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Monday, November 24, 2008

Itera, Turkmenistan in talks on Caspian shelf development

RBC, 24.11.2008 - Moscow 12:59:18 – During their meeting in Turkmenistan's capital Ashgabat, Itera's chief Igor Makarov and Turkmen President Gurbanguly Berdimuhamedov discussed the implementation of Itera's large investment projects in Turkmenistan, the Russian-based international group of companies' press office reported today. Specifically, the parties held talks over the possibility of Itera's participation in the development of Turkmen hydrocarbon offshore fields in the Caspian Sea. Makarov confirmed that the group was ready to maintain close energy relations with Turkmenistan. The sides also paid special attention to the ongoing construction of several facilities on the Caspian shore.

Friday, November 21, 2008

Lukoil targets 30 pct of Repsol-radio

MADRID, Nov 19 (Reuters) - Russian state oil company Lukoil (LKOH.MM: Quote, Profile, Research, Stock Buzz) is targeting 30 percent of Spanish oil major Repsol including 20 percent of the company held by Sacyr Vallehermoso, Spanish radio reported on Wednesday without citing sources. A spokesman from Repsol denied that the company is in talks with Lukoil, while a Sacyr spokeswoman reiterated that the company continues to study the possible sale of its stake in Repsol and has been in talks with potential buyers. Repsol's second largest shareholder, Spanish savings bank La Caixa with 14 percent of the oil group, was not available for comment. Last week, Russian news agencies quoted deputy Prime Minister Alexander Zhukov as saying that Gazprom was considering buying a 20 percent stake in Spanish oil major Repsol. Gazprom denied it was looking at Repsol last Friday, after Spanish Prime Minister Jose Luis Rodriguez Zapatero also dismissed the matter in a radio interview. Spanish builder Sacyr Vallehermoso said in September it could sell its 20 percent stake in Repsol as it struggled with a falling property market and rising payments on debt. Some analysts said the stake might find a buyer among Russia's energy companies and its sale could lead to a full-scale takeover or break-up of Repsol, which has lagged rivals in profitability and in growing production and reserves in recent years. A 30 percent stake in Repsol would not necessarily lead to control of the company as its bylaws state that voting rights of any individual shareholders are restricted to 10 percent of the company's share capital, regardless of the stake held. In order to change these bylaws, a shareholder would need support of holders of 75 percent of Repsol's share capital present at an extraordinary general meeting of shareholders. Spanish officials have said they would prefer a Spanish buyer for the stock but would consider any bids seriously. (Reporting by Jonathan Gleave, editing by Carol Bishopric)

Monday, November 17, 2008

'Gas Troika' Plans Draft Charter

17 November 2008 - Moscow Times - The Energy Ministry said Friday that the Forum of Gas Exporting Countries will hold its Moscow summit on Dec. 23 and will agree on a draft charter on Nov. 26. The meeting was originally planned for mid-November but was delayed while the countries made preparations for the forum's charter, the ministry said in a statement. The new charter will help the largely informal club morph into a more formal organization, which could resemble the Organization of Petroleum Exporting Countries. Global No. 1 gas producer and largest reserve-holder Russia held talks with Iran and Qatar, the second- and third-biggest holders of natural gas reserves, last week after they formed a "big gas troika" last month. The OPEC-style grouping should become a permanent body, holding regular meetings to discuss key developments in the gas markets, and could include other countries later on. Its formation sent a nervous tremor through the European Union and the United States, which have argued that the market should set gas prices. Both have repeatedly warned that an OPEC-style gas group could pose a serious danger to global energy. The reserves of Russia, Iran and Qatar boast more than half of the global total. But Europe's top suppliers argue that the new organization would help better structure long-term gas needs and coordinate capital expenditure programs.

Oil Falls Below $50, MICEX Sputters

Market Watch - A short, sharp, shock - down11-14-2008 - Moscow Times - The price of Urals crude fell below $50 per barrel on Thursday for the first time since early 2007, sinking Russian stocks and putting additional pressure on the ruble as the government struggles to balance the budget. Meanwhile, confusion dominated the MICEX stock exchange, as an order from the government watchdog commanding a resumption in trading contradicted an announcement earlier by the exchange that it would stay closed until Monday. The MICEX Index fell as much as 17 percent before the halt, only to recoup some of the losses later in the day to close down 8 percent. Plunging oil prices and shaky investor confidence have led to Russian stocks shedding more than $1 trillion dollars during Dmitry Medvedev's presidency, investors said. The dollar-denominated RTS exchange said the capitalization of the stocks it handles has fallen more than $1 trillion to $385 billion since a market peak on May 19. "Things are as bad as they possibly could be: The Russian market no longer functions," said James Beadle, an asset manager at Pilgrim Asset Management, which invests in stocks and bonds. "The main reasons are obviously what is going on globally, particularly with commodity prices, and political issues within Russia," Beadle said. As capital flight and the global credit crunch have drained investor confidence, the bourses have responded with frequent trade suspensions to the consternation of many funds, which have difficulties reporting net asset value to their investors. The MICEX, the country's most liquid index, was halted from late Tuesday, and activity resumed Thursday only to be stopped again after 35 minutes. The exchange said Thursday that the suspension would last until Monday or an order from the markets watchdog, which then commanded a resumption after just one hour. Half an hour later, the MICEX announced a one-hour suspension, followed within moments by an order from the watchdog for trade to continue uninterrupted. "The decision was taken in order to synchronize the trade of stocks on Russian bourses," said a watchdog representative, referring to the dollar-denominated RTS, which remained open for most of Wednesday. The sharp fall on the MICEX was in part due to its playing catch-up with Wednesday's 12.5 percent sell-off on RTS, as well as with London-listed Russian companies, which lost 17.6 percent while the MICEX was closed. Rosneft, the country's biggest oil producer, led the decline as crude for December delivery traded near a 21-month low in New York. Urals blend crude traded at $48.80 to $48.90 a barrel, its lowest since January 2007. The government says its budget can be sustained on $50 oil next year, as it can resort to the use of gold and forex reserves. The Central Bank reported on Thursday a $9.2 billion drop in reserves, which are now down about $120 billion since their August peak, mainly on the back of heavy interventions to support the ruble.

Wednesday, November 12, 2008

Putin allays fears of natural gas cartel

RBC, 11.11.2008, Moscow 15:46:22 – Russian Prime Minister Vladimir Putin sees no reason why consumer countries should have any fears regarding the creation of a forum of natural gas producing countries, he told journalists following a meeting with Egyptian Prime Minister Ahmed Nazif in Moscow today. Putin stressed that no cartel was being created, nor was a cartel agreement to be signed. He acknowledged his awareness of the concern among consumer countries, but said they were unjustified and that Russia was supporting the idea of such a forum in order to ensure uninterrupted and reliable gas supplies to key consumers at fair and economically feasible prices. Putin stressed that the next meeting regarding this issue would be held in Moscow, and noted that Russia's Egyptian partners had confirmed their interest in the work of this forum and their willingness to take part in the meeting.

Russia, Iran, Qatar consider gas production, liquefying JV

MOSCOW, November 12, 2008 (RIA Novosti) - Russia, Iran and Qatar, leading natural gas producers that are set to meet on Wednesday for cooperation talks, plan to set up a joint venture to produce, liquefy and sell gas, a Russian business daily said on Tuesday. Kommersant cited a Russian government official as saying the "gas troika" would build a pipeline to pump gas from Iran's South Pars deposit, the world's largest with reserves estimated at 14 trillion cubic meters, to an LNG plant in Qatar. Analysts expect the project to be worth at least $4 billion. Each country could have 30% in the project, and the other 10% could go to China or South Korea, the paper said, citing analysts. Analysts say Qatar's participation could reduce the political risks of selling Iranian gas, the paper reported. "The infrastructure to produce gas at South Pars, a pipeline on the Persian Gulf floor linking to Qatar's Ras Laffan province [100-150 km from the deposit] and an LNG plant there are planned to be built as part of the project," an unidentified Russian government official told the daily. A source in the Russian natural gas monopoly Gazprom confirmed the plans to the paper, adding that "the fourth participant in the project will be picked depending on the sales market." Analysts quoted by the paper said China, with which Qatar has signed a deal to supply 7 million metric tons of LNG a year, and South Korea, which has increased consumption of liquefied gas recently, are the most likely candidates. Kommersant said its sources had not given specific figures, but Valery Nesterov of Troika Dialog investment company told the paper the project would be worth at least $4 billion. Gazprom, which has already been engaged in the development of South Pars's second and third stages, could now receive revenue from exporting the gas, which Iran had not previously allowed, the paper said. Energy cooperation with Iran could be risky due to U.S. sanctions, while sales from Qatar would allow a change in Iranian gas's "citizenship," East European Gas Analysis Director Mikhail Korchemkin was quoted by the paper as saying. Russian Prime Minister Vladimir Putin moved on Tuesday to ease fears over the planned talks in Doha, saying the three countries do not plan to create a gas cartel. "We are aware of the concerns and fears expressed by some energy consumers. There are absolutely no grounds for such fears. We are not establishing a cartel, nor are we striking any cartel deals," Putin said. Russia, Iran, and Qatar - ranked first, second and third respectively in terms of global gas reserves - formed the "gas troika", agreeing to boost coordination in the sphere, at their meeting in Tehran in October. The decision sparked fears among consumers that the countries plan to create an OPEC-style gas cartel and will control prices. Europe feared Russia would expand its influence on energy markets via the cartel.

Gazprom looks at buying 20% in Spain's Repsol

MADRID, November 12 (RIA Novosti) - Russian energy giant Gazprom is considering buying a 20% share in Repsol, Spain's largest private oil and gas company, Deputy Prime Minister Alexander Zhukov said on Wednesday. "Gazprom is studying the issue of buying a 20% stake in Repsol put up for sale by the Spanish construction company Sacir Vallehermoso," Zhukov said after a meeting of the Russian-Spanish inter-governmental commission for economic and industrial cooperation. At the same time, Zhukov said the prospective deal was a private matter of the two companies. Repsol is among the world's top 10 private oil and gas companies, selling about 55 million metric tons (403 million barrels) of oil and 32 billion cubic meters of gas annually. Zhukov also said that Spanish energy companies were interested in developing gas deposits in Russia and implementing liquefied natural gas production projects. Zhukov said the list of Spanish companies interested in energy cooperation with Russia included Repsol and the electric utility Iberdrola. The materials prepared for Zhukov's visit to Spain say that Repsol is continuing negotiations on a possible joint venture with Russian company Tambeineftegaz to develop the Tambeisky field on the Yamal Peninsula in Russia's Arctic, and with U.S. Anadarco to implement a project for liquefied natural gas production and transportation. Zhukov said Russia and Spain also had good prospects for cooperation in alternative energy projects, adding that Iberdrola had already signed a contract to build a wind turbine farm in southern Russia's Krasnodar Territory. Zhukov also said Spanish company Tecnicas Reunidas had started the modernization of the Khabarovsk refinery in Russia's Far East under an $800-million contract.

Spanish energy companies want to develop gas fields in Russia

MADRID, November 12 (RIA Novosti) - Spanish energy companies are interested in developing gas deposits in Russia and implementing liquefied natural gas production projects, Russian Deputy Prime Minister Alexander Zhukov said on Wednesday. Zhukov spoke Wednesday at a meeting with the leaders of the Spanish Confederation of Entrepreneurs. Zhukov said the list of Spanish companies interested in energy cooperation with Russia included Repsol, Spain's largest private oil and gas producing and refining corporation, and Iberdrola electric power operator. The materials prepared for Zhukov's visit to Spain say that Repsol is continuing negotiations on a possible joint venture with Russian company Tambeineftegaz to develop the Tambeisky field on Yamal in Russia's Arctic, and with U.S. Anadarco to implement a project for liquefied natural gas production and transportation. Zhukov said Russia and Spain also had good prospects for cooperation in alternative energy projects, adding that Iberdrola had already signed a contract to create a wind-turbine farm in the Krasnodar Territory in southern Russia. Zhukov also said Spanish company Tecnicas Reunidas had started the modernization of the Khabarovsk refinery in Russia's Far East under a $800-million contract.

Putin says gas exporters' group no threat to consumers

MOSCOW, November 11 (RIA Novosti) - Fears by Western consumers that a group of natural gas producing countries that includes Russia will lead to price manipulation are ungrounded, Russian Prime Minister Vladimir Putin said on Tuesday. "We are aware of the concerns and fears expressed by some energy consumers," Putin said. "There are absolutely no grounds for such fears. We are not establishing a cartel, nor are we striking any cartel deals." A number of major gas producers have established the Gas Exporting Countries Forum (GECF), but have not yet adopted a charter. The group, which already includes Venezuela, Iran, Libya, the United Arab Emirates, Russia, and other countries, lacks a strict membership system. Norway has observer status. The member countries currently control about 73% of the world's gas reserves and 42% of its production. "However, energy producers, as well as consumers, have the right to and must coordinate their decisions, exchange information, and do their best to ensure uninterrupted hydrocarbon supplies on global markets," Putin said, adding that uninterrupted supplies and reasonable prices were the main objective of the grouping. Russia, Iran, and Qatar - ranked first, second and third respectively in terms of global gas reserves - will hold gas cooperation talks in Doha, Qatar, on Wednesday. The "gas troika" agreed to boost coordination in the sphere at a meeting in Tehran in October. A Russian government source said in late October that Russia had no plans to establish a natural gas cartel similar to OPEC, an idea first launched by then-Russian president Vladimir Putin in 2001 and enthusiastically backed by Iran. Western states have opposed the cartel as a political weapon. "We do not plan to create a natural gas cartel, or a gas OPEC, but welcome the integration of and coordination between gas producers," the official said. Russia's finance minister and deputy prime minister, Alexei Kudrin, earlier questioned the abilities of oil and gas cartels to cut market risks, including prices that he said have been driven up by market speculation.

Friday, November 07, 2008

LUKoil, ERG set up venture to run refinery in Sicily

ERGRBC, 06.11.2008, Moscow 19:57:22 – LUKoil and ERG S.p.A., Italy, signed a final agreement to set up a joint venture that would run the ISAB oil refinery in Sicily. The document was signed during the extended Russian-Italian governmental consultations chaired today by President Dmitry Medvedev of Russia and Prime Minister Silvio Berlusconi of Italy. In late June 2008, LUKoil and ERG S.p.A. inked an agreement on a joint venture to operate ISAB, in which LUKoil was supposed to own 49 percent, and ERG the remaining 51 percent. The deal was priced at EUR 1.347bn, excluding the value of crude inventory. At that time, the parties announced that the deal would be finally completed in the forth quarter of 2008 (in November) after all approvals had been received and documents finalized. LUKoil will finance the deal with a syndicated loan it is planning to raise, as well as with its own resources. Vice President Leonid Fedun stated that it would also be possible for LUKoil to buy out the remaining stake within the next five years. The partners will be supplying crude to the refinery and selling the output in proportion to their ownership stakes. The plant will expand LUKoil's refining capacity by 13 percent, the company estimates, planning to supply some 8.5m tonnes of oil to the refinery in 2009.

Russia buys Oman's share in Caspian Pipeline Consortium

CARACAS, November 6, 2008 (RIA Novosti) - Russia has bought out Oman's share in the Caspian Pipeline Consortium, and the deal is expected to be closed within the next two weeks, the head of the Transneft pipeline operator said Thursday. "We have bought out Oman's share - the entire 7%. Now only the technical details remain," Nikolai Tokarev said, adding that documents from Oman should be received and the legal procedures completed. Another buyer for Oman's share was Kazakhstan, which holds 19% in the CPC. Russia's share is now 31% Russian business daily Kommersant said on Wednesday. Russian Prime Minister Vladimir Putin first hinted that a deal might go ahead at a meeting with Kazakh President Nursultan Nazarbayev last Thursday. In an interview with Kommersant, a source in Transneft, the operator of the Caspian Pipeline Consortium (CPC), confirmed that the deal had been completed, but did not disclose any details. Oman agreed to sell its stake in the project early this year, Kommersant said. The country had sent relevant offers to Russia and Kazakhstan. Hungary's MOL was also a potential bidder. Russia agreed to buy the entire 7% stake for $700 million, the price offered by the Hungarians. However, a Kommersant source close to the deal said the final price was around $350 million - half the starting price. The CPC, designed to carry Kazakh and Russian crude to a terminal on the Black Sea, was commissioned in October 2001. Its capacity currently stands at around 30 million metric tons of oil per year and is expected to double by 2012. Mikhail Barkov, Transneft's vice president, said in late September he was not ruling out the possibility that the international consortium could be forced to close down. He said the agreements on privileged tariffs for the consortium were set to expire at the end of 2008, putting into question the pipeline's future existence.

Tuesday, November 04, 2008

Russia targets downstream projects and export pipelines

3 November 2008 - by Chris Weafer - Amongst the key objectives set out by President Medvedev at the start of his presidency last May was to promote greater investment into downstream energy projects and into export pipelines. Russia plans to move up the value chain in the energy sector in order to increase the energy for trade leverage with the EU and Asian countries as well as to reduce the dependency and vulnerability to volatile raw material prices. That means, greater investment in refineries, LNG plants and petrochemical facilities. It also means building more export capacity for gas and oil products. Sitting alongside such environmentally sensitive, but energy hungry, regions and the EU and Japan, it makes perfect sense for Russia to build processing facilities and to export the valuable end product. It is, for example, the reason why the priority for the eastern oil pipeline might now be altered to place greater emphasis on bringing oil to the Pacific coast. Processing the crude at facilities on the coast makes more economic sense than simply exporting crude. If we are now entering a lengthy period of lower energy prices then there will almost certainly have to be changes to the Moscow’s planned approach to economic development, in general, and to its energy policy in particular. With lower oil and gas tax revenues, the government will have to rely to a much greater extent on foreign investor participation in the economy and also to help fund some of the major energy projects that are planned. It has already become clear that the state energy companies will need to involve the international majors in some projects, such as in the Arctic region and off Sakhalin, to leverage off their technical capabilities and experiences. But that was moving slowly because cash was previously not such a big problem, especially with the previous assumption that the industry tax burden might be cut by up to USD 20 billion tax from next year. That tax cut is not likely in the current price environment. Currently the government, like many of its international peers, is involved in something of a fire-fight to ensure that the country’s currency does not go into free fall nor the banking system fails. When this period is passed, there will have to be a reassessment of the assumptions, both revenue and spending, that make up President Medvedev’s strategic plan for the economy over the next three to four years. The energy lobby will undoubtedly push for a greater share of the available resources, i.e., tax cuts and funding, in order to shore up existing production and to push ahead with planned projects. Some in government will oppose that as they push for a greater focus on diversification within the economy. Decisions made as a result of that debate will also have a major impact on how Russia’s energy sector develops from here and the opportunities for coinvestment afforded to international energy companies. For the gas industry the position is even more acute. With tougher economic conditions ahead, the economy may not be able to support the higher gas tariffs that are required a) to bring the price of domestic gas up to the net-back export price or b) to help fund the major new projects in Shtokman, Kovykta, Yuzhno-Russkoye and, especially, the Yamal Peninsula. Apart from being required to compensate for the faster ageing of Russia’s giant gas fields, the output from these projects is required to fulfil international trade and political deals agreed with the EU and China. On a more optimistic note, what this should mean is that the government will have to encourage the use of foreign capital to a greater extent than was thought only six months ago. There was a sense of complacency, not just in the energy sector but also in other parts of the economy. A complacency that resulted from the expectation that oil and gas revenues would continue to grow and that, therefore, Russia had enough internal financial resources to fund its plans for the energy sector and the broader economy. It could bring in foreign partners and decide in the pace of project development when it suited. That has already changed. USD 70 p/bbl oil means that there is no spare cash and the threat of a faster decline in oil production from 2009 means that there is also no spare time. It is not quite a buyers/investors market yet. But it is no longer a sellers market either. The net result of this new energy price environment and global economic slowing is that Russia will have to push ahead with mechanisms to improve the country’s investment image. That means better legal protection for assets owned by foreign energy companies, it means a higher profile campaign against corruption and red tape. It also has to mean that the new rules-of the-game don’t change again. Russia has the geological capability to significantly add to current production in oil and gas and to become dominant in the emerging LNG business. But it is not going to realise that, and the diversification objectives for the broader economy, without the involvement, in a real partnership sense, of the international energy majors.

Libyan leader’s visit comes with upside for business

Muammar Qaddafi31 October 2008 - Russia Today - Libyan leader Moammar Gadhafi is visiting Moscow for the first time in 25-years, seeking to expand an energy and military partnership. Gadhafi is expected to sign a 2 billion dollar contract on weapon supplies, while Russia's Gazprom is keen to agree on obtaining control over Libyan gas deliveries to Europe. Russia has already bolstered relations with Libya - earlier this year writing off its $4.5 Billion debt. In exchange Moscow won lucrative business deals mainly in energy. Libya is the fourth largest gas supplier in Africa - and awarded Gazprom several licenses to explore potentially gas-rich areas. Now the company is seeking approval for a 33 percent stake in the Elephant field - as part of an asset swap with Italian energy firms. Aleksandr Nazarov, analyst at Metropol IFC says agreement is crucial for the Russian gas major. ”Libya has the fourth largest gas reserves in Africa. Europe regards African gas as an alternative to supplies from Russia. So a partnership with Tripoli is crucial for Gazprom to maintain a leading position in gas supplies to the EU.” To transport African gas to Europe, Gazprom wants to build a pipeline from Libya under the Mediterranean sea. Moreover Gazprom, is in talks with Nigeria to pick up its gas, and pipe it across the Sahara. The 13 billion -dollar pipeline will travel through Libya and then to Europe, according to Pavel Sorokin, analyst at UniCredit Aton. “It is a green field project so they will need to start from scratch. And that will shatter the existing way of things in the region. And it’s a hard thing. So this needs a lot of political investment and financial investment. And is there a point in all that? That’s what Gazprom is trying to prove.” Apart from traditional weapon contracts, Russia hopes to agree on the construction of 554-kilometre of track - to be laid by Russia's rail monopoly between the Libyan cities of Surt and Benghazi.

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