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Friday, May 29, 2009

Novatek to pay cash for Yamal LNG bite

05-27-2009 - Upstream OnLine - Russian gas player Novatek will pay for its planned $650 million acquisition of a stake in Yamal Liquefied Natural Gas in cash, its chief financial officer said, denying media reports it may make the payment in its shares. "It is a cash deal... in several tranches. The first tranche will probably be next week," said Novatek's Mark Gyetvay told Reuters, adding that the remaining sum could be raised from the debt market. Kommersant business daily quoted unnamed source on Wednesday as saying Novatek could grant $650 million worth of its shares to businessman Gennady Timchenko for his 51% stake in Yamal LNG. Earlier this week Novatek announced the acquisition of the Yamal LNG stake, which gives it exploration and development rights to the South-Tambeyskoye gas field. Meanwhile, Luxembourg-based investment fund Volga Resources is set to buy a 13.13% stake in Novatek from Cartagena Development. The deal, which is subject to regulatory approval will boost Volga's holding in Novatek to 18.2%. Novatek's management induirectly control Cartagena, Volga Resources said in a statement. The company added that its founder and largest shareholder, Guennadi Timtchenko was today elected to the Novatek board.

Alekperov to talk over West Qurna-2

05-27-2009 - Upstream OnLine - Lukoil boss Vagit Alekperov is set to visit Baghdad for talks about a contract to develop the West Qurna-2 oilfield, according to reports. Lukoil was involved in the development of the first phase of West Qurna and signed a contract with the Saddam Hussein regime to develop the second stage, but the deal was frozen in 2002. Last year, Iraq and Lukoil agreed to establish a working group to amend the original contract on West Qurna-2. "I plan a visit to Baghdad to continue the dialogue," Alekperov told Russian news agency RIA Novosti. "I hope we reach an understanding and that the conditions including the company in the project are mutually acceptable." West Qurna-2's proven recoverable reserves have been estimated at around 6 billion barrels of oil. Under the terms of the contract, output could amount to 4.8 billion barrels of oil and 56.4 billion cubic metres of associated gas. Investment in the project could reach $4 billion, a Dow Jones report said. Ali Hussein Balo, chairman of the oil and gas committee of the Iraqi parliament, earlier said in an interview with RIA Novosti that Lukoil would have an opportunity to renew the contract. Baghdad is also discussing the West Qurna-2 oilfield with Chevron and Total. However, analysts have said Iraq is likely to resume work at West Qurna-2 with Lukoil after Russia recently wrote off the bulk of the country's debt of around $12 billion.

Fridman takes helm at TNK-BP

05-27-2009 - Upstream OnLine - Russian billionaire Mikhail Fridman has agreed to serve as interim chief executive of TNK-BP, until a permanent appointment is made by the end of the year. BP and Alfa-Access-Renova (AAR), who each hold 50% of TNK-BP, said in a statement that TNK-BP would hire two executives, Pavel Skitovich and Maxim Barsky, each of whom had "the credentials to become the new [chief executive]". The two men would take senior positions in the company. In the statement, the companies said they have agreed a succession plan which will see a new independent chief executive officer in place at TNK-BP by the end of the year. Skitovich, formerly a member of the executive board of Russian investment outfit Interros and former general director of Polyus Gold Mining Group, is BP's preferred candidate for the top job. Barsky will join TNK-BP from West Siberia Resources where until 2008 he served as a managing director and is currently a board member. He was put forward after BP went public with their choice yesterday afternoon. The statement added. "At the request of BP, and to observe the requirement of the revised shareholder agreement signed in January that the [chief executive] be a Russian speaker with extensive Russian business experience, Mikhail Fridman, chairman of the TNK-BP board, has agreed to serve as the interim [chief executive] and executive chairman of the board during this period." Tim Summers, who has been acting chief executive since January, will resume his role as chief operating officer.

Russian oil trade king buys more gas assets

May 27, 2009 - (Reuters by Katya Golubkova) - MOSCOW, One of Russia's most secretive businessmen, Gennady Timchenko, revealed on Wednesday he has built up an 18 percent stake in gas firm Novatek (NVTK.MM) as he seeks to diversify his oil wealth into other industries. Timchenko co-founded the world's third-largest crude oil trader by volume, Switzerland-based Gunvor, which has annual revenues estimated at $70 billion and handles the bulk of exports from the likes of state oil major Rosneft (ROSN.MM). Gunvor's rapid growth prompted speculation the firm enjoyed special support from the Kremlin, although Gunvor's competitors say the trader often offers healthy premiums to outbid rivals. Last year, the mysterious tycoon wrote an open letter headlined "Gunvor, Putin and me", saying media speculation about his close ties with the former Russian president and current prime minister, Vladimir Putin, were "overblown". On Wednesday, after a year of virtual complete public silence, Timchenko announced through his fund, little known to date Luxembourg-based Volga Resources, that he had increased his stake in Novatek by 13.13 percentage points to a total of 18.2 percent. Novatek is Russia's second-largest gas producer after state-run giant and gas export monopoly Gazprom (GAZP.MM), which holds a stake of 19 percent in Novatek -- now only slightly more than Timchenko. The purchase of 13 percent in Novatek would have cost Timchenko $1.56 billion at today's market price. Volga Resources said it bought the shares from Novatek's management. Novatek traded at $45.2 per GDR in London at 1320 GMT, up from as low as $13 in December but down from $97 last May, when Russian markets reached their peaks. Shares in Novatek rose 7 percent in Moscow, outperforming the broader market as traders said news about Timchenko and Tuesday's announcement that Novatek bought new gas reserves supported the stock. "Both Gazprom and Timchenko are very close to the country's leadership and most likely their big political influence will help Novatek solve whatever problems it has," said Valery Nesterov from Troika Dialog brokerage. On Tuesday, Novatek said it would pay $650 million to buy 51 percent in gas firm Yamal LNG, which controls the giant South-Tambeyskoye Arctic natural gas field. Novatek said the seller of Yamal LNG was Volga Resources but did not name Timchenko. The fund itself said later that Volga was created in 2007 by Timchenko to invest in oil, gas, infrastructure and development projects in the former Soviet Union, Eastern and Central Europe and Turkey. South-Tambeyskoye has reserves of up to 1.3 trillion cubic metres -- equal to 45 percent of global annual gas consumption. By comparison, Gazprom controls a fifth of global gas reserves, enough to supply the world with gas for over 10 years. Business newspaper Kommersant quoted unnamed sources on Wednesday as saying Novatek would grant $650 million worth of its shares to Timchenko in return for his stake in Yamal LNG. But Novatek said on Wednesday the deal did not involve equity. "It is a cash deal ... in several tranches. The first tranche will probably be next week," said Chief Financial Officer Mark Gyetvay, adding that the remaining sum could be raised from the debt market. UniCredit analysts said in a note the Yamal LNG acquisition appeared cheap but an objective appraisal of the reserves was difficult at the moment. "We cannot be sure of the development costs, which may include construction of the cross-Yamal pipelines and/or an LNG plant above the Arctic circle," UniCredit said.

Tuesday, May 26, 2009

Russian Govt OKs 4 New Production Licenses in Yamal-Nenets Region

05-26-2009 - RigZone News - OAO Novatek has received approval from the Federal Agency for Subsurface Use to convert four exploration licenses into new production licenses on fields located in the Yamal-Nenets Autonomous Region. Throughout 2007 and 2008, NOVATEK financed the successful exploration activities on the Severo-Khancheyskiy, Novoyurkharovskiy, Yarudeyskiy and Raduzhny license areas, and as a result, the Company was able to demonstrate recoverable reserves under the Russian reserve classification categories “C1 + C2” of 80.2 billion cubic meters of natural gas and 7.5 million tons of gas condensate. The four production licenses were issued in accordance with current Russian legislation on a non-competitive basis as a result of the work performed by the Company in compliance with the initial terms of the licenses. In accordance with the new license agreements, the Company will continue to undertake further exploration activities as well as start the development activities on the discovered fields.

New name in TNK-BP ring

05-26-2009 - Upstream OnLine - A potential second candidate for TNK-BP's top job has been mooted as news emerged today that the company's Russia-connected shareholders have suggested appointing an interim chief executive for three to six months before a final choice is made. A source close to the Russian shareholders told Reuters shareholders would consider a second candidate, Maxim Barsky, as a possible permanent chief executive. The source added that the shareholders want a new interim chief executive named for a period of three to six months before an independent company head is chosen. Barsky is a board member at oil producer West Siberian Resources. BP , which owns 50% of TNK-BP, said on Monday it had nominated Pavel Skitovich, a former employee of billionaire Vladimir Potanin, as its candidate for the company's top job. The UK supermajor and the quartet of Russia-connected billionaires who share control of TNK-BP fell out publicly last year in a dispute that spooked foreign investors and led to the departure of many expatriate staff, including then-chief executive Robert Dudley. Though both sides say they have resolved their differences, a permanent chief executive has yet to be appointed. Tim Summers, the former chief operating officer now serving as chief executive, has said his contract expires at the end of next month. BP retains the right to nominate a chief executive for TNK-BP, but the Russia-connected shareholders have insisted that the candidate be a Russian speaker with experience in the country.

BP Nominates Skitovich for TNK Head

26 May 2009 - Reuters - BP said Monday that it had nominated Pavel Skitovich for the post of chief executive at TNK-BP, in a move it hopes will mark the end of a shareholder conflict at the oil producer. Skitovich, a former Soviet vice consul in Uganda, served as chief executive of gold miner Polyus for five months in 2007 and has worked for the Interros group of billionaire Vladimir Potanin. "As far as we are concerned, the search for a new CEO is over. We have formally nominated a very strong candidate, and we hope that the approval process will be completed in due course," BP spokesman Toby Odone said. BP and the quartet of Russia-connected billionaires who share control of TNK-BP fell out publicly last year in a dispute that spooked foreign investors and led to the departure of many expatriate staff, including then-chief executive Robert Dudley. Though both sides say they have resolved their differences, a permanent chief executive has yet to be appointed. Tim Summers, the former chief operating officer now serving as CEO, has said his contract expires on June 1. BP retains the right to nominate a chief executive for TNK-BP, but the Russia-connected shareholders have insisted that the candidate be a Russian speaker with experience in the country. An industry source, who declined to be named, said BP could agree to the appointment of a new interim chief executive should the appointment of Skitovich not be approved prior to the expiry of Summers' contract. One possible candidate, the source said, is businessman Viktor Vekselberg, who controls 12.5 percent of TNK-BP and is one of the four partners. Vedomosti reported on Monday that shareholders had reached a preliminary agreement on Vekselberg's taking this role, citing an unnamed businessman familiar with the management of BP.

EU asks Russia, Ukraine to prevent new gas rows

EU asks Russia, Ukraine to prevent new gas rows22 May, 2009 - The Moscow News - The European Union is calling on Russia and Ukraine to prevent gas conflicts in the future, after Russia’s President Mikhail Medvedev expressed doubts over Kiev’s ability to pay for its gas and said a new gas row could be near. The EU asks Russia and Ukraine to do everything in their power to prevent such crises, European Commission President Jose Manuel Barroso told a news conference after the Russia-EU summit in Khabarovsk on Friday. The EU believes that some of Russia's initiatives dealing with a new legal framework for cooperation in the energy sector deserve Brussels' attention, Barroso was quoted by Interfax as saying. A repeat of the two countries' row over gas prices would hardly benefit the general atmosphere of relations, Barroso said. That is why the EU proposes developing an early warning mechanism, in which political will plays an important role, he said. Ukraine should pay more than $4 billion this year for 19.5 billion cubic meters of gas to be pumped into storage, Medvedev was quoted by Bloomberg as saying at a news conference today with EU leaders. About 80 percent of state-run OAO Gazprom’s exports of natural gas to Europe flow via Ukrainian pipelines. The January pricing dispute between Russia and Ukraine renewed calls in Europe to diversify fuel supplies away from Russia.

Kiev and Moscow in gas deadlock

05-22-2009 - Upstream OnLine - Russia and Ukraine failed to reach a decision on the issue of Ukraine's gas storage, Ukrainian Prime Minister Yulia Tymoshenko said after talks today with her Russian counterpart Vladimir Putin. "There has been no decision worked out on this yet," Tymoshenko said. "But I believe that we will find a compromise." "I'm sure we will find mutual understanding on how to pump gas into storage, because it's very important for the European Union, for Ukraine and for all who consume Russian gas," Reuters quoted Tymoshenko as saying earlier in the day. "I'm sure that we can resolve this issue," she said.

Friday, May 15, 2009

Attempts to tackle EU energy security without RF counterproductive

May 14, 2009 - (Itar-Tass) - MOSCOW. Russia’s Foreign Ministry considers any attempts to resolve the issues of Europe’s energy security counterproductive, the ministry’s spokesman, Alexander Nesterenko said on Thursday. “From our point of view the project of creating the EU’s “southern corridor” (dubbed as “modern Silk Road”) without taking into account the interests of the most important energy supplier – Russia – is no more than a political undertaking. This as well as the lack of commercial prospects explain the fact that representatives of Turkmenistan, Kazakhstan and Uzbekistan refused to sign a final declaration at the summit in Prague,” he said. “Any attempts to resolve Europe’s energy security issues without Russia counterproductive. We made clear our position to our European partners,” the diplomat said.

Brits losing control over TNK-BP

May 13, 2009 - (UPI) - LONDON. British control over Russian oil venture TNK-BP is dwindling as negotiations to find a new chief executive continue to stagnate. Disputes over corporate direction from BP and Russian oligarchs represented by the Alfa, Access/Renova group erupted last year as former Chief Executive Robert Dudley fled Russia in July, citing harassment. Dudley stepped down last year, leaving his deputy, Tim Summers, as acting chief executive. His term was extended in April, though The Times of London reports German Khan, a member of the AAR group, is in fact leading the company. Tony Hayward, the chief executive at BP, traveled to Moscow in April, the Times reports, to discuss Dudley's replacement, but he came away from the meeting with different priorities. The Times reports the agreement to subdue the chief executive search suggests British influence over Russia's third-largest oil producer is waning. TNK-BP reported $1.5 billion in profits for the first quarter of 2009 and, despite the acrimonious relationship between both sides, the relationship still is considered cordial, the Times reports.

Wednesday, May 13, 2009

Japan joins Russian push for Pacific gas projects

May 12, 2009 - (Reuters by Oleg Shchedrov) - TOKYO. Russian gas export monopoly Gazprom ( signed a memorandum of understanding with Japan on Tuesday to explore gas projects in eastern Russia, the company's chief executive said. Alexei Miller told reporters the memorandum would explore ways to process gas near the Pacific city of Vladivostok for supply to consumers in Russia and the Asia-Pacific region, including Japan. The Agency of Natural Resources and Energy, part of the Japanese Ministry of Economy, Trade and Industry, as well as Itochu Corp (8001.T) and Japan Petroleum Exploration Co signed up to the memorandum. The gas would be delivered to Vladivostok along the new Sakhalin-Khabarovsk-Vladivostok pipeline, which Miller said would be completed by the end of 2011. "After construction of the Sakhalin-Khabarovsk-Vladivostok gas pipeline, and after the demands of domestic consumers are met, it will become possible to supply gas and its products from Vladivostok to Asia-Pacific countries, including Japan," Miller said. Miller also said Gazprom had begun development of the Sakhalin-3 gas project. Though it was too early to determine partners for this project, Miller said those companies with which Gazprom had worked on Sakhalin-2 would take preference. Royal Dutch Shell and Japanese firms Mitsui and Mitsubishi Corp are Gazprom's partners at the Sakhalin-2 project, which shipped Russia's first liquefied natural gas to Japan at the end of March.

Thursday, May 07, 2009

Amid global recession, Russia's energy prices to rise

WASHINGTON, May 5, 2009 (UPI by John C.K. Daly) - In the current global downturn, perhaps no energy company has fallen further from financial grace than Russia's natural gas state concern Gazprom. In a frantic search for liquidity amidst declining energy prices in the global recession, Gazprom is considering raising prices for its potentially most volatile customer base -- the Russian consumer. It would be a gesture fraught with risk for the government of Russian President Dmitry Medvedev and Prime Minister Vladimir Putin, but Gazprom's shrinking revenue base may leave the energy giant little choice. The price discrepancy between what Russians pay for their subsidized natural gas and what Gazprom's foreign clients pay is immense. Last year, when Gazprom began formulating its prices for the first quarter of 2009, Gazprom spokesman Sergei Kupriyanov said during a Dec. 27 Russian radio interview that Russian consumers would pay $65 per thousand cubic meters, while European customers would pay $260 to $300 per tcm. Fast forward four months. In the wake of pricing disputes with both Ukraine and Turkmenistan, on April 27 a government spokesman, speaking on condition of anonymity, told Interfax that Russia's Energy Ministry prepared a new forecast on the country's socioeconomic development for 2009-2012 under which gas tariffs in 2010 could increase 5 percent for companies and 20.8 percent for the population. Under the terms of the proposal, electricity tariffs would also increase 5 percent for companies and 10 percent for the general public. Russian consumers can take some slight cold comfort in the fact that the new forecast followed a similar but harsher one prepared last August by the Energy Ministry for 2009-2011, which projected gas prices increasing in 2010 by 27.7 percent for industry and 30 percent for the general populace. Electricity increases were similarly severe, rising 22 percent for industry in 2010 and 18 percent in 2011, while tariffs for the population were to increase by 25 percent and 40 percent. The tariffs in the forecast were not approved. The proposed increases are fraught with political risks, as the subsidized energy prices are one of the last fiscal cushions available to a population that has been financially hammered since the 1991 collapse of communism. While Gazprom has taken great strides in forcing its former Soviet republic and Eastern European customers to absorb a series of rate increases designed to bring prices closer to world levels, energy tariffs for citizens within the Russian Federation have been largely immune from such capitalist "shock therapy." The government's caution is largely due to the political risks inherent in provoking the long-suffering Russian consumer, few of whom have seen any significant increase over the last 18 years of their standard of living while being subjected to the spectacle of Russia's new class of energy billionaires indulging in obscene spending sprees. The crisis has also put on hold for the moment the government's plans to liberalize Russia's wholesale energy market, which could be postponed by six months, a source familiar with the Economic Development Ministry's deliberations said, speaking off the record. According to the Federal Tariff Service, 30 percent of the energy market has been liberalized, but this share was to grow to 50 percent by July 1, a decision that is now likely to be delayed. The Economic Development Ministry will officially submit its latest forecast to the government next month, and the forecast is to be considered at the end of May. The decision to squeeze its home base of consumers represents a stunning turnaround of fortunes for Gazprom, founded in 1989. Gazprom is now Russia's largest company and the world's largest natural gas provider, with 432,000 employees. In 2007, less than two years ago, Gazprom ranked sixth on the Financial Times Global 500 list, with a market value of $245 billion. Gazprom's majority shareholder is the Russian government, with 50.01 percent of its stock. Last year, Gazprom chief Alexei Miller confidently predicted that markets would shortly see $250-per-barrel oil, which would see Gazprom's market capitalization becoming the world's first company to achieve $1 trillion in assets. Despite Miller's roseate predictions, inside Russia, Gazprom's revenue stream is constrained by domestic regulation, which compels it to supply the domestic market at government-regulated prices. As Gazprom is the country's largest contributor to the treasury, the Energy Ministry's forecast indicates Moscow is now willing to tinker with domestic prices in its search for additional revenues amid the global recession of energy prices, despite the potential for price increases provoking social unrest. By any yardstick, the global recession has hit the Russian economy hard. According to the Central Bank, this year Russian businesses and the state must repay more than $152 billion on their foreign debt. Rising unemployment is also stalking the Russian economy; according to the Economic Development Ministry, this year Russia's unemployed will rise to 7.6 million to 7.8 million, against an earlier forecast of 6 million. Russia's Federal State Statistics Service recently put unemployment for the first quarter of 2009 at 7.1 million, 9.5 percent of the working population. As far as pummeling the country's shrinking employment base with price increases, market forces are already impacting the Russian government's projections. According to Russia's Market Council, electricity consumption for the week of April 17-23 declined 5.2 percent year-on-year, slipping 1.2 percent from the previous week alone. Most ominously, consumption declines were recorded in 49 out of the 64 regions covered by the wholesale market's price zones. Should the projected price increases go into effect, consumption will doubtlessly drop further. Gazprom's slogan is, "Mechty sbvaiutsia!" ("Dreams come true!") If the projected tariff rates go through, then Russian customers are likely to use a different word for Gazprom's reveries -- "koshmar," which means "nightmare." Rampant inflation, unemployment and rising rage over social inequity were some of the factors behind 1917, a fact that Russia's energy barons and government officials seem to have forgotten. Instead of extolling the country's Soviet past, Russia's current leadership could do worse than ponder the conditions that brought it into power in the first place 92 years ago and pay attention before rising numbers of unemployed battered by inflation forcibly remind them.

Wednesday, May 06, 2009

Russia exports 21.5 bln cu m of gas, 55 mln tons of oil in 1Q09

MOSCOW, May 6, 2009 (RIA Novosti) - Russia exported 21.5 billion cubic meters of gas worth $7 billion, and over 55 million metric tons of oil to the tune of $16.5 billion in the first quarter of 2009, the Federal Customs Service said on Wednesday. Gas exports to non-CIS countries plummeted by 61% in January-March 2009 to 18.6 billion cubic meters year-on-year, while gas exports to former Soviet republics totaled 2.9 bln cu m, down 49.8% against the first three months of 2008. Oil exports to non-CIS countries at some 51 million metric tons saw no change, quarter on quarter, and were worth $15.5 billion to Russia. While oil exports to Commonwealth of Independent States increased 5.5% to 4 million metric tons worth $989 million. Gas output in the reporting period declined by 14.7% to 154 bln cu m in Russia, the statistics service said, adding that production in 2008 had slightly increased by 1.6% to 663 bln cu m with exports totaling 174.3 bln cu m amounting to $66.4 billion. The country plans to produce from 620 bln cu m to 644 bln cu m of gas and export 190 bln cu m-196 bln cu m in 2009. The statistics service said Russia reduced oil output by 1.3% to 120 million metric tons (882 million bbl) in January-March 2009. The country's Economic Development Ministry has forecast a 1.1% decline in oil production to 482 million metric tons (3.54 billion bbl) in 2009.

Monday, May 04, 2009

Sechin Says EU Faces Ukraine Supply Risk

04 May 2009 - The Moscow Times by Anatoly Medetsky - Deputy Prime Minister Igor Sechin warned the European Union's top energy official on Thursday that gas supplies to Europe through Ukraine could still break down because of limitations in the country's pipeline system. Ukraine needs to buy 19.5 billion cubic meters of gas in the near future to make sure that flows to Europe remain uninterrupted, Sechin told EU Energy Commissioner Andris Piebalgs at the fourth EU-Russia Permanent Partnership Council on Energy. "If this is not done, the tragedy that we lived through in January will develop catastrophically," Sechin said, Interfax reported. But Ukraine's outdated transit network might be unable to handle the increased volumes, he said. The comments appeared to hammer home Russian frustration at initially being excluded from an EU-Ukraine agreement on modernizing the country's energy infrastructure. Russia suspended exports through Ukraine for two weeks in January -- leading to widespread shortages in Europe -- after accusing Kiev of stealing "technical gas," which is used to power transmission stations. Ukraine denied the charge. "I just want us to realize the existence of risks that continue to influence the gas transit situation," he said. Piebalgs responded by urging against making a drama out of the problem. Ukraine usually fills its gas reservoirs in the summer to prepare for winter consumption peaks in Europe. The country pumped 800 million cubic meters of gas into storage in April, Prime Minister Yulia Tymoshenko said Thursday in Kiev. The statement came a day after she returned from Moscow, where she and Prime Minister Vladimir Putin agreed that Gazprom would pay an advance for transit fees to enable Ukraine to pay for the gas. Ukraine transports 80 percent of Russia's gas sales to Europe. Sechin said Russia was ready to help Ukraine pay for some of the technical gas and that it was considering state loans to help. "When we say there's a problem, we also propose a solution. We have even agreed to co-financing," Sechin said. Sechin also brought up the Energy Charter, restating Russia's disappointment with the treaty, which he said failed to regulate the dispute with Ukraine. Adopted in 1991 and signed by 49 countries and the EU, the charter sets energy investment, trade and transit rules. Russia signed it in 1994 but never ratified the treaty, and Putin suggested last week that Russia could withdraw its signature. "The Energy Charter treaty has proved nonviable," Sechin said, according to excerpts of his speech on the Cabinet web site. Piebalgs ruled out a proposal by President Dmitry Medvedev to replace the charter with a new treaty that would provide greater security to producers and include the coal and nuclear power industries under its auspices. "The Energy Charter treaty will continue to live its life until the countries that established it decide differently," Piebalgs told reporters.

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