RusEnergy

26 February 2009 - The Moscow Times by Anatoly Medetsky - U.S. oil major Chevron pulled out of a joint venture with Gazprom Neft after disappointing finds at the two Siberian fields they explored, a spokesman for the Russian company said Wednesday. Chevron's office in Moscow confirmed the previously undisclosed decision, saying it left Northern Taiga Neftegaz in August. Gazprom Neft is now the venture's sole owner. The partners, which set up the venture in 2006, said in June that they had suspended work on the fields because their reserves did not meet expectations. The venture, in which Chevron had 25 percent, explored the Pyakutinsky and Aikhettinsky fields, originally thought to have at least 45 million tons of oil. The California-based company is still looking to explore in Russia, with or without Gazprom Neft, said its Russian unit, Chevron Neftegaz. "Chevron expects to find interesting joint projects in the future," it said. "Gazprom Neft is also interested in developing partnerships with different companies, including Chevron." Alexei Kokin, oil analyst at Metropol, said Gazprom Neft apparently had no more fields that it wanted to contribute to the partnership, given that it has another joint venture with LUKoil. Gazprom Neft can explore its other fields and cover the investment on its own thanks to a weaker ruble and a fall in costs for labor and building materials, he said.

02-25-2009 - Upstream OnLine - Russia plans to build a second liquefied natural gas plant in its far east region in next few years, a regional governor said, just a week after the Sakhalin-2 project came on stream. Primorye Governor Sergei Darkin said the plant would be among the largest in the Asia-Pacific region, although the details of the project were still being worked out. Natural gas would be supplied from offshore deposits around the Pacific island of Sakhalin, a Reuters report said. A pipeline from Sakhalin to the region's capital, Vladivostok, was due for completion in 2011, the local administration said in a statement on its website. "Residents of Primorye will feel the positive effect of realising this project in the next few years, through the creation of new jobs and the strengthening of the economy..." Darkin was quoted as saying in a statement. Sakhalin Energy, controlled by Russian gas export monopoly Gazprom, inaugurated the country's first LNG plant last week in a lavish ceremony including Russian and Japanese heads of state. At full capacity, it will be able to supply 5% of world demand for the super-cooled gas. The first cargo is expected to load at the end of March. Japan, the world's largest LNG consumer, will take about 65% of the plant's output and the rest will be sold to South Korea and the North American market.

02-25-2009 - Upstream OnLine - Swedish explorer Lundin Petroleum has been granted a five-year extension on the Lagansky exploration licence, in the Russian sector of the Caspian Sea. The extension, granted by Russian subsoil licensing gency Rosnedra, runs until August 2014. The Lagansky licence holds last year's Morskaya discovery, which has estimated gross recoverable resources of between 110 million and 450 million barrels of oil. Lundin said the extension now allows it to delay drilling of the Morskaya-2 exploration/appraisal well until next year. The well will appraise the western end of the Morskaya discovery. Instead, the company will drill the Petrovskaya-1 exploration well later this year. The Petrovskaya prospect is a four way dip closure which lies on trend and updip of Morskaya and is estimated to contain unrisked potential resources of 300 million barrels. Lundin boss Ashley Heppenstall said: "The extension to the exploration period of the Lagansky Block licence provides us with the requisite time to fully explore this exciting area which already contains the Morskaya discovery.' An option agreement icovering Lagansky was signed in 2007 with Gazprom, which gave the Russian gas giant an option exercisable for a 50% plus one share interest in the block. Lundin also signed an option agreement with its minority partner to buy its 30% stake. The net effect is that, upon completion, Gazprom will own a 50% plus one share and Lundin 50% less one share interest in Lagansky.

02-25-2009 - Upstream OnLine - A gas company belonging to Russian tycoon Viktor Vekselberg has been granted clearance from Italian authorities to build one of Europe's largest gas storages in Italy by 2011, the company, Avelar Energy, said today. Swiss-based Avelar, which forms part of Vekselberg's Renova holding, said in a statement it would invest €400 million ($512.5 million) to build the storage in the province of Matera in southern Italy. It will have capacity of 700 million cubic metres, gradually rising to 1 billion, a Reuters report said. Avelar said it had yet to clear the plan with local authorities after obtaining an accord from different Italian ministries. The project also includes pipeline modernisation and construction of a gas processing plant. Vekselberg, alongside fellow Russian partners, controls half of TNK-BP, with UK supermajor BP holding the other half. TNK-BP has ambitious gas production plans in Russia although most of them have been curbed by the country's gas export monopoly Gazprom . Gazprom supplies Italy with 22 Bcm of gas per year - a little over a quarter of the country's annual consumption - and wants to expand further by selling more gas to Eni and independent players. Gazprom has a number of gas storage facilities in Europe, but not in Italy.

02-24-2009 - Upstream OnLine - A consortium made up by Norway's Aker Solutions, French engineering player Technip and SBM Offshore have bagged the €25 million ($32 million) concept definition and front-end engineering and design contract for the floating production unit planned for the massive Shtokman field, in the Russian sector of the Barents Sea. In a statement, consortium partner Aker Solutions said the workscope includes design, FPU concept definition, FEED design for the hull, turret and mooring system and topsides. The work, which will start immediately, will be carried out by an integrated team involving the three partners of the consortium, with Aker Solutions acting as leader. Aker added it would take about 12 months to complete. The consortium will also bid for the full engineering, procurement, supply, construction and commissioning contract next year. Aker Solutions boss Simen Lieungh said: "We are very pleased to be part of the initial phases of the development of the world's largest offshore gas field. "Equally important for us is the establishment of the partnership with Technip and SBM."

02-20-2009 - Eurasia Daily Monitor by Vladimir Socor - Russia's first-ever plant for liquefied natural gas (LNG) was inaugurated near Yuzhno-Sakhalinsk on February 18 in the presence of Russian President Dmitry Medvedev, Britain's Prince Andrew, Netherlands Economic Affairs Minister Maria van der Hoeven, and Japanese Prime Minister Taro Aso. The plant will process gas from the Sakhalin-2 extraction project, consisting of several offshore fields in the Sea of Okhotsk. The consortium as presently constituted includes Gazprom with 50 percent plus one share, Royal Dutch Shell as project operator with 27.5 percent, and the Japanese companies Mitsui and Mitsubishi with 12.5 percent and 10 percent, respectively. Sakhalin-2 gas reserves are estimated at up to 2 trillion cubic meters (along with crude oil reserves estimated at up to 150 million tons). The total investment in gas extraction and liquefaction is valued at $22 billion for the project's 20-year lifetime. Japan is due to receive the lion's share, 65 percent, of Sakhalin-2 gas, with South Korea to receive some volumes and North American companies also lining up for contracts. The sea depths around Japan ruled out the construction of pipelines from the nearby Sakhalin Island, necessitating the liquefaction of the gas and its transport by a fleet of as many as 50 tankers, once the project comes fully on stream. The Sakhalin liquefaction plant, to operate at full capacity beginning in 2010, is expected to produce 5 percent of the world's annual LNG supply. Japan imports almost 40 percent of the LNG traded worldwide at present. The additional import from Russia would diversify the sources of Japan's LNG, almost all of which has originated in the Gulf region thus far. Sakhalin-2 will account for 7 percent of Japan's LNG imports. At the inaugural event, Aso said Japan particularly valued the geographic proximity of gas and oil from Russia's Far East, compared with Middle Eastern sources. Japanese companies are now planning with Gazprom to launch the Sakhalin-3 project, envisaging exports of gas to Asian countries from 2020 onward (Interfax, February 18; Kommersant, Handelsblatt, February 19). Geographic proximity, however, is not necessarily synonymous with supply security if Russia is the source, as the experience at Sakhalin has demonstrated. In 2006 and 2007 Russian authorities compelled the Sakhalin-2 consortium partners to change the terms of their production-sharing agreement and also to cede part of their assets to Gazprom. Up to that moment, Shell had held the majority stake and provided most of the technological inputs for the challenging phases of extraction and liquefaction. Once those challenges had been overcome and the technology provided, Moscow unleashed its environmental and regulatory authorities against Shell. Under threats of multibillion dollar fines and possible eviction from the project, Shell was forced to accept the status of a minority shareholder and to sell $12 billion worth of its investment to Gazprom at a dictated price of $7 billion. The two Japanese companies also had their stakes reduced in that process of partial re-nationalization of foreign assets by the Russian state (see EDM, December 13, 2006; January 3, 2007). At present, Russian authorities are pressuring ExxonMobil to change the terms of its production-sharing agreement with Gazprom at the Sakhalin-1 joint project. The American company's subsidiary there, Exxon Neftegaz, had enjoyed a contractual exemption from restrictions on gas exports from this project. Now, however, Moscow wants the gas from that project to be sold in Russia, rather than to Asian countries as originally intended. Russian authorities are holding up approval of the Exxon Neftegaz investment budget for 2009, almost forcing the project to a standstill. The Japanese companies Itochu and Marubeni, the Indian state energy firm ONGC, and Russia's Rosneft are minority shareholders in the Sakhalin-1 gas project (Moscow Times, UPI, February 18). This situation resembles that of BP's Kovykta natural gas project in eastern Siberia. Since 2007 Russian authorities have pressured BP to renounce its right under the original agreement to export the future product to China. Instead, Moscow prefers to see Kovykta gas sold in Russia and has used this situation to pressure BP on other issues. Eager to break into the global LNG market, although it lacks LNG technology, Moscow has sought to share in BP's large LNG operation on Trinidad & Tobago (which supplies North America), in return for which Moscow would presumably have relented at Kovykta.

02-19-2009 - MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - Russia's first liquefied natural gas (LNG) plant was opened on February 18 in a ceremony on Sakhalin attended by Russian President Dmitry Medvedev and Japanese Prime Minister Taro Aso. The plant is part of the Sakhalin-II project. Its capacity of 9.6 million metric tons a year will make Sakhalin a major new source of fuel for the Asia-Pacific region. Japanese, South Korean and U.S. companies have already purchased its output for the next 25 years. Sakhalin-II was planned by Russia and foreign investors to tap hydrocarbons from the north-eastern shelf of Sakhalin Island in the Okhotsk Sea and sell them on energy-hungry Asia-Pacific markets. In 1994, Sakhalin Energy joint venture was founded to run the project. Sakhalin-II operates under a production sharing agreement, which grants foreign investors considerable tax breaks. It was these breaks that in the 1990s, when oil cost less than $20 per barrel, attracted serious foreign investors to launch the project from scratch despite a severe sub-Arctic climate and a remote and little developed region with practically no industrial infrastructure. Under a deal concluded in late 2006 and early 2007, Russia's oil and gas giant Gazprom became one of the Sakhalin Energy shareholders by buying a controlling stake in the venture (50% plus one share). The other shareholders are Royal Dutch Shell (27.5%) and Japan's Mitsui (12.5%) and Mitsubishi (10%). All the main Sakhalin-II facilities are fully operational now. There are three offshore platforms producing hydrocarbons and a trans-Sakhalin oil and gas pipeline system (300 kilometers underwater and 800 kilometers overland) to transport hydrocarbons from the north-eastern tip of the island to its southern part. It is there that Russia has built its first LNG plant in Prigorodnoye with an annual capacity of 9.6 million metric tons of LNG for subsequent shipment by sea tankers. Recoverable reserves of the project are estimated at 150 million metric tons and 500 billion cubic meters of gas. The overall cost of the project is $20 billion, most of it in the unique LNG plant. Many forecasts say liquefied natural gas will dominate the world gas market in the future. In 2030, LNG is expected to account for 60% of all international gas trade, compared with 30% now. Russia's emergence as a dynamic and competitive LNG player will give it a role in shaping the global gas market and help gain access to new and previously closed geographical niches, including not only the Asia-Pacific region, but also the U.S. Atlantic seaboard. With time, growing world demand for LNG may push its prices up. The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

02-18-2009 - International Herald Tribune-AP - MOSCOW: Russia sometimes makes "mistakes" in its dealings with other nations on energy issues, President Dmitry Medvedev acknowledged Wednesday, calling for deeper dialogue with key partners, including the United States and Europe. Medvedev also said Russia must strengthen its position on global energy markets and ensure its influence over prices for oil and gas, which are crucial sources of revenue. The rare admission of mistakes and the call for closer interaction set a conciliatory tone in the wake of January's suspension of Russian natural gas supplies to Europe via Ukraine. Medvedev may have been signaling that Russia wants to mend fences with the West on the divisive issue of energy — and warning his own government that using energy as a political weapon does not always work. "We ourselves make mistakes at times, we do not fully calculate political risks and practical consequences," Medvedev said at a meeting on improving Russia's global energy policy, according to a Kremlin transcript. The two-week suspension of supplies to Europe badly damaged Russia's reputation, despite its insistence that Ukraine was to blame. Deliveries dried up when Russia's state-controlled monopoly Gazprom turned off the taps in a politically charged price dispute with Ukraine; most of the Russian gas sold to Europe arrives through Ukrainian pipelines. Russia and the EU both want guarantees against a repeat of the cutoff, but they have clashed over the format. Medvedev has rejected EU pleas to join the Energy Charter, a treaty that would open up its rich gas fields to more foreign participation, and has pushed for a new international accord. Meanwhile, hopes that emerged a few years ago for close energy cooperation between Russia and the U.S. faded as political ties swiftly deteriorated. "We should step up our dialogue with the countries of the (former Soviet Union), with the European Union, the U.S. and other leading world states," Medvedev said. But he also said Russia should "more closely coordinate its activities" with OPEC members and with other gas producers, a prospect that worries Western consumers. Medvedev spoke after a meeting with Japanese Prime Minister Taro Aso on Russia's Pacific Island of Sakhalin, where they attended the opening of a liquefied natural gas plant that is to send about half its production to energy-hungry Japan. Gazprom sees Europe as its most important market in the medium-term, despite EU efforts to diversify supplies, the ITAR-Tass news agency quoted Gazprom CEO Alexei Miller as saying. He said Europe will likely rely on Russia for as much as 35 percent of its gas by 2020. But Medvedev acknowledged that improvements to Russia's own energy sector are overdue, including increasing efficiency and economizing. "One must honestly admit there has been little progress," he said. Analysts say costly efforts to modernize infrastructure and develop new fields have been put off too long and will be doubly difficult now amid Russia's deep financial troubles. Medvedev urged the Cabinet to come up with a medium-term plan of action on Russia's energy goals and a program aimed at bolstering its global energy clout. "The bottom line is that our situation and the welfare of our citizens will depend on how actively and consistently we function in the international arena, in energy cooperation," Medvedev said.

February 18, 2009 - MOSCOW (RIA Novosti) - The Islamic Republic of Iran is ready to expand cooperation with Russia in the oil and gas sphere on mutually beneficial terms, Iranian Foreign Minister Manuchehr Mottaki has said in an interview with RIA Novosti. “Iran, in principle, welcomes the expansion of cooperation with other producers of oil and gas, including with Russian companies,” Mottaki said, He noted that bilateral cooperation between Iran and Russia as its neighboring country were developing “on the basis of the signed documents and taking into account long-term prospects”. “Cooperation with Russian companies will continue on the basis of existing opportunities, on mutually beneficial terms and within the framework of cooperation between two countries,” the Iranian foreign minister said. Iran’s proven reserves of natural gas amount to over 27,800bn cubic meters (second place in the world after Russia). In 2007 the production of natural gas in Iran amounted to 111,9bn cubic meters. Russia’s Gazprom has been participating since 1997 in the development and production of the second and third stages of the South Pars field. In July 2008 Gazprom and the National Iranian Oil Company signed a memorandum on mutual understanding.

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17 February, 2009 - Upstream OnLine - Russian gas giant Gazprom's banking arm Gazprombank has handed oil producer Slavneft a two-and-a-half-year $100 million loan to help it fund ongoing activities. Slavneft is a joint venture between Gazprom Neft, Gazprom's oil arm, and TNK-BP, half-owned by UK supermajor BP, a Reuters report said.

02-16-2009 - Upstream OnLine - TNK-BP turned on the taps at the Urna and Ust-Tegus fields, in the Uvat area of West Siberia's Tyumen oil patch, and pledged to invest $500 million this year to increase output in a region where most other major deposits have been depleted. TNK-BP, UK supermajor BP's Russian vehicle, plans to produce 1.5 million tonnes (11.8 million barrels) of oil from the Urna and Ust-Tegus fields this year. Output will be ramped up to a peak of 9 million tonnes per year (71 million barrels) by 2020, officials said. "It's a significant event for the country's economy," Deputy Prime Minister Igor Sechin, who oversees Russia's energy sector, said at the opening ceremony today. Russian oil production declined last year for the first time in a decade, presenting a challenge to a government that has grown used to the bumper export revenues derived from the sector. As once-bountiful West Siberian deposits become depleted, companies are investing billions of dollars with the aim of opening up new deposits in East Siberia and the Arctic. Uvat is one of the few remaining greenfield oil sites in West Siberia. TNK-BP holds 15 licences in the region, with the Urna and Ust-Tegus fields lying in the eastern sector of the province. "A complex project has been created on 15 licence areas. With the launch of this hub, a new oil province in Tyumen region has started work," Reuters quoted Sechin as saying. Crude from the two licence areas was fed into the 264-kilometre spur that links up with the national pipeline network run by Transneft . TNK-BP, has invested $925 million in the project to date, which it completed ahead of the original start-up date of 1 April. Tim Summers, TNK-BP's interim chief executive, said in a statement the project had also been completed within budget. "Our goal is to keep production flat with last year," Summers told reporters at the launch. "Keeping it flat with last year will be a challenge." The company last year launched another major project, the Verkhnechonskoye field in East Siberia.

 RBC, 13.02.2009, Moscow 16:34:16.Russian Prime Minister Vladimir Putin discussed a number of key issues during a meeting with oil companies' representatives on Thursday. At the meeting, the government expressed readiness to support the oil sector and suggested a temporary abolition of export duties for oil produced in Eastern Siberia's oil fields. Furthermore, Putin commissioned the government to develop new tax benefits for the region's oil fields. According to experts' estimates, oil companies operating in Eastern Siberia paid some $200m worth of export duties and mining taxes to the federal budget in 2008. This year, these oil producers will be able to save some $80m-$110m if the export duty is abolished, experts say. It is still unclear, however, if the mining tax may also be lifted. If it happens, oil companies will be able to save an additional $32m-$35m and increase their profitability by 2 to 3 percentage points starting in 2010. Analysts believe that Surgutneftegas and Rosneft, Eastern Siberia's largest oil producers, will benefit the most from this decision. On the whole, the news is also expected to be positive for each company's shares in the long term.

02-13-2009 - Upstream OnLine - Russian oil company Lukoil is interested in bidding for at least two of the fields Iraq is offering in an oil and gas bidding round, two company sources said today. "We are interested in both the West Qurna and the Rumaila oilfields," one source told Reuters, when asked for which fields Lukoil might bid. Lukoil may join forces with US major ConocoPhillips bid for the fields, he added, speaking on condition of anonymity on the sidelines of a workshop between Iraqi officials and oil companies on the bidding round. Rumaila is the largest field on offer and alone accounts for nearly 15% of Iraq's oil reserves, the world's third largest. Lukoil has lobbied with Iraqi officials to revive a deal for West Qurna that it signed while Saddam Hussein was in power in Iraq. The sources declined to comment on whether Lukoil was continuing those efforts. The company had hoped that Russia's forgiving most of Iraq's $12.9 billion debt last year might help. Iraq has said Lukoil would have to compete with other companies for the contract. But Baghdad has renegotiated and signed another Saddam-era deal with the Chinese National Petroleum Company. Lukoil said last year that it wanted to join forces with ConocoPhillips for bidding in Iraq. ConocoPhillips owns a 20% stake in Lukoil. Iraq is offering service contracts for six of its largest producing oil fields in the first bidding round since the US-led invasion in 2003, as it looks to attract billions of dollars of investment to overhaul its dilapidated oil infrastructure and boost output. Iraq has also offered two undeveloped gas fields in the round.

13.02.2009 - [Neftegaz.RU] - According to Mr. Khan, "this oil production volume generates the required cash flow, which is important to maintain in the current situation." Obviously, the main task of the entire Russian economy today is support of sustainable development and, in particular, maintenance of the current level in production of natural resources. Lesser volumes of oil and gas production mean lesser payments into budgets of all levels. The Executive Director of TNK-BP said that the company will continue its activities in the Samotlor field, which account for up to 70% of TNK-BP production. In the beginning, five years ago, TNK-BP directed its efforts to well design, drilling, and completion and used a new approach to hydraulic fracturing. As a result, production of oil in the Samotlor field increased by a third up to nearly 30 million tons a year. According to expectations, oil production in Samotlor will not decline in the nearest four-five years. This is a really unique achievement in the conditions of natural production decline in mature fields. Estimates of experts show that annual investments of approximately $1 billion are required for maintaining the production at a high level. The company was compelled to use new technologies in the Samotlor field by circumstances. The time-tested classical method of water flooding turned out to be inefficient in certain parts of the field -- more water was injected into the reservoir but little oil was eventually displaced. The company had to reorient injection and production wells and change the volumes of water injection into different parts of the reservoir. Ultimately, it was decided to use modern geological exploration methods, including three-dimensional seismic surveys. Approximately 4,000 square meters will be explored in the Samotlor field using new technologies. The two-year program of geological exploration of the company will be completed this year. However, even now it is clear that the use of three-dimensional seismic studies increased the success of drilling and made it possible to construct visual models of individual reservoirs called satellite structures that lie near the main field and infrastructure and may be developed with relatively low expenditures. According to German Khan, "three-dimensional seismic studies combined with horizontal drilling helped us discover seven satellite structures near the field. Five of them are already being developed now and have opened access to proven reserves of 60 million barrels of oil equivalent." Nine satellite structures were identified last year, and tests were conducted in two more areas. Now, the results of these works are being analyzed. The Executive Director of TNK-BP said that there are reasons to think that the results of the accomplished works will help the company maintain the current level of oil production in the field. The Samotlor field was discovered in the vicinity of Nizhnevartovsk in the early 1960s. The reserves of this field exceeded 55 billion barrels of oil (approximately 7.5 billion tons). The first producing well was drilled in 1969. The peak of production in the field is almost 160 million tons a year. The bookable reserves of the field are estimated at approximately 7 billion barrels of oil and 100 billion cubic meters of gas. The field is being developed by Samotlorneftegaz, a 100% subsidiary of TNK-BP.

02-11-2009 - Upstream OnLine - Russian producer TNK-BP is set to bring the Uvat fields, in Wester Siberia, on stream next week, almost two months ahead of schedule. "We will be ramping up production gradually throughout this year and it will be somewhere in the region of 2 million tonnes (14.7 million barrels) per year by 2010," TNK-BP spokeswoman Marina Dracheva told Reuters, adding that two Uvat fields will come on stream on 16 February. Uvat was originally scheduled to come on stream on 1 April. TNK-BP currently owns 15 licences in Uvat, she added. By 2010, TNK-BP will have spent $2.5 billion on the Uvat development. "(Uvat is) one of the major projects in its first stage that we are keeping intact in terms of progress, taking into account the several budget optimisations we are forced to make due to the worsening economic climate," Dracheva said.

13 February 2009 - The Moscow Times by Anatoly Medetsky - Prime Minister Vladimir Putin agreed on Thursday to consider more incentives to reverse declining oil output, as the energy minister delivered the grimmest outlook yet for the industry. Crude output will drop by nearly 8 percent from last year's level through 2013 if the government doesn't provide further aid to producers, Energy Minister Sergei Shmatko said at a meeting that Putin convened at a refinery outside St. Petersburg to talk to oil executives. Any potential incentives would further dent federal revenues, which are already expected to contract drastically this year on the back of low oil prices and the global economic crisis. Putin announced that the government was willing to discuss lower export duties for oil that is flowing or will flow later from eastern Siberian green fields. These new fields must also enjoy lower taxes, he said. Existing fields in western Siberia have been depleting, forcing companies to venture out into wilder expanses to the east. "We know that transportation costs are high there and infrastructure is not developed," Putin said to the chief executives of companies including Rosneft and LUKoil, the country's biggest and second-biggest crude producers, respectively. "I believe it's possible to support you." In return, the companies will have to invest the money that they save on taxes in exploration and development, "not bonuses or other needs that are not of primary importance," Putin said. Current taxes do not encourage companies to invest in new fields, Putin conceded. If introduced, the new incentives will come in addition to a package of tax breaks that was approved last year and went into effect in January. Putin said at the meeting — held at the Kirishi refinery owned by No. 4 crude producer Surgutneftegaz — that the previous measures would help the industry to save 500 billion rubles ($14.3 billion). The easing of the tax burden coincided with the devaluation of the ruble, benefiting the oil industry by raising the amount of rubles being earned from exports. Despite that, Shmatko said oil companies might fall short of 200 billion rubles earmarked this year to invest in increasing output. Next year, the shortage may expand to at least 500 billion rubles, he said, citing data from oil producers. "The industry is stagnating," he said. Should the government not -intervene, oil output will drop to 450 million tons per annum by 2013, he said. He said the forecast was based on an oil price of $60. Alternatively, production will grow to 511 million tons by that year if the state extends more tax breaks and state guarantees for loans, Shmatko said. Russia produced 488 million tons of oil last year, registering the first annual production drop in a decade. Shmatko's estimate for output contraction is realistic only if the oil price falls further, said VTB analyst Svetlana Grizan. A barrel of the Russian export blend, Urals, has stabilized at about $40 in the past several weeks. As a way out, Shmatko offered a transition to a tax on excess profits for new fields, but it was unclear if the proposal received the green light from Putin at the meeting. Putin said any new taxes in the oil industry must be easy to collect. Analysts have warned that oil producers might want to inflate their costs to reduce tax payments in the event that an excess-profits tax becomes reality. The oil industry generated 43 percent of all federal budget revenues, or 4.4 trillion rubles, last year, Shmatko said. Shmatko also warned that the transportation rate of $16 per barrel on the East Siberia-Pacific Ocean pipeline that Transneft plans to charge would make oil production unprofitable in eastern Siberia. The pipeline is scheduled to begin operating in December.

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02-11-2009 - Upstream OnLine - Russia’s Lukoil has lined up a three-year €1 billion (US$1.3 billion) unsecured loan facility from Gazprombank. The facility has a fixed interest rate of 8% per annum said Lukoil in a statement. Proceeds from the loan will be used for general corporate purposes, including loans for subsidiaries and affiliates and also for the repayment of other bank loans.

//The government has decided to postpone a full-scale tax reform in the oil industry
10 February 2009 - RBC News - Although government is not yet prepared to grant significant tax cuts to oil companies, it supports producers in their efforts to modernize production and develop new fields. Thanks to the government’s measures, the tax burden on the oil industry has already dropped by RUB 500 billion (approx. $14.5bn), Prime Minister Vladimir Putin said at a conference focusing on the problems facing Russia’s oil sector. More measures could be approved before the end of the year, including the lifting of export duties on East Siberian oil, and the replacement of the mineral extraction tax with a new windfall profit tax for new deposits. The mineral extraction tax rate was lowered from January 1; the oil export duty was also reduced, and a more flexible formula was adopted for its calculation. As a result, the tax burden on the oil sector eased by about RUB 500 billion (approx. $14.5bn), Putin stressed, while instructing both the Finance Ministry and the Economy Ministry to develop new support measures for the country’s oil industry. Among other measures, the oil export duty could be lifted altogether for oil coming from East Siberia, for a period of three years, according to Energy Minister Sergei Shmatko. In addition, the mineral extraction tax on oil from new deposits may be replaced with a windfall profit tax. “We call it taxation of the results of operations, which means that the tax will not be paid on gross revenue,” he explained. Thus, producers developing new oilfields will have more cash left for investment, Shmatko emphasized. Under the existing taxation rules, the development of 36 percent of explored reserves and 93 percent of new reserves remains unprofitable. The measures taken by the government are expected to cover an investment deficit of RUB 2.8 trillion (approx. $81bn). In this case, Russia’s oil production will rise to 511 million tonnes by 2013, an increase of 155 million tonnes in five years. With taxation as it is now, oil production will drop by 110 million tonnes during the same period. Shmatko also pointed out the need for tax changes in the oil refining industry. Refineries producing heavy oil products enjoy profit margins of about 30 percent, while the producers of light oil products - which requires bigger investment - have margins of less than 10 percent. As a result, fuel oil becomes the most popular oil product. Shmatko suggested solving this discrepancy by equalizing export duties on light and heavy oil products from 2012. He also called for revising the formula for calculating export duties on oil and oil products. Oil refineries modernizing their production could receive state support, Putin said. Shmatko explained that such companies could get state guarantees and affordable loans, helping them to revamp their businesses and produce a higher quality and environmentally friendly gasoline. The government could also simplify VAT return rules for the acquisition of imported equipment for advanced oil refining, according to Finance Minister Alexei Kudrin. New tax rules will come in handy for companies operating in East Siberia, says Vitaly Kryukov, an analyst at IFD Kapital. Oil projects in this region have bigger operating and capital costs than those in West Siberia, which affects the profit margins of East Siberian projects. The proposed tax measures would be of particular benefit to Surgutneftegas, Rosneft and TNK-BP – the leading operators in East Siberia. Lower export duties on East Siberian oil will not produce any immediate effect, according to Mikhail Krutikhin, a partner at RusEnergy consultancy. “Very little oil is being produced in East Siberia now, and it will take a long time to begin oil exports from the region,” he explained. The government is trying to keep a steady balance between the interests of the state budget and those of the oil industry, reckons Dmitry Abzalov, an analyst at the Center for Current Politics. “With low oil prices, the introduction of a windfall profit tax will effectively ease tax pressure on oil producers. Otherwise, many smaller companies could face bankruptcy, which means that the budget would receive smaller revenues, to say nothing of an oil production decline threat,” he said. Yet the government had to drop plans for a number of radical measures, such as the lifting of the oil export duty, for fear of adding to the budget deficit, according to Abzalov. However, Artyom Konchin, an analyst at UniCredit Aton, is convinced that more radical tax measures are needed, focusing on the actual results of oil companies’ operations, not on current oil prices.

02-05-2009 - Upstream OnLine - Norway's StatoilHydro, a partner in Russia's giant Shtokman gas field, joined an expanding list of western energy majors today when it said it was looking at the Russian region of Arctic Yamal. "We are looking for possibilities on the Arctic offshore shelf. And this includes Yamal," the company's head in Russia Bengt Lie Hansen told reporters on the sidelines of the Energy Exchange conference in Moscow. Russia counts on Yamal - which needs investments of up to $60 billion and should produce 250 billion cubic metres of gas per year by 2020 - for the bulk of its gas supply to Europe in decades to come. Russian gas export monopoly Gazprom is currently the sole operator in Yamal, a northwestern region containing a large, frozen Arctic peninsula. The world's largest gas company has said it is considering US majors ExxonMobil and ConocoPhillips and Shell for liquefied natural gas projects in the region. There has previously been no mention of StatoilHydro. Gazprom, which holds a 51% stake in Shtokman, has said it chose StatoilHydro, owner of a 24% stake, as the Nordic company has technical expertise in dealing with harsh weather and year-long ice. StatoilHydro has a 24% stake in the ambitious Shtokman gas project in the stormy Barents Sea, which has estimated reserves of 3.8 trillion cubic metres of gas, making it one of the world's biggest gas fields. France's Total has a 25% stake. The group needs $15 billion to $20 billion to start the first phase, planned for 2013-2014.

02-04-2009 - Upstream OnLine - Kazakh and Russian oil exports via the Caspian Pipeline Consortium (CPC) rose to 761,340 barrels per day last month, the highest level ever, and rose 1.4% from 750,871 bpd in December, CPC said. The group exports CPC Blend from a terminal near the Russian port of Novorossiisk. Russian companies including as Rosneft, Surgutneftegaz and TNK-BP also transport crude via the link. Last year, CPC transported 32.2 million tonnes of oil, down from 32.6 million tonnes in 2007. The pipeline group is led by US supermajor Chevron and includes Russian pipeline company Transneft, ExxonMobil, Shell, BP and Lukoil . State shareholders Russia and Kazakhstan own 31% and 19% in CPC respectively. BP is leaving the Chevron-led CPC over disagreement about its expansion terms approved in December by all other consortium members.

MOSCOW, Feb. 4, 2009 (UPI) -- Russian oil output fell to 300 million barrels in January while natural gas production followed, falling to 1.9 trillion cubic feet, the Energy Ministry said. The declines represent about a 1 percent decline in oil output and roughly 13 percent for natural gas. Exports, meanwhile, declined by 2.3 percent for oil and nearly 75 percent for natural gas, RIA Novosti reported Wednesday. Russia blamed the decline in natural gas exports on the gas row with Ukraine. Ukraine hosts 80 percent of the natural gas bound for Europe. Disputes in January halted those supplies for weeks. Russian energy monopoly Gazprom claimed the dispute cost the company $2 billion in revenue. Russian finance officials, however, noted prices for the Russian benchmark Urals blend of crude oil beat January estimates of $41 per barrel to finish the month at $42.80. The Russian Energy Ministry had reported in January crude oil production declined 0.7 percent to 9.74 million barrels per day in 2008. December totals fell 2.1 percent to around 815,000 bpd. The Energy Ministry reports come amid January claims from Russian oil major Rosneft, which forecast a 2 percent increase in oil output, or roughly 2.25 million bpd.

MOSCOW, February 2 (RIA Novosti) - LUKoil's foreign investment will total $1.5 billion in 2009, the president of Russia's largest independent crude producer said on Monday. "LUKoil's foreign investment will total $1.5 billion this year. This amount will enable us to fulfill all our obligations on our overseas projects," Vagit Alekperov said in an interview with the international news channel Russia Today. Alekperov also said LUKoil would cut its investment programs in 2009 by about 25-30% compared with 2008. LUKoil's total investment in 2009 will be around $8 billion, Alekperov said. He added that this amount would enable the company to boost crude output by 1.5-1.8% in 2009. The company produced 96.6 million metric tons (1.9 million barrels per day) in 2007, while crude output in 2008 fell 1.3% to 90.2 million metric tons (1.8 million barrels per day). LUKoil accounts for about 1.3% of global oil reserves and 2.3% of world crude output.

01-30-2009 - ISN Security Watch by Robert M Cutler - Eastern Europe freezes as Brussels fiddles, while with Moscow's help Gazprom extends its grasp of energy production in the Caspian Sea region, Robert M Cutler writes for ISN Security Watch. Uzbekistan does not usually come to mind when one thinks of Central Asian energy producers: It exports less than Kazakhstan or Turkmenistan. However, it is one of the top 10 gas-producing countries worldwide and third in gas production in the Commonwealth of Independent States (CIS). Still, Uzbekistan has not gained corresponding attention on the world energy map because its population of approximately 28 million consumes over 80 percent of the gas produced, leaving comparatively little for export. Last month, Bulgarian President Georgi Parvanov visited Tashkent to try to induce his Uzbek counterpart, Islam Karimov, to dedicate volumes of gas to the Nabucco pipeline project planned to run from Central Asia to Central Europe. The latter declined, saying that his country exported gas through only one Soviet-era pipeline, and therefore exports only to Russia. Parvanov was, in fact, a bit late. In September, Karimov had agreed to build a new pipeline to Russia parallel to the existing Central Asia-Center and Bukhara-Urals pipelines. With a capacity of 54 billion cubic meters per year (bcm/y), it will originate in Turkmenistan and also cross Kazakhstan before terminating in Russia. About half the volume will come from Uzbekistan, increasing its exports to Russia by about half from the level in 2006, with Gazprom investing around US$1.5 billion in development of the gas condensate fields in the country's Ustyurt region. In addition, Uzbekistan's three-year agreement to supply 3.5 bcm/y to southern Kazakhstan will terminate at the end of 2010. Kazakhstan has been "repaying" Uzbekistan via a swap arrangement by sending 3.5 bcm/y from its own Karachaganak complex in the northwest of the country to the cross-border Orenburg gas processing plant in Russia. However, Karachaganak's production capacity is being further ramped up and the Orenburg plant is being expanded, so those volumes from Kazakhstan will not be lost to Russia in the future. All this suggests that despite Uzbekistan's on-again, off-again relations with the Shanghai Cooperation Organization (SCO), the country's ties with Russia are not suffering. Indeed, Russian Prime Minister Vladimir Putin's efforts to form a Central Asian "gas club" of SCO members appear to be bearing fruit; just not inside SCO itself. The signature of a trilateral agreement for yet another pipeline in December 2007, beginning in Turkmenistan and running to Russia through Kazakhstan alone, is further evidence of this energy diplomacy. The pipeline, the Caspian coastal pipeline (sometimes called the Caspian Gas Pipeline, but also erroneously, by mistranslation from the Russian, the "Pre-Caspian" Pipeline), has, however, had some trouble getting started. No multilateral consortium or any governing institution oversees it. Rather, each of the three governments is responsible for funding and assuring construction on its national segment. There has been some delay, but some of the more specific terms for the work were detailed in legislative acts adopted by the individual countries' respective parliaments in December 2008. Gazprom's growing profile in Central Asia is a result of its policy direction inaugurated earlier in the present decade to sit on its Arctic gas reserves; much of which it cannot develop without western technology and materials science. It chose to dedicate its own investment not to Russia but to other fields in third countries, and to wait until its western partners were eager (or desperate) enough to furnish not only the necessary industrial techniques but also the capital investment (while denying them the right of actual ownership). Thus in concert with the Russian government of the day, Gazprom has in the last few years sought to purchase at the source, over the long term at fixed prices, the entire export production of Azerbaijan, Libya and Algeria. Even if Gazprom has not been totally successful (Azerbaijan, for example, declined), it is no coincidence that all this production is earmarked for Europe. By contrast, at a 26 January high-level meeting in Hungary the European Commission, while reconfirming a general commitment to the Nabucco pipeline project for trans-Caspian gas, declined to pass from words to financial sponsorship. This failure risks validating the controversial distinction between "Old Europe" and "New Europe" It is the latter that shivers more, and where the poor and aged freeze worse during Russia's now no-longer-exceptional suspensions of gas transmissions to Ukraine. There are those who will have difficulty reconciling such inaction by Brussels with the all-European norm of social cohesion.