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Monday, June 29, 2009

Putin offers surprise deal to Shell

06-29-2009 - Upstream OnLine - Russian Prime Minister Vladimir Putin moved again to ease his government's clasp over the energy sector at the week-end, capping off a week of foreign energy deals with a surprise offer for Anglo-Dutch supermajor Shell. Weaker oil prices, now half of what they were a year ago, have persuaded Russia to scale back its resource nationalism. Moscow now looks to be balancing the dogged protection of its energy wealth with the need to have foreigners invest in it. The offer to Shell, which comes days after Russia struck major deals with France's Total, is emblematic of the renewed openness, because Shell was the victim of Russia's most aggressive drive to re-take control of its natural resources. In 2006, under intense government pressure, it ceded control of the vast Sakhalin-2 project to Russia's Gazprom. But on Saturday, Putin invited Shell to help develop the giant Sakhalin-3 and Sakhalin-4 projects off Russia's Pacific coast. "These require offshore production in difficult deep sea areas where your experience will be very valuable," Reuters quoted Putin telling Shell chief executive Jeroen van der Veer at a meeting in his summer residence outside of Moscow. Van der Veer accepted the invitation and said it was an ideal time to move ahead with these projects, as the financial crisis has brought down the price of construction. "We are ready to work quickly," he said. "It is a good signal that investments start to flow again, a good signal for Russia and, of course, a good signal for Shell." In February, gas export monopoly Gazprom inaugurated Sakhalin-2, a $22 billion liquefied natural gas project, in which Shell has 27.5% after giving up control to Gazprom. Sakhalin-3 and Sakhalin-4, also based on the Pacific island of the same name, are at far earlier stages and big money is still needed even to nail down how much oil and gas they hold. The informal agreement with Shell on Saturday did not lay out the Anglo-Dutch major's future role in these projects. When asked by Reuters whether it would have a direct stake in either one, Shell chief financial Peter Voser said: "I think it's a natural progress now, having built Sakhalin-2." A key aim of Van der Veer's visit to Moscow, the final one of his career as Shell's chief executive, was to introduce Voser as his successor. Voser will take his place as of Wednesday. Over the past decade, Putin has built close ties with the heads of many foreign energy giants and has a habit of meeting them face to face before allowing any major deal to go forward. Because the two of them share fluency in German, Van der Veer said it would be easy for them to get along. "I can assure you that this Swiss-accented German is not easy to understand," said Putin, who learned to speak the language during his early career as a KGB spy in Dresden. Putin said that Shell has met all of its contractual obligations in Russia and was a welcome partner, despite the public controversy with Gazprom over Sakhalin-2. "We have a dialogue that has not been easy, but we have reached an agreement to meet each other half way and come to an agreement that has allowed us to build a firm foundation for future cooperation," Putin said. Van der Veer added: "Co-operation with Gazprom has been very smooth." At the Saturday meeting, Shell also signed a cooperation deal with Russian shipping company Sovcomflot to develop shipping infrastructure for the transport of liquefied natural gas.

Rosneft, China Reach $15B Loan Deal

June 24, 2009 - Baker Botts L.L.P. - A US $15 billion loan agreement between Russian oil and gas company Rosneft and the Chinese government is the first step in the development of a major oil supply contract between the two countries. The agreement, which closed in April of 2009, is one of the largest private loans booked in Russia this year. The Chinese Development Bank (CDB) will fund the loan that will allow Rosneft and the China National United Oil Company (CNUOC) to enter in a 20-year oil supply contract. This agreement, coupled with a US $10 billion loan to Transnet for pipeline construction between the two countries, will significantly contribute to moving energy resources to the east from Russia. "These two transactions, totaling more than US $25 billion is seen as advancing cooperation between Russia and China in the energy industry," said Steven Wardlaw, Partner In Charge of the Moscow office of Baker Botts and a lead lawyer in the negotiations. "The agreement that was reached between Rosneft and Chinese representatives presented a number of complex international financial and legal issues that required detailed discussions about how the agreement needed to be structured in order to benefit both countries." Officials expect product covered by this agreement to start flowing from Russia on a spur of the East Siberian Pacific Ocean Pipeline that runs into the northwest corner of the People's Republic of China early in 2011. Baker Botts L.L.P., dating from 1840, is a leading international law firm with offices in Austin, Beijing, Dallas, Dubai, Hong Kong, Houston, London, Moscow, New York, Palo Alto (California), Riyadh and Washington. With approximately 800 lawyers, Baker Botts provides a full range of legal services to international, national and regional clients.

Friday, June 26, 2009

Russia's Gazprom in billion-dollar Namibia deal

06-26-2009 - (AFP) — WINDHOEK Russian energy giant Gazprom said Friday its banking unit had struck a one-billion-dollar (711-million-euro) deal with Namibian energy company Namcor to build a new power plant in Namibia. Under the deal, Russia would build a power plant generating energy for both Namibia and South Africa, getting a foothold in the lucrative Kudu gas field, Namibia's only commercial field to date. The deal was reached during a visit to Windhoek by Russian President Dmitry Medvedev, who left Namibia for Angola on Friday as he wraps up a four-nation African tour that has focused on tapping the continent's energy wealth. "Our Namibian partners have offered us to organise a financing scheme to monetise gas resources," the head of Gazprom International Boris Ivanov told reporters in Luanda. "The cost of the project is around 1.0 to 1.2 billion dollars," he said, adding that the price tag includes the power station, a pipeline and other infrastructure, with construction taking up to four years. "It's not a large deposit but has enough reserves," he said about the Kudu field. "It's a pilot project in Namibia but its economic efficiency is very high." Gazprombank said in a statement that much of the power generated would be exported to South Africa, which is struggling to meet its growing energy needs. "There are plans to use gas from the Kudu field for the power plant. A considerable part of the electricity to be generated will be supplied to South Africa," the company said. The Kudu field, located about 140 kilometres (85 miles) offshore, is estimated to contain 3.3 trillion cubic feet of proven reserves, but years of negotiations over the reserves have yet to yield concrete projects. Medvedev and his counterpart President Hifikepunye Pohamba witnessed the signing of the agreement during his visit to Windhoek. Windhoek and Moscow pledged closer cooperation, a joint communique said on Friday after the first visit by a Kremlin chief to the uranium-rich southern African nation. "Agreement was also reached on the expansion of Russian investments to develop and introduce new large-scale projects in the Namibian economy, in particular in mining, oil exploration and energy," it said.

Gazprom's $2.5bn gas deal with Nigeria raises European concerns

June 26 2009 Financial Times by Matthew Green Gazprom, the Russian gas group, has signed a deal to invest at least $2.5bn in a joint venture with Nigeria's state-owned oil company to explore and to develop the country's vast gas reserves. Dmitry Medvedev, Russia's president, said during a visit to Abuja, Nigeria's capital, that he hoped the nations would become "major energy partners". "If we carry out all our plans, Russian investment in Nigeria can reach -billions of dollars," Mr Medvedev said late on Wednesday. The formation of the 50-50 joint venture between Gazprom and the Nigerian National Petroleum Corporation (NNPC), named Nigaz, follows a prolonged courtship by Russia which began under Vladimir Putin, the previous president and current prime minister. Gazprom's action to secure a foothold in a country where western groups have led the development of the oil industry for the past half century has given rise to concerns in Europe that Moscow is seeking to gain control of Nigerian reserves to tighten its grip on the the European Union's gas supplies. European governments see Nigeria's gas reserves - the seventh-largest in the world - as a potential route to diluting their reliance on Russia, which supplies up to half the gas consumed by the EU. Nigeria has struggled to develop its gas industry to anything like its full potential, due in part to its failure to come up with the viable regulatory framework and pricing mechanism needed to spur commercial investment. The government of Umaru Yar'Adua, Nigeria's president, has designed a "gas masterplan" which intends to prioritise gas for domestic use to supply industries and tackle Nigeria's chronic power crisis. Implementation has been slow and some experts question whether the regulatory approach envisaged in the plan is viable. Gazprom has nevertheless signalled its intention to help Nigeria realise its ambitions to develop domestic gas infrastructure. The Nigaz joint-venture intends to explore for gas and build refineries, gas pipelines and gas-fired power stations throughout Nigeria, including a section of pipeline that could form part of a proposed trans-Sahara pipeline to export gas directly to Europe. "We will take part in building the first segment of gas pipeline from southwestern Nigeria northwards," said Boris Ivanov, head of Gazprom International. "If [the] trans-Sahara pipeline is realised, it will be its first segment." Capital costs are estimated at $10bn (€7.2bn, £6.1bn) for the trans-Sahara pipeline and $3bn for gas gathering centres. The proposed 4,128km pipeline from Nigeria via Niger and Algeria would send up to 30bn cubic metres of gas a year to Europe. The EU has pledged political and economic backing for the trans-Sahara pipeline. But a consortium has yet to emerge to fund and build the project. Total, the French energy group, this year said it would be willing to participate in the project .

Thursday, June 25, 2009

Gazprom says Nabucco getting special treatment

MOSCOW, June 25 (Reuters by Simon Shuster) - The European Union is discriminating against Russian-backed gas pipelines in favour of Nabucco, the head of Gazprom's foreign department, Stanislav Tsygankov, said on Thursday. "When you look at the regulatory treatment of Russian-linked projects compared to European ones, one is reminded of the famous book by George Orwell that says all animals are equal but some are more equal than others," Tsygankov told a news conference. "Nabucco is getting the green light everywhere ... while our gas transport projects, South and North Stream, are constantly facing regulatory barriers."

Total, Novatek Seal $900M Gas Deal

25 June 2009 - The Moscow Times by Anatoly Medetsky, Ira Iosebashvili – French energy major Total and Novatek, Russia's largest independent gas producer, ended a two-year quest to join forces Wednesday, sealing a $900 million project to develop a Siberian gas field, Prime Minister Vladimir Putin said after meeting the companies' chiefs. The agreement -- in which the companies will jointly develop the Termokarstovoye gas field on the Yamal Peninsula after Total takes a 49 percent stake in Novatek unit Terneftgaz -- is the largest foreign investment in Russia since the country was caught in the grips of the global economic crisis last September. Putin called Termokarstovoye a "very promising field," which along with adjacent sections could eventually expand and be designated as a deposit of national importance. He also opened the door for the French company to participate in other Russian energy projects, including the second phase of the $25 billion Shtokman gas field. No foreign partners have been selected, but Total is helping develop the first stage. "I know you have offered to expand our cooperation and participate not only in the current stage of the project but in future stages," Putin said, referring to Shtokman. "This is entirely possible." The Yamal Peninsula is strategically vital for Russia's gas industry. The remote province is expected to produce 250 billion cubic meters of gas per year by 2020, require $60 billion in investment and supply a majority of the gas that Russia will sell to Europe in the coming decades. By comparison, Russia exported 158.8 bcm of gas to Europe last year. Total also said it had spoken with Gazprom about participating in liquefied natural gas projects on the Yamal Peninsula. The deal comes just days after Total announced the sale of a major stake in a Dutch refinery to LUKoil, Russia's largest private oil producer, for $725 million. The purchase was announced during President Dmitry Medvedev's visit to the Netherlands on Friday. Putin said Wednesday's agreement illustrated that the country's strategic gas fields were open to investment from foreign corporations. "For this, of course, you need the approval of a special government commission, but if you are going to be involved in this level ... investing money, then of course, we will take this into consideration," he said. Foreign investors were spooked after Gazprom took control of the Sakhalin-2 project from Shell in 2007, following heavy pressure from the government. Further limiting the options for foreign investors, the government drafted a law that requires them to get approval from a special government commission if they want to take part in developing strategic oil and gas fields. Fields are considered strategic if they hold at least 50 bcm of gas or 70 million tons of oil. Gazprom also holds a monopoly on Russian gas exports, meaning that other companies must either sell their output to Gazprom or Russian consumers. "I don't think it's difficult to work in Russia," Total CEO Christophe de Margerie said after the signing. "One only needs to learn to work efficiently with Gazprom, Novatek and Rosneft. "We're prepared to invest more into the Russian economy," he added. Neither of the companies identified the price for the 49 percent stake. Gazprom owns about 19 percent of Novatek, and Russian businessman Gennady Timchenko, co-founder of commodities trader Gunvor and an acquaintance of Putin, recently raised his stake to 18 percent, from about 5 percent. Management controls about 48 percent. Leonid Mikhelson, Novatek's founder and chief executive, agreed to let Timchenko increase his stake in exchange for allowing Novatek to gain control over the Yuzhno-Tambeiskoye field, Kommersant reported Wednesday. Another condition was that Novatek would be allowed to bring Total in as a partner to develop the massive deposit, the newspaper said. A spokesman for Timchenko declined to comment on the report. Calls to Novatek went unanswered. Analysts said the deal could have positive implications for Novatek and Total. The deal will provide Total with a foothold in an important gas-producing region and give Novatek cash to pay for the acquisition of Yuzhno-Tambeiskoye, said Alexander Nazarov, an analyst at Metropol. Novatek's board approved a deal last month to buy 51 percent of Yamal-LNG, which holds the license for the 1.2-trillion-cubic-meter field, from Timchenko's Volga Resources holding for $650 million. As for the Termokarstovoye field, Novatek could have potentially developed the small deposit itself, Nazarov said. The small field may be a trial balloon for the two companies, said Svetlana Grizan, an analyst at VTB Capital. They could later join forces on Yuzhno-Tambeiskoye, she said. "This may be the beginning of broader cooperation," she said. Total and Novatek signed a cooperation agreement in May 2007 and have been trying to partner up on projects for the last two years without success. Total even tried to buy a blocking stake, but the deal did not win anti-monopoly approval. Novatek's founding shareholders sold 19 percent to Gazprom instead. During the three-way meeting, Total's de Margerie described past attempts to negotiate with Mikhelson. "We tried to establish cooperation with Mikhelson several years ago," de Margerie said, Interfax reported. "He's a scary person in negotiations." Putin didn't miss the chance to offer a rejoinder. "That was a compliment," he said.

Space and Gas Deals Planned in Nigeria

25 June 2009 - The Moscow Times by Maria Antonova - Members of President Dmitry Medvedev's entourage said Wednesday that he would oversee the signing of major gas and nuclear deals, as well as a sweeping agreement on space cooperation during his visit to Nigeria. Medvedev left Egypt on Wednesday afternoon for Nigeria, the second destination on his four-country African tour aiming to establish a bigger business presence in the resource-rich continent. Federal Space Agency chief Anatoly Perminov said the expected agreement with Nigeria covered space cooperation in seven areas, including telecoms, navigation and geological research. "Everything but sending up pilots," he said, RIA-Novosti reported. He said Egypt had agreed to cooperate on Glonass, Russia's struggling answer to the U.S.-led GPS satellite system, and that the document would be signed soon. Perminov also said Russia was launching a satellite for South Africa within a month from the Baikonur Cosmodrome, which it leases from Kazakhstan. Medvedev called Kazakh President Nursultan Nazarbayev on Wednesday, according to the Kremlin web site, although it was not immediately clear what they discussed. A telecoms satellite is also ready to launch for Angola, Perminov said. "We hope to resolve all the financial aspects of this project on this visit," he added. The delegation will go to Angola on Friday. Medvedev and his delegation of officials and businessmen landed in the Nigerian capital, Abuja, on Wednesday evening for the first-ever visit there by a Russian president. Sergei Prikhodko, Medvedev's top foreign policy aide, told reporters that Gazprom and the Nigerian National Petroleum Corporation would sign a record gas deal, with the Russian company investing up to $2.5 billion into a Nigerian joint venture. The companies will have equal stakes in the venture, which will engage in research, extraction and transporting gas, he said. Gazprom had previously discussed the possibility of participating in the construction of a pipeline across the Sahara Desert, as well as pipeline infrastructure in Nigeria. The trans-Sahara link would connect Nigeria with Algeria's export system, making it possible to send Nigerian gas to Europe. Rosatom chief Sergei Kiriyenko said he also expected a series of nuclear energy cooperation agreements in Nigeria, including Russia's possible participation in construction of a nuclear power plant and uranium exploration. "It's a chance for us to stake out a claim for the territory," he said, regarding uranium exploration on lands that have not yet been explored, Interfax reported. Medvedev is scheduled to visit Namibia and Angola next, the first time a Russian leader will have traveled to either country. The Russian delegation includes Natural Resources and Environment Minister Yury Trutnev, Federal Fisheries Agency head Andrei Krainy, Vneshekonombank chief Vladimir Dmitriyev and executives from major companies including Alrosa, Gazprom Neft and Intourist. Russia is especially well-positioned to "cooperate with Namibia in sectors related to energy" and is interested in projects on hydro, heat and nuclear power as well as Namibia's mining industry, Prikhodko said. Alrosa, VEB, Sintezneftegaz, Technopromexport, Stroitransgaz and units of Gazprom are interested in increasing their business in Namibia, Prikhodko said.

Wednesday, June 24, 2009

Putin sees France's Total in new projects in Russia

June 24, 2009 (Reuters by Katya Golubkova) - MOSCOW, Total (TOTF.PA) emerged as Russia's favoured energy partner on Wednesday, with Prime Minister Vladimir Putin inviting the French major to take part in some of its largest gas projects after meeting its chief executive. Putin welcomed Total's participation in future stages of the giant Shtokman field, which is being led by Russia's Gazprom (GAZP.MM), and said the French company could invest $1 billion in the Yamal development with another Russian gas firm, Novatek (NVTK.MM). Total Chief Executive Christophe de Margerie, on a visit to Moscow, expressed his gratitude to Putin. "I don't think it's difficult to work in Russia," he said. "One only needs to learn, one needs to learn to work effectively with Gazprom." Britain's BP (BP.L) had a bumpy ride during its 15 years in Russia, marked by multiple disagreements with a quartet of Soviet-born oligarchs who share ownership of its TNK-BP joint venture. [ID:nLQ109843] A government source later told Reuters that Total would sign a deal with Novatek later on Wednesday to develop a gas field on the Yamal peninsula in northern Russia. De Margerie also said he had already held talks with Gazprom on participating in liquified natural gas projects on Yamal. Russia is counting on Yamal -- which needs investments of up to $60 billion and should produce 250 billion cubic metres (bcm) of gas per year by 2020 -- for the bulk of its gas supply to Europe in decades to come. Total is already Gazprom's partner in the first stage of the $25 billion Barents Sea Shtokman gas project, but partners for the second stage of the development have not been selected. "I know that you have offered to expand our cooperation and take part not only in the current stage of the project, but in future stages. This is totally possible," Putin said of the off-shore Shtokman project. (Reporting by Katya Golubkova,

Tuesday, June 23, 2009

Surgut hits 171% reserves replacement

23 June, 2009 - Upstream OnLine - Russian producer Surgutneftegaz has replaced 171% of its oil production in 2008 by adding about 105 million tonnes (771 million barrels) of oil to its reserves. The company, which has a total of 134 exploration and production licences, did not disclose the total amount of reserves, a Reuters report said.

Monday, June 22, 2009

Sechin quashes Surgut-Rosneft talk

I. Sechin06-19-2009 - Upstream OnLine - There are no plans to merge Russia's largest oil producer, state-controlled Rosneft , with its privately controlled peer Surgutneftegaz, Rosneft chairman and Russia's top energy official, Igor Sechin, said today. Speaking at Rosneft's annual shareholders' meeting, Sechin was addressing years of speculation that the Surgut could be merged with one of Russia's state energy majors, Reuters said. Separately, Sechin said the Russian government will support Surgut in its discussions with Hungarian player MOL. Surgut bought a 21% stake in MOL from Austria's OMV for €1.4 billion ($1.9 billion) in a surprise move earlier this year, earning the ire of MOL and Hungary's government. The company has said its intentions were friendly.

Rosneft plans $579m costs cut

06-19-2009 - Upstream OnLine - Russian state-run oil producer Rosneft is planning to cut costs by 18 billion roubles ($579 million) as part of its anti-crisis programme, according to reports. Russian news agency RIA news agency quoted company boss Sergei Bogdanchikov as announcing the move, but did not say whether he was referring to 2009 or the programme that would stretch beyond this year. A Reuters report added that Rosneft had repaid $7 billion in debts in the first half of this year.

Russia, Netherlands Discuss ‘Serious’ Energy Plans

June 20, 2009 (Bloomberg by Lyubov Pronina and Torrey Clark) -- Russia and the Netherlands have “serious plans” to extend energy projects and “enhance” European fuel security as Royal Dutch Shell Plc seeks a role in the gas-rich Yamal region, President Dmitry Medvedev said. “We can advance on Yamal projects,” Medvedev told reporters today in Amsterdam, after meeting with Dutch Prime Minister Jan Peter Balkenende. Medvedev also met with Shell Chief Executive Officer Jeroen van der Veer, praising the company’s Sakhalin-2 project with OAO Gazprom for producing Russia’s first liquefied natural gas this year. Russia expects 20 percent of its natural-gas output to come from the Arctic Yamal Peninsula and the surrounding Kara Sea by 2020, Russia’s First Deputy Prime Minister Viktor Zubkov said after meeting Van der Veer yesterday. Gazprom may work with Shell to build an LNG plant in Yamal, Chief Executive Alexei Miller said earlier this year. LNG is natural gas cooled to a liquid for shipment by tanker to markets unreachable by pipeline. Medvedev called Dutch support for Gazprom’s Nord Stream gas pipeline, which will link Russia link directly to Germany, “a positive example” of cooperation with European partners “without any fear.” Nord Stream: Gasunie, the Dutch state-owned gas distribution company, holds 9 percent in the Nord Stream AG venture that aims to bring the pipeline online in 2011. Gazprom, the world’s biggest natural gas supplier, has said Nord Stream will boost European energy security after price disputes with transit country Ukraine disrupted deliveries three times since the start of 2006. European leaders have argued for diversifying supplies away from Russia. “We can do more,” Balkenende said today. Dutch companies want to extend cooperation with Russia in biotechnology, IT and telecommunications, as well as energy projects. The Netherlands was Russia’s second-largest trading partner last year, with a total volume of about $62 billion, while Dutch investment in Russia reached $45.2 billion, or 18 percent of total foreign investment, the Kremlin said yesterday. During the first day of Medvedev’s visit to Amsterdam yesterday, OAO Lukoil, the Russian oil producer with the most international assets, announced an agreement to buy 45 percent of Dutch refinery TRN from France’s Total SA for about $725 million.

Lukoil Takes 45% Stake In Total's Dutch Refinery

19 June 2009 - Dow Jones - Wall Street Journal by Jacob Gronholt-Pedersen and Geraldine Amiel - MOSCOW/PARIS, Russian oil major OAO Lukoil Holdings (LKOH.RS) Friday said it agreed to buy a major stake a Dutch refinery, the latest in a series of deals signaling Russian energy companies' push to strengthen their positions in the European market. Lukoil, 20%-owned by U.S. oil major ConocoPhillips (COP), said it will pay France's Total SA (TOT) $725 million for a 45% stake in Total Raffinaderij Nederland, or TRN, refinery and that it plans to close the deal by the end of the year. The deal was announced on the first day of Russian President Dimitry Medvedev's state visit to the Netherlands and reflects the energy giant's open advocacy of foreign expansion by energy companies such as Gazprom OAO (GAZP.RS), which can boost the country's international influence. Last month, U.S. peer Valero Energy Corp (VLO) said it agreed to buy the same stake from U.S.-based Dow Chemical Co. (DOW), which co-owned the refinery with Total. But the French company exercised its preemptive rights to purchase the stake and simultaneously agreed to sell the stake to Lukoil. The 153,000 barrels-per-day refinery located in Vlissingen is mainly run on Russian crude oil, and the deal "contributes to the development of a broader strategic partnership between Lukoil and Total," a statement said. The deal is the latest example Russian oil and gas producers expanding abroad. In November last year, Lukoil, the most active Russian oil company outside the country, took a 49% stake in ERG SpA's (ERG.MI) Isab refinery in Priolo, Sicily. In April, Russia's Surgutneftegaz purchased a 20% stake in Hungary's national energy company MOL Nyrt. And last year, state-controlled gas giant OAO Gazprom (GAZP.RS) bought Serbia's national oil company NIS, and has formed alliances with European energy firms to build two new pipelines that will pump Russian gas to Northern and Central Europe. Lukoil, Russia's second-largest oil producer, is striving to fulfill a vow to boost its refining capacity by more than 70% by 2016. Chief Executive Vagit Alekperov said the acquisition "organically fits in our company's strategy aimed at increasing oil refining capacities located in the immediate proximity to the markets where products with higher added value are sold." Total has also been trying building relations with Russian energy companies. It holds a stake in Gazprom's Shtokman gas project in the Barents Sea, and has a stake in Russia's northern Kharyaga field. But analysts at UBS, who rate Lukoil's stock a neutral, were cautious on the company's European expansion. "We don't see any significant value creation in this deal for the shareholders," said analyst Maria Radina, noting currently low European refining margins. Lukoil's shares closed up 1.5% at $48.1 each in Moscow. The company had $3.2 billion of cash on its balance sheet on March 31 and is expected to finance the deal from cash-flow or existing debt facilities, Radina said. Lukoil already owns refineries in Bulgaria and Romania and runs gas stations in the U.S., Hungary, Finland, Poland, Serbia, Romania, Macedonia, Cyprus and Turkey. But a number of its recent attempts to buy assets abroad failed, either because the acquisitions were too expensive or due to what the firm described as the unwillingness of the European Union to allow cash-rich Russian firms to buy lucrative assets there. Last year, Lukoil scaled back its ambition of acquiring a 30% holding in Spanish oil company Repsol-YPF SA (REP), partly due to political unease in Spain over the deal.

Russian-Chinese $100 billion energy deal

MOSCOW, June 19, 2009 - (UPI) -- Chinese President Hu Jintao concluded his visit to Russia Thursday, which included a $100 billion agreement covering deliveries of Russian oil to China. Trud newspaper reported Friday that Russian President Dmitry Medvedev praised the agreement, telling reporters, "The deal worth about $100 billion is the largest ever concluded between Russia and China." Under the terms of the agreement, over the next two decades China will receive 300 million tons of Russian oil. Transneft's Head of Public Relations Igor Demin remarked that agreement formalized discussions earlier this year during which the two parties agreed in principle on long-term supplies of Russian oil, with China providing loans to Transneft and Rosneft to construct the East Siberia-Pacific Ocean pipeline to ship the oil. Among the factors influencing Moscow's decision are the fact that Europe has ceased to be an attractive growth market, the increasing depletion of Western Russia's oil resources and Moscow's interest in developing its eastern regions' economy through massive infrastructure projects.

Monday, June 15, 2009

BP Sees Low Foreign Investment

15 June 2009 - Bloomberg - LONDON. The government will keep foreign investment in the oil and gas industry at 25 percent of the total to help Russian companies operate profitably, the head of BP said. "Russia believes that's about the right amount, and I don't expect it to change," CEO Tony Hayward told reporters Wednesday. "Russia has got three or four major enterprises, which continue to participate sensibly in their oil and gas sector." BP's largest investment in the country is in TNK-BP, a joint venture with Russian billionaires that accounts for about a quarter of its total production and reserves. It is also cooperating with Rosneft to search for oil and gas in Russia's Far East and in the Arctic, according to BP's web site. Royal Dutch Shell, ExxonMobil, ConocoPhillips and BP are the biggest foreign investors in Russia's fuel industry. Earlier this month, Hayward urged the nation's government to drop barriers to foreign investment at a time when "capital is in short supply." The global credit crisis and tumbling oil prices have forced some producers to cut spending plans. StatoilHydro of Norway and France's Total have gained access to Russian projects by forging partnerships with Gazprom. The group plans to develop the Arctic Shtokman field, which has enough gas to meet world demand for more than a year.

Wednesday, June 10, 2009

German military asks for change to Nord Stream route - paper

MOSCOW, June 10, 2009 - (RIA Novosti) - Germany's armed forces have demanded that the planned route of the Nord Stream gas pipeline linking to Russia be altered, Russian business daily reported Kommersant on Wednesday. The 6 billion-euro pipeline being built jointly by Russia and Germany under the Baltic Sea is planned to eventually pump 55 billion cu m of gas per year to Western Europe, bypassing traditional transit nations. In a letter to the defense committee of the country's lower house of parliament, the Bundeswehr (armed forces) said it was concerned that the pipeline would be laid close to a sea testing ground near the Island of Rugen, which is actively used for naval exercises, Kommersant said. The paper said the German military had repeatedly voiced concern over the Nord Stream project. The latest statement by the Bundeswehr's top officials echoed complaints made in January 2007 by commanders of the Northern District based in Kiel, who said construction would be adjacent to zones where the German Army and Navy hold exercises. Nord Stream AG, the project operator, has confirmed that the Bundeswehr filed the request during public consultations on the project. "We have studied the issue closely, and invited the leading international experts to analyze potential risks. Dialogue is currently being held with the relevant German departments. We are sure to find a solution that will relieve tensions over the proposed route," Nord Stream AG spokesman Jens Muller said. According to Kommersant, the issue is also likely to be addressed in Moscow by visiting German Foreign Minister Frank-Walter Steinmeier, who will meet with Russia's President Dmitry Medvedev and Prime Minister Vladimir Putin later on Wednesday. The Nord Stream project has been repeatedly delayed over Baltic nations' environmental and security concerns. Putin visited Finland earlier this month to assure his Finnish counterpart Matti Vanhanen that participants in the project were ready to alter the route in line with Finland's environmental concerns.

Lukoil sells $160m rouble bond

06-10-2009 - Upstream OnLine - Russian oil major Lukoil started the placement of a 5 billion rouble ($159.9 million) bond, a spokesman for Troika Dialog, the mandated bookrunner for the deal said today. Lukoil sees the coupon range, for its first rouble-denominated bond issue since the credit crisis effectively froze the local bond market in the second half of last year, at 13.75% to 14.75%. The company plans to close the book 19 June, wrote Reuters. In April, Gazpromneft , the oil arm of gas export monopoly Gazprom, sold a 10 billion rouble bond with a coupon rate at 16.7%. Analysts have said the placement was successful due to solid demand from investors seeking to benefit from expected central bank rate cuts and the strengthening of the rouble.

Friday, June 05, 2009

Russian oil chief puts fair price for oil at $75 per barrel

06-05-2009 - MosNews - World oil prices, currently around $65 a barrel, are inconvenient for Russia, Deputy Prime Minister Igor Sechin says. Russia needs oil prices to be at least $75 a barrel, Sechin was quoted by RIA Novosti as as telling the press Friday. Sechin said making forecasts about oil prices was an ungreatful task at the moment, since the market is totally unpredictable. But he noted that Russia did not plan to cut down on oil production in the next few years. According to Yulia Tseplayeva, the chief economist for Merrill Lynch in Moscow, for each $1 increase in the price of oil, Russia’s government budget earns about $1.7 billion a year. Yet in recent Russian history, the two periods of most intensive economic change — both of which were a condition for the boom of the past decade — were preceded by deep and prolonged slumps in oil prices.

Tycoon Vekselberg calls for major investment in Russian oil

Viktor VekselbergST. PETERSBURG, June 5 (RIA Novosti) - The lack of major investment in the development of new Russian oil fields in the mid-term could increase the prime cost of domestic production and affect global oil prices, a billionaire co-owner of TNK-BP said on Friday. "Unless we invest large sums in the development of new fields in East Siberia, Yamal and the Arctic, in a certain period we will see the prime cost of oil production in Russia hike, which could affect the situation on the global market," Viktor Vekselberg said during discussions on oil prices at the St. Petersburg International Economic Forum. He also voiced support for the idea of establishing transparent mechanisms for selling oil globally. "We should think about the influence of the dollar/ruble exchange rate," Vekselberg said.

Lukoil profits drop 71%

06-03-2009 - Upstream OnLine - Russian producer Lukoil posted a 71% drop in net income for the first quarter of 2009, despite lower spending and lift costs per barrel compared to the same period last year. Net income for the quarter came in at $905 million, compared with $3.16 billion in the same period last year. Lifting costs per barrel of oil equivalent during the quarter decreased by almost 20% year-on-year to $3.10 from $3.86, said the company in a statement. Capital expenditure, including non-cash transactions, for the quarter was $1.5 billion, 39.2% lower than last year, added the statement. Revenue was down 41% to $14.75billion from $24.96 billion, mainly due to lower oil prices and despite a 3.2% rise in crude production in the quarter. Earnings before interests, taxes, depreciation and amortisation, or Ebitda, halved to $2.41 billion from $4.81 billion. Analyst's forecast for the company differed dramatically. A Reuter’s poll resulted in a consensus forecast of $1.1, while a Dow Jones poll of 10 analysts had forecast $595 million.

Thursday, June 04, 2009

Venezuela Agrees to Russian Group Carabobo Venture

June 3,2009 (Bloomberg by Steven Bodzin) - Venezuela agreed to work with a group of five Russian oil companies including OAO Rosneft and OAO Lukoil to create an oil joint venture in areas of the country’s Orinoco Belt, according to an accord published today. The venture will work in the central and northern parts of the Carabobo 1 block, according to an agreement signed Nov. 26 and printed today in the Official Gazette, the formal record of Venezuelan government actions. The accord says Russian National Oil Consortium, or Consorcio Ruso, will be a partner with Venezuela. Consorcio Ruso was formed last year to work in Venezuelan oilfields and includes Rosneft, OAO Surgutneftegaz, OAO Gazprom, Lukoil, and TNK-BP. Venezuela is auctioning minority stakes in the same sections of the Carabobo 1 block. Nineteen companies, including Consorcio Ruso, paid $2 million each for data on three proposed projects, one of which would pump 400,000 barrels a day from the same areas described in the treaty. The accord doesn’t mention the auction. Other companies that may bid include Chevron Corp., BP Plc and Royal Dutch Shell Plc. An official in the communications office at Venezuela’s Oil and Energy Ministry declined to comment. Gazprom Deputy Chief Executive Officer Alexander Medvedev said Nov. 26 that the Russian group would gain access to Carabobo oil and declined to comment on whether the areas being discussed were also part of the bid round.

Tuesday, June 02, 2009

Russian gas output takes a tumble

Going down02 June, 2009 – Upstream OnLine – Russia's natural gas production declined sharply last month as the country cut output sharply in response to plunging demand in Europe and at home. However, the country's oil output held steady, Energy Ministry data showed. The data, released today, showed natural gas production at Russia's Gazprom reached new 10-year lows to just 980 million cubic metres per day, down 14% from April and 34% from May last year, a Reuters report said. European consumers have been delaying gas purchases since the start of the year, waiting for prices to finally catch up with lower oil prices and switching to alternative fuels or pumping gas from underground storage facilities. Russian gas consumption also fell as the country entered its first recession in a decade with industrial production recording a double-digit fall in the January to April period. Analysts told the news agency they expect to see a recovery in gas demand in the second half of the year. Around 80% of Russian gas output comes from Gazprom, which supplies a quarter of Europe's gas. The rest is produced by smaller independent gas companies or oil producers. Russia's total gas output in May was 12% lower than in April, the data showed. However, oil production in May stood at 9.84 million barrels per day, unchanged from April this year and up 1% year-on-year. Last year, Russian oil output fell by around 1% and concerns were high that lower oil prices and lagging investments would lead to yet another drop this year. Russian pipeline monopoly Transneft's oil exports stood at 4.4 million bpd in May, an increase of 0.6% from the 4.37 million bpd pumped in April. However, exports slipped 1.4% year-on-year. In May last year, Transneft pumped 4.46 million bpd.

Russia’s Rosneft sees first-quarter net profits drop 20 percent

28 May, 2009 – MosNews - Russia's top oil producer Rosneft said Thursday that first-quarter net profit dropped 19.7 percent to $2.1 billion from the same period a year ago because of lower oil prices and weaker domestic demand. The figure is down from $2.6 billion a year ago — but 65 percent up from the 2008 fourth quarter, when state-controlled Rosneft was under pressure from a steep drop in oil prices and higher export duties, the company said in a statement. Revenues in the first quarter of 2009 fell by 49.5 percent over the year to $8.3 billion. Rosneft's earnings before interest, taxes depreciation and amortization, or EBITDA, dropped 50.7 percent, to $2.3 billion. EBITDA is sometimes used as a measure of a company's basic business activity once financial items are stripped out. Rosneft said it had cut net debt by $2 billion to $19.2 due to "strong free cash flow generation." Crude production dropped 0.7 percent compared to one year ago to 2.1 billion barrels a day. Oil prices fell from all-time highs of $147 per barrel in July to a trough around $35, but have since recovered to trade over $60 per barrel.

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