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Tuesday, July 22, 2008

Russian energy firms, Venezuelan company sign cooperation deals

BARVIKHA (Moscow Region), July 22 (RIA Novosti) - Russian energy companies have signed cooperation agreements with Venezuela's state oil and gas company as part of an official visit by the South American country's president to Russia. Anglo-Russian oil venture TNK-BP and Venezuela's PDVSA agreed on the joint exploration of the Ayacucho-2 area in the Orinoco oil belt in Venezuela. Russian state-run energy giant Gazprom signed a deal with the Venezuelan company on the appraisal and certification of the Ayacucho-3 oil fields. LUKoil and PDVSA signed a memorandum of understanding and an agreement on joint exploration in the Junin-3 area, also in the Orinoco belt. The documents were signed in the presence of Russian President Dmitry Medvedev and Venezuelan leader, Hugo Chavez. Chavez told the Russian leader: "We are happy to be here, and this is an excellent opportunity to promote and improve our relations and open up new horizons." Medvedev said the Russian-Venezuelan talks would give "another powerful impetus" to bilateral relations.

Monday, July 21, 2008

Kremlin to Dole Out Arctic Reserves

21 July 2008 - The Moscow Times by Catrina Stewart - President Dmitry Medvedev signed a law Friday enabling the Kremlin to handpick companies to develop the vast oil reserves believed to be located in the Russian Arctic. In a televised meeting with Deputy Prime Minister Igor Sechin, who oversees the energy industry, Medvedev outlined priorities for developing some of the country's richest and most-challenging oil deposits. The government will take the unusual step of selecting companies to develop the Arctic reserves, instead of holding auctions or tenders, Medvedev said. "The continental shelf is our national heritage," he said, signaling a move toward greater state control over the country's lucrative energy industry. "This was done consciously to ensure rational use of this national wealth." Sechin said that only state-controlled energy companies with a minimum of five years' experience working on the continental shelf would be eligible to operate the projects, which would effectively leave just Gazprom and Rosneft. In May, then-President Vladimir Putin signed a law establishing limits on foreign participation in sectors deemed strategic, including energy, aerospace and telecommunications. "This is very much in the vein of this economic policy of differentiating sectors according to which are strategic, and which are not," said Yaroslav Lissovolik, chief economist at Deutsche Bank. But analysts have questioned whether Russian majors have the necessary financing and technology to lead major offshore projects without significant foreign participation. Despite soaring oil prices, the country's energy majors have struggled recently under the burden of high taxes, which they claim makes it difficult to invest in new fields to offset declining production. Sechin, as chairman of Rosneft, has been one of the chief lobbyists for tax cuts. Facing its first declines in oil production in years, the government has taken concrete steps to provide a boost to the energy sector. Earlier this month, the Federation Council approved a raft of tax breaks in the oil sector, which it is estimated will save the industry up to 140 billion rubles annually ($6 billion). The bill proposed tax holidays for companies working on the continental shelf, lasting 10 to 15 years or until output reaches 35 million tons of oil. Rosneft chief Sergei Bogdanchikov has estimated developing the country's offshore reserves will cost 61 trillion rubles ($2.6 trillion). Russia has been increasingly assertive in the Arctic region as global warming makes resources there more accessible. Moscow last year sent an expedition to plant a Russian flag on the seabed under the North Pole and said research indicated that a massive underwater mountain range in the area — believed to contain huge oil and gas reserves — was part of Russia's continental shelf.

Imperial joy in Siberia, as cup runneth over

Jul 21, 2008 - Scandivnavian Oil-Gas Magazine - U.K.-based Russia explorer Imperial Energy Corp. has struck oil in the Glukovskoye 6 well in Western Siberia and the company expects to produce oil at the field year-end 2009, it was understood Monday. The well found oil across six metres of Jurassic-era rock. An offshoot pipeline will connect the field to Imperial’s Maiskoye-Luginetskoye export line. Elsewhere in the complex of West Siberian fields, the Festivalnoye 218 well encountered “significant showings of hydrocarbons”, but overproduction of mud compelled engineers to “cement back, run casing and side-track the well into the Palaeozoic using substantially greater mud weight”. Festivalnoye flows oil into the Maiskoye-Luganetskoye pipeline. The festival continued for Imperial with news the Ministry of Natural Resources has granted it a production licence until July 2028 for the Golovnoye Field in Block 74. With its cup over running over in the Tomsk region, Imperial managers now also expect first oil from the Kiev Eganskoye field to begin filling one of the company’s recently constructed 150-kilometre pipelines in September 2008.

Rosneft, TNK-BP, and Transneft divide oil flows

Rosneft, TNK-BP, and Transneft divide oil flowsJul 18, 2008 - Scandinavian Oil-Gas Magazine - Rosneft, TNK-BP, and Transneft have divided the oil flows. TNK-BP will reorient almost half of all oil produced in the Samotlor field to the east for filling the Eastern Siberia – Pacific Ocean oil pipeline, which is currently under construction. Rosneft will send oil to the Eastern Siberia – Pacific Ocean pipeline from the Vankor field (in the Krasnoyarsk Krai). These companies signed as agreement yesterday on performance of swap operations and coordinated it with Transneft. As a result, the transportation company will not have to extend the pipeline running from Omsk to the east, which would presumably cost approximately $1 billion. So far, the cooperation between Rosneft and TNK-BP has been limited to Rosneft’s purchase of a blocking share of the Verkhnechonsk field controlled by TNK-BP in the Irkutsk Region and BP’s purchase of approximately 1% of shares of Rosneft. Now, when the Eastern Siberia –Pacific Ocean oil pipeline may be reversed (until its second line is built), the companies agreed to perform swap operations. The Eastern Siberia – Pacific Ocean oil pipeline, construction of the first line of which was started in spring 2006, will connect oilfields of Western and Eastern Siberia with the Pacific Ocean coast. The rated throughput capacity of this oil pipeline, which is more than 4,770 km long, is 80 million tons a year. According to the schedule, construction of the first line from Taishet to Skovorodino (in the Amursk Region) will be completed in early 2010. The throughput capacity of this line will be 30 million tons a year. However, Transneft is going to complete all works for construction of the first segment of the Eastern Siberia – Pacific Ocean oil pipeline from the Verkhnechonsk field towards the Angarsk Petrochemical Company by this fall and reverse the pipeline in September. Beginning from this September, supplies will be made according to the following scheme: TNK-BP will start supplies from the Verkhnechonsk field to the Angarsk Petrochemical Company controlled by Rosneft. Oil produced by the state company Rosneft in the Vakor field (up to 13 million tons a year) will be processed at the Ryazan Refinery owned by the Russian-British consortium. After 2010, when the Eastern Siberia –Pacific Ocean oil pipeline starts operation in the forward direction, the agreement signed yesterday will switch to another scheme of supplies. No changes will be made in supplies from the Vakor field. TNK-BP will transport oil from the Samotlor field (up to 13 million tons a year out of 28 million tons that will be annually produced in this field by that time) through the existing oil pipeline to Taishet and then through the Eastern Siberia – Pacific Ocean oil pipeline. Some of the supplies will go to the Angarsk Petrochemical Company. The agreement is signed until 2015 with a prolongation option. “This is the first time when two state companies and one private company are performing swap operations of this scale,” said Vladimir Bobylev, official representative of TNK-BP, to Vremya Novostei. “We have launched an efficient mechanism that will help us avoid unnecessary expenditures.” Representatives of Transneft are sure that this agreement will raise the efficient of oil supplies, save the parties from unnecessary expenditures related to transportation of oil over long distances, make construction of additional transportation infrastructure facilities unnecessary, and get rid of risks related to bottlenecks of the transportation system. Approximately 300,000 tons of oil will be produced in the Verkhnechonsk field this year and about 1 million tons in 2009. Rosneft is going to produce 1.9 million tons of oil in the Vankor field this year and increase oil production in this field up to 15,6 million tons by 2010.

Russia scraps shelf auctions

Russia scraps shelf auctions18 July, 2008 - Upstream OnLine - Russian President Dmitry Medvedev has signed a law allowing the government to allocate strategic oil and gas deposits on the continental shelf without auctions, the Kremlin said. "This is a thoroughly thought-out decision aimed at enhancing the efficiency of exploration and production," RIA Novosti quoted Medvedev as saying. The law on strategic sectors, already approved by parliament, limits foreign participation in developing Russia's biggest oil and gas reserves. It gives the right to develop Russia's offshore reserves to companies with five years' experience in the area and in which the state owns at least a 50% stake, leaving only minor roles in hydrocarbon projects for foreign investors and independent producers. Russian state-controlled giants Gazprom and Rosneft are likely to receive monopoly rights to all oil and gas field development on the Russian shelf. "The continental shelf is our national asset, and this is a special law, setting out special procedures," Medvedev said. Medvedev has put Deputy Prime Minister Igor Sechin, head of Rosneft's board of directors, in charge of offshore hydrocarbon development. Rosneft chief Sergei Bogdanchikov earlier said Russia needs 61 trillion rubles ($2.6 trillion) of investment to develop offshore oil and gas deposits. Earlier this month, Prime Minister Vladimir Putin voiced concern over the oil and gas industry, saying it has almost exhausted its potential for growth, threatening the country's export obligations. He called for a major technological overhaul in the sector, as well as more exploration to find new strategic deposits.

E.On starts construction of worlds largest power station at Surgut

E.On starts construction of worlds largest power station at SurgutJuly 18, 2008 - Russia Today - German electricity generator E.On has started work on the construction of two 400 megawatt turbines near Surgut. When completed the turbines will make the power station the worlds largest. Construction is part of the $3.2 Billion E.On will invest in power generator OGK-4 by 2011. The $820 million project to build the turbines is being undertaken by General Electric and Gama, and will see the Surgut No 2 Station have a capacity of 5.6 gigawatts. OGK-4 general director, Andrei Kitashyov says the electricity producer has secured long term gas supply contracts for the turbines with Gazprom, Novatek, and Surgutneftegaz.

Oil price falls wont affect Russian economy

Oil price falls wont affect Russian economyJuly 17, 2008 - Russia Today - Oil prices have fallen sharply for the second straight session, in a sign that markets are becoming more volatile. Experts point to fears of an economic slowdown, especially in the U.S. But while the world’s biggest economy is reeling - Ratings Agency, Moody`s, has lifted its rating for Russia, reflecting the country's strong fiscal position and economic growth. Fears of an economic slowdown in the US keep kept oil markets volatile on wednesday - with a sharp downward movement of 6 dollars a barrel for the second day running. At around 135 dollars, it’s a sign the markets are not sure strong levels of demand can persist. However, Ron Smith of Alfa Bank says long-term, fundamental demand for oil remains strong. If this trend continues in the next ten days or two weeks we should see another run at higher prices. At the same time there is reason to believe this might be a bubble, and if this trade ever turns, if the hedge funds and everyone else who’s piled into suddenly start to think that prices are going to go down then that will become a self fulfilling prophecy and they will go down. Russia, the world’s second-biggest oil exporter, remains little affected for now. With petro-dollars flowing into the country, any hope that lower prices will slow inflation are also vague. Inflation has topped 9 per cent so far this year. But the falls in the oil price of this week wont have an immediate impact on inflationary pressure according to Roland Nash of Renaissance Capital. Its to small a move to have a big impact on the inflation rate in the short term. You need to see the oil price fall for a considerable period of time. While the clouds continue to gather for the leading developed economies, investors are increasingly looking to Russia as a safe haven. So the decision by ratings agency Moody’s to lift its investment rating of Russian government debt is a timely signal to investors.

Wednesday, July 16, 2008

Russian rig set for 2010 Arctic debut

Jul 15, 2008 - Scandinavian Oil-Gas Magazine - Russian Prime Minister Vladimir Putin has toured a new Arctic-capable Russian drill rig in the Cold War port of Sverodvinsk, it was understood Tuesday. News agency AFX said the rig will be good to minus 50 degrees Ceslsius and good against ice flows which build up every four years in the Eastern Barents Sea, home of giant oil and gas fields, including the 3.8-trillion-cubic-metre Shtokman. The news agency reported the rig will be finished in 2010, however shipbuilding yard Sevmash has been beset by problems meeting recent orders, including orders for Norwegian ship owner Odfjell. The yard cited rising steel and other project costs in the cancelled multi-ship order. The yard has traditionally built nuclear-powered vessels.

Imperial Energy shares jump on buyout offer

July 15, 2008 - Russia Today - Shares of Imperial Energy closed up 18% after it released a statement about a buyout offer. The British oil company, operating in West Siberia and Kazakhstan, received a proposal from the Indian Oil and Natural Gas Corporation. Indian demand for energy is growing fast due to rapid industrialisation. Imperial said it viewed the offer with interest. The British oil company has a growing portfolio of oil and gas projects in West Siberia. Imperial produces only 10,000 barrels per day in the Syberian Tomsk region, which contains 900 mln barrels of recoverable reserves.

New refinery proposal will add to domestic competition

July 15, 2008 - Russia Today - The Russian government has proposed an eight BILLION dollar project to build a refinery to supply the internal market. That's goes with a set of measures to cut rising fuel prices on the domestic market. The domestic market should be more attractive for oil producers than exporting, with Russia short of quality fuels said Prime Minister Vladimir Putin. The Government unveiled an EIGHT BILLION dollar project to build an independent refinery that should hold back the price on oil products in Russia. If project goes ahead - The first refinery built since the Soviet era - the new plant with a 12 million tonne capacity will assist independent oil producers that are not connected to the large vertically integrated companies. Elena Korzun, General Director of Assoneft, says, Russian independent companies extract 4% or 20 million tons (out of almost 500 million tons) and we don't refine because we have no capacity. It should be a government refinery and together with it's construction the problem of oil exchange will be resolved. The question remaining is the location of the proposed refinery. Inland sites might be better for the domestic market, however a coastal location will offer export opportunities, as Jeff Roberts, President of Pomor Petroleum notes. Murmansk. That's where pipeline from West Siberia is supposed to be and it's still the best place - its the only ocean port, can take very big vessels, and get to the States very easily. Currently Russia refines 230 million tons of oil, together with exporting almost the same amount of crude. Like many countries, Russia suffers from a lack of refining capacity. Modern refineries can increase the currently low volumes of finished products, like kerosene jet fuel, petroleum and diesel, being produced Gennady Shmal, the President of the Oil and Gas Producers Union says the new refinery will add to competition. The new refinery will create competition and may limit rising fuel prices. It is necessary for independent oil producers who currently they sell a larger part of their crude production to large oil companies for less than the market price. The new refinery project has not been presented to the energy ministery yet and there is no funding for construction yet either. However the introduction of differentiated tariffs for light and heavy fuels at the end of 2004 made refining a more attractive business as the government introduced tariffs to deter oil companies from exporting crude.

Russia's Tatneft to drill exploratory oil wells in Libya, Syria

MOSCOW, July 16 (RIA Novosti) - Tatneft, one of Russia's top 10 oil producers, announced Wednesday plans to drill exploratory oil wells in Libya and Syria. Tatneft, which is based in Tatarstan in the Volga River area and accounts for more than 80% of the republic's oil output, plans to boost its crude production outside the republic by 60% to 315,000 metric tons (2.3 million barrels). It is carrying out geological prospecting at four blocks in Libya and one block in Syria. "In Syria, six exploratory wells are planned, two of which have already been drilled. In Libya, the plan is to drill four oil wells this year," Tatneft said in a statement. Tatneft received the right to develop three oil fields in Libya with reserves of over 1 billion metric tons (7 billion barrels) of oil in December 2006. Prior to that, the company had signed a contract with Libya for one oil field. In March 2005, Tatneft signed a contract to explore and develop a new oil and gas field in eastern Syria. Tatneft produced 13 million tons (95.6 million barrels) in the first half of 2008, up 0.7% against the same period last year, the company earlier said in a statement.

TNK-BP, Rosneft agree on cost-cutting oil swap deal

MOSCOW, July 16 (RIA Novosti) - The Russian oil pipeline operator Transneft, the Russian-British joint oil venture TNK-BP, and Russia's largest crude producer Rosneft have signed a swap agreement on oil supplies to cut their costs, Transneft said Wednesday. The agreement stipulates the annual supply of 13 million metric tons (95 million barrels) of crude from East Siberia's Vankor deposit, currently being developed by Rosneft, to the Ryazan refinery in central Russia owned by TNK-BP, Transneft said. In turn, TNK-BP will supply crude from its Samotlor field in West Siberia to Taishet in the Far East and further along the route of the East Siberia - Pacific Ocean (ESPO) pipeline, currently being built by Transneft, and also to Rosneft's refinery in Angarsk in East Siberia. The East Siberia-Pacific Ocean pipeline project is designed to pump up to 1.6 million barrels of crude per day from Siberia to Russia's Far East, and then on to the energy-hungry markets of Asia. The scheme will come into effect from 2010 when the first stage of the ESPO project goes online.

BP rejects proposals by Russian shareholders for TNK-BP

MOSCOW, July 13 (RIA Novosti) - BP has rejected proposals made at a board meeting of TNK-BP by a group of four Russian billionaires that jointly own 50% in the Russian-British joint venture, Russian shareholders said on Sunday. A meeting of the board of directors of TNK-BP was held on July 11. It was earlier reported that Viktor Vekselberg, one of the four Russian billionaire shareholders in TNK-BP, offered a four-point plan to end a dispute with the joint venture's partner BP. The ongoing row between the Russian AAR consortium of shareholders in TNK-BP and the British oil major, each owning 50% in Russia's third largest oil producer, has been over company strategy, with the Russian investors also demanding cuts in the number of foreign staff working in Russia. "We are disappointed over the fact that BP has again rejected our proposals aimed at raising the efficiency of the activity and management of TNK-BP," the venture's board chairman, Mikhail Fridman said. The AAR consortium's proposals included a call for TNK-BP entire management to leave at the start of 2009, with BP retaining the right to elect the joint venture's chief executive. In particular, it was proposed to dismiss TNK-BP CEO Robert Dudley and elect a new, independent executive. The second point in the peace plan included the proposal that the number of directors at the ventures subsidiaries be split evenly among BP and Russian shareholders. In addition, the AAR consortium proposed changing the status of secondee workers in Russia in a move to cut the number of BP foreign staff at the company. Finally, the Russian shareholders proposed restoring a power of attorney for Russian executives at the venture.

Friday, July 11, 2008

Matra Petroleum Wins Russian Court Case

July 11, 2008 - Oil Voice - At the deferred Moscow Regional Court hearing held yesterday, the presiding judge dismissed all claims by Gaz i Neft against Matra Petroleum. Peter Hind Matra’s Managing Director said: “We are very pleased that this matter has now been resolved. Progress and work on our discovery in Orenburg has not been affected and we look forward to aggressively pursuing field development, further exploration on our block and new opportunities in Russia.”

Wednesday, July 09, 2008

TNK-BP's British Chief Retains His Post

08.07.2008 - [Neftegaz.RU] - At an extraordinary meeting today, the Board of Directors of TNK-BP Management, the company that controls the Russian assets of TNK-BP Ltd., voted against dismissing Robert Dudley from this post as the company's chief executive, a statement issued by Alfa-Group, Access Industries, and Renova consortium (AAR, the Russian shareholders of TNK-BP) says. Two directors voted for Dudley's removal, while three voted against. The results of the vote did not surprise AAR, as the three directors of the five-member Board of Directors of TNK-BP Management, who voted against, had been appointed by Dudley.

Eni enters Russia's downstream gas market with power plant deal

MOSCOW, July 8 (RIA Novosti) - Eni has signed contracts to supply gas to power plants in Russia's Urals region, a sale and purchase debut for a European firm on the Russian downstream gas market, the Italian energy company said Tuesday. Under the terms of the contracts, signed on June 1 by Eni's wholly owned subsidiary Eni Energhia and TGK-9, which owns power plants in the Perm Territory, as much as 350 million cubic meters of gas will be sold by 2010. "Thanks to the new contracts, Eni will become the first European player to enter the Russian gas downstream market through sale and purchase deals," Eni said in a news release. "Moreover, this success represents a fundamental step towards the development of Eni's presence in the Russian market, and to achieving the target set out in the strategic plan 2008-2011 of 900 million cubic meters to be sold in 2011." Eni is a leader in the European gas market and these contracts advance its strategy of entering major new markets. Russia is the second largest consumer of gas worldwide and the Russian government is pursuing a gradual plan of price increases that should bring domestic gas prices into line with European ones between 2011 and 2014, excluding transportation costs and export taxes. Commercial relationships between Eni and Russia date back to the early 1950s. Cooperation between Eni and Russian energy giant Gazprom, which started in 1969, has significantly developed and strengthened in recent years. In November 2006, Eni and Gazprom signed a strategic agreement to launch joint projects in the mid- and downstream gas markets, as well as in the upstream sector and in technological cooperation. In June 2007, both companies signed a memorandum of understanding on the construction of South Stream, a gas pipeline system that would link Russia to the European Union across the Black Sea. In April 2007, Eni was also awarded, through the EniNeftegaz consortium, the assets of Lot 2 in the Yukos liquidation procedure, securing it a stake in Russia's upstream sector.

Swedish oil company optimistic after major Caspian discovery

Lundin PetroleumMOSCOW, July 9 (RIA Novosti) - A Swedish oil company announced it has made a major oil discovery in Russia's north Caspian Sea, Lundin Petroleum AB said in a news release. The discovery was made during exploratory drilling on the Morskaya-1 well on the Lagansky block close to a recent discovery made by Russia's largest independent crude producer, LUKoil. "This is a world class oil discovery which has confirmed the excellent prospectivity of the Lagansky block," said Ashley Heppenstall, President and CEO of Lundin Petroleum. The Swedish company said further appraisals would be required. The test well is to be moved to Laganskaya-1, where drilling is expected to commence at the end of September. Lundin Petroleum plans to drill a further two wells in 2009. "It is clearly positive that the discovery is predominantly oil but based upon the data acquired it appears that the size of the discovery will be below pre-drill estimates. Further appraisal drilling will be needed to assess the full extent of the hydrocarbon reservoirs across such a large structure," the CEO said. The Lagansky block has estimated reserves of more than 800 million barrels of oil equivalent. Lundin Petroleum currently has a 70% interest in the Lagansky block, although Russian state-run energy giant Gazprom has a call option to acquire a 50% plus one share. In addition, Lundin Petroleum has a call option to acquire an additional 30% from minority shareholders. If both options are exercised Lundin Petroleum will retain 50 percent minus one share in the Lagansky block and Gazprom will hold 50% plus one share in the project. Lundin Petroleum is an independent oil and gas exploration and production company with a well balanced portfolio of world-class assets in Europe, Africa, Russia and the Far East. The company has existing proven and probable reserves of 184.2 million barrels of oil equivalent as of January 1.

Tatneft says crude output up 0.7% to 95.6 mln bbl in 1H08

MOSCOW, July 8 (RIA Novosti) - Tatneft, one of Russia's top 10 oil producers, produced 13 million tons (95.6 million bbl) in the first half of 2008, up 0.7% against the same period last year, the company said in a statement Tuesday. The company produced 2.2 million tons (16 million bbl) of crude in June 2008, up 0.4% from June 2007. Tatneft is based in Tatarstan and accounts for more than 80% of the republic's oil output. Oil companies in Tatarstan produced 16.3 million tons (119.6 million bbl) of crude in January-June 2008, up 1.4% year-on-year.

Tuesday, July 08, 2008

Revolution on Russian gas market

Revolution on Russian gas marketJuly 7, 2008 - Russia Today - A new law is set to give "non-discriminatory access" to Gazprom's pipelines. The EU and World Trade Organisation have been lobbying hard for the move - but energy producer Lukoil warns the reform actually jeopardises Europe’s security of supply. The EU’s “Reciprocity Clause” blocks Gazprom buying energy grids within the EU until European firms can do the same in Russia. Before letting Russia join, the World Trade Organisation wants - at the very least - third-party equal access to Gazprom’s 150,000 km network. Former UES chief Anatoly Chubais says the government signed a new law on Monday guaranteeing “non-discriminatory access”. A leading power sector investor claims such reforms will come despite - not because of - Western warnings. “The pressure from foreigners might have an opposite effect. The Russian government tends to be very prickly about being pushed, but they are smart. People in the Russian government are typically smart folks, at least the ones I’ve encountered, and I’m sure Medvedev does understand that competition breeds efficiency,” said David Herne, CEO of Halcyon Asset Management. Lukoil produces 7% of Russia’s natural gas, around 10 billion cubic metres a year. Access to Gazprom pipelines would allow export to Europe, where prices are five times higher. However, Lukoil’s head of investor relations warns a free-for-all pipeline battle actually threatens EU supply. “This potential measure made in a rough manner can destroy all these elements of energy security, which is not a desirable variant for any side of this business - for producers, for the state, for the consumer side,” Gennady Krasovsky warns. Chubais lobbied for pipeline democratisation because Gazprom could have held his newly-privatised power plants hostage to supply. He added that the liberalisation of the entire Russian gas market would follow sooner or later.

China to Pay More for Gas than Europe

Open Gallery...July 03, 2008 - Kommersant - Each 1,000 cu meters of gas to be supplied via Altai pipeline to China’s border will cost $10 to $15 more than the gas supplied to Europe, State Duma Vice Speaker Valery Yazev announced July 3. Yazev is the president of Russia’s Gas Society. “The issue of Altai gas pipeline, the western variant, is being considered now. The price should be a bit higher than on the border with Europe,” Yazev said during the Moscow-Beijing video conference held in RIA Novosti. The reason is the greater haul distance from northern Tyumen to China’s border vs the deliveries to Europe, the official explained. Gazprom CEO Alexei Miller said earlier that the gas price would average roughly $400/ths cubic meters for Europe in 2008. Russia intends to annually export to China 68 billion cu meters of gas by 2020. The memorandum on Russia’s gas supplies to China was signed far back in 2006. The plans were to deliver the gas via Altai pipeline, but the parties’ inability to agree on the gas price delays the design and construction of the pipeline.

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