporate the assets of Russian companies with experience in offshore operations, such as Soyuzmorgeo, Arctic Marine Engineering Geological Expeditions, Dalmorneftegeofizika, Sevmorneftegeofizika and Arktikmorneftegazrazvedka. Management of the national geological exploration company may be entrusted to Russia’s state-owned Gazprom and Rosneft. Both companies could create geological exploration subsidiaries, later to be incorporated into the national company. Alternatively, the new company might be managed by state oil company Zarubezhneft. If Gazprom and Rosneft get control of the Russian continental shelf, the implementation of these plans will take a long time, thinks Rinat Gizatulin, spokesman for the Russian Natural Resources Ministry. The reserves of the Russian continental shelf, estimated at 100 billion tonnes of conventional fuel, are expected to play a key role between 2020 and 2030.
Tuesday, January 09, 2007
ConocoPhillips boosts stake in LUKoil
RBC, 09.01.2007, Moscow 15:44:40.ConocoPhillips has increased its stake in LUKoil to 20 percent, the Russian oil company reported. This corresponded with ConocoPhillips's plans to bring its stake in the Russian oil producer from 7.59 percent acquired on September 29, 2004 in a $1.988bn deal ($30.76 per share) up to 20 percent by the end of 2006. LUKoil is currently completing the acquisition of ConocoPhillips's retail business. The deal is scheduled to come to a close in the second quarter of 2007.
Russia may be thankful to OPEC
MOSCOW. (Oleg Mityayev for RIA Novosti) - At its conference on December 14, OPEC announced its decision to reduce oil production by 500,000 barrels a day starting on February 1, 2007. The explanation was simple: winter in the northern hemisphere will be drawing to a close by that time, so demand for fuel will be falling. Still, it is difficult to say how much crude OPEC will really produce. At its previous meeting, in October, the cartel decided to cut production by 1.2 million barrels a day, from 27.5 million to 26.3 million. However, in reality its oil production in November stood at 27.1 million barrels a day, according to the International Energy Agency. Experience has already taught us that the actual volume of oil produced is not the most important factor. Of greater importance is OPEC's rhetoric, as the organization controls 40% of the world's oil output. Simply by announcing its intention to cut production, OPEC prevents oil prices from falling below a level that is convenient for the majority of oil sheiks. In October, it thus succeeded in ending the decline in oil prices, which had dropped by 25% since July but stopped at $60 per barrel. The latest statement pursues the same goal. At the same time, OPEC is trying not to hurt consumers too much. As the practice shows, the price of $60 per barrel is quite acceptable to them. Overall, everyone is content now. The developed countries, which are mostly energy importers, have accumulated sufficient commercial reserves of oil and petrochemicals to feel safe for the time being. Saudi Arabian Petroleum and Mineral Resources Minister Ali al-Naimi said, "The oil market now has a much better outlook than it did during OPEC's last meeting." The cartel's decision will help to achieve a better balance on the market, he added. Besides, the announcement has not affected the global market much: oil prices moved up, but only to slightly above $62 per barrel. The IEA, which represents consumer countries, is asking OPEC not to cut production further. Ahead of the meeting, it confirmed its forecast for oil consumption growth in 2007: it will be up 1.7% to 85.9 million barrels a day. This is not all that much. The reasons for the decline in growth are the slowdown in the world's biggest economy - the U.S. - and the decreasing growth of oil consumption in China. The World Bank offered its own forecast, released two days before OPEC's latest decision, which is even more, if not overly, optimistic for oil consumers. In its annual report on the global economic outlook, the Bank said that oil demand would grow by no more than 1.2-2 million barrels a day until 2010, while global supply would increase by 3 million barrels a day. Production growth will come mainly from fields in Africa, Saudi Arabia and the Caspian Sea, the World Bank's analysts said. Neither the Bank nor the IEA expects a significant surge in production in Russia, which is the world's second largest oil exporter after Saudi Arabia. Statements by some Russian oil producers about growing output should probably not be taken too seriously. All the more so, as the Russian government admits that domestic oil production is stagnating. The crucial thing for Russia, the bulk of whose revenues come from oil exports, is that oil prices should not fall below $60 per barrel. The Russian budget for 2007 is based on an optimistic forecast for Russian export crude, $61 per barrel. However, its actual price has been no more than $56-$57since autumn, as its quality is believed to be inferior to that of the world's leading brands. Russian experts are unanimous in believing that the price used in the budget is exaggerated. Still, most of them agree that prices in 2007 will not be much different from this year's, and the budget will be fulfilled, only with a smaller surplus than the planned 1.5 trillion rubles. The Stabilization Fund will grow more slowly than planned (it was expected to increase from the current 2 trillion to 4.2 trillion rubles by the end of 2007). Overall, however, everything should turn out well for Russia, thanks to OPEC.
Sunday, January 07, 2007
EBRD 'scraps $300m Sakhalin loan'
02 January 2007 - Upstream onLine - The European Bank for Reconstruction and Development (EBRD) is likely to abandon a $300 million loan to Sakhalin 2 after Shell and its Japanese partners were forced to sell a 50% stake in the venture to Russian gas monopoly Gazprom, according to reports. The mandate of the EBRD would probably preclude it from lending to a project now dominated by a state-run company like Gazprom, a report published in the Wall Street Journal Europe said. "It doesn't invest in projects that have just been nationalised," a banker familiar with EBRD's work told the newspaper. A spokesman for the EBRD, Anthony Williams, said no decision had been taken, the paper said. A decision not to approve the loan is not likely to jeopardise the $22 billion development, which lies off Russia's Pacific coast.