Russia 090417 Basic Political Developments



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Crown Oil & Gas snares Russian assets


http://www.upstreamonline.com/incoming/article176111.ece
By Upstream staff 

US-based Crown Oil & Gas has completed the acquisition of Langford Worldwide and its Russian subsidiaries from Boshoff Holdings in a deal worth $11.9 million.

With the acquisition of Langford and its wholly-owned Russian subsidiaries, Crown holds exploration and development licenses for the Tereshkinsky, Kikinsko-Gusikhinsky and Krasnoarmeisky-2 properties located in the Saratov region of Russia.

The Saratov region is situated in the European part of Russia on the border with Kazakhstan, the largest oil producing country in Central Asia. The three properties have a combined area of about 500,000 acres. Continuing seismic work and analysis is scheduled for 2009 and will be followed by exploration drilling.

Friday, 17 April, 2009, 04:24 GMT  | last updated: Friday, 17 April, 2009, 04:24 GMT

Sibir joy at record Salym output


http://www.upstreamonline.com/live/article175821.ece
By Upstream staff 

Sibir Energy said today that daily crude oil production at the Salym fields hit a new record by exceeding 160,000 barrels per day.

The Salym fields are in Western Siberia and are operated by Salym Petroleum Development, a 50-50 joint venture between Sibir and Anglo-Dutch supermajor Shell.

Sibir's acting chief executive Stuard Detmer said in a release: “It has taken less than two years to double production at Salym."

Thursday, 16 April, 2009, 09:50 GMT  | last updated: Thursday, 16 April, 2009, 09:59 GMT



9 million tons of oil through Belokamenka


http://www.barentsobserver.com/9-million-tons-of-oil-through-belokamenka.4581292-116321.html
2009-04-17

reloaded at the floating oil terminal Belokamenka in the Kola bay.

8 million tons will come from Varandey oil terminal and 1 million from the oil company Rosneft, Head of Administration of Murmansk Sea Port Sergey Didenko said at a press conference recently, Portnews.ru reports.

Varandey oil terminal is located in the Barents Sea, 23 kilometers from land, and is owned by Lukoil. Oil from the Timano-Pechora oil and province is transported from the terminal on 20 000 ton tankers to Belokamenka. The 300 000 tons tanker Belokamenka is owned by Rosneft. An agreement between the two companies will shortly be signed, Didenko said.

According to Portnews.ru, in 2008 1.4 million tons of oil was shipped from Varandey and 7.3 million tons was reloaded at Belokamenka.

16/04/2009 | Moscow News №14 2009



Oil production puts Russia on collision course

http://www.mnweekly.ru/business/20090416/55374322.html

By Ed Bentley

OPEC is squaring up for a spat with Moscow as it becomes increasingly frustrated with Russia's reluctance to curb oil output as agreed with the international cartel.

Oil prices continued to hover around the $50-a-barrel mark despite a statement from the International Energy Authority (IEA) that demand would fall more than expected. However, OPEC is becoming for prices above $60 and is frustrated with Russia for not reducing its exports in line with the cartel's record cuts this year.

Russia's oil exports increased 6.3 per cent in February and 2.2 per cent in March, including by 10-fold to the United States. At the same time U.S. imports from OPEC fell by 14 per cent, or 818,000 barrels per day.

"OPEC is frustrated with the fact that Russian oil production is not falling as promised (it rose in March)," said Chris Weafer, chief strategist at Uralsib in a note to investors. "It is believed that Russia assured OPEC, at a December meeting, that oil production would slide steadily all year."

OPEC's cuts have raised the oil price from $35 in February to around $50 a barrel, but Saudi Arabian Oil Minister Ali Al-Naimi said at OPEC's last meeting on March 16 that suppliers need a price of $60 to $75 to support production of higher cost resources. The following day, Algerian Oil Minister Chakib Khelil said he was disappointed Russia hadn't cut production to support prices, Bloomberg reported.

Russia is expected to reduce production this year but only by about 1.5 per cent, which is considerably less than OPEC's cuts. Although Russia does not have any formal obligations to OPEC, it would naturally benefit from higher prices.

"I think some kind of price regulation was discussed jointly but in terms of quota setting and production Russia has its own independent policy," said Lev Snykov, an oil and gas expert at VTB Capital.

Despite being the world's largest oil producer, the 5.02 million barrels OPEC shipped in January dwarfs Russia's exports of 157,000 barrels per day to the United States, limiting the amount they can influence prices.

"I don't think that Russia will have an effect on the price and in addition I don't think the Kremlin has abandoned its plan of aligning itself with OPEC's efforts to sustain price levels," said Artem Konchin, oil and gas analyst at UniCredit Aton.

Some Western analysts have claimed that Russia is trying to increase its exports to the United States and is trying to take advantage of OPEC's commitment to reducing production by 4.2 million barrels per day.

"Russia has been trying to get a foothold in our market for a long time," said Bill O'Grady, chief markets strategist at Confluence Investment Management in St. Louis, Bloomberg reported. "With both gas and oil Russia hopes to gain geopolitical leverage."

The IEA announced last week that world oil demand would fall 2.4 million barrels a day this year, while OPEC predicted it would slide 1.37 million barrels per day. Both groups have revised these figures upwards from previous forecasts, which is likely to put downward pressure on the oil price in the short term

Russian analysts have warned that it doesn't matter who Russia sells oil to, but did say that it could cause problems with OPEC, which wants to support the oil price.

"Russia will resume building up exports and this could raise issues with OPEC," said Valery Nesterov, oil analyst at Troika Dialog.

The Russian government's budget takes a large chunk of its revenue from the energy sector and has forecast an average price of $42 a barrel for 2009. However, Snykov stated that VTB expects it to be $55 for the year, while Mary Ann Bartels, chief market at analyst at Bank of America's Merrill Lynch Unit predicted a price of over $70 a barrel this year, Bloomberg reported.

If Russia does not cut production then OPEC might increase production to lower the price in order to put pressure on the Russian budget, which already has a big deficit at $42 per barrel.

"If Saudi Arabia decides to make life difficult for Russia over the next few months to bring pressure to try and force production cuts, then the second quarter might be even more difficult than expected," said Weafer. "Saudi Arabia is in a better position to withstand a period of much lower oil prices to try and force Russian compliance."

While the federal budget would suffer, Russian oil companies would be well placed to withstand this kind of attack from OPEC. Production costs in Russia are approximately $15 per barrel and any decrease in price would hurt all suppliers.

"There is the theory that OPEC can flood the world with oil to make it really tough for Russia to get by but price wars would also hurt OPEC," said Konchin. "Russia and OPEC are mature en­ough to find a common aim in this situation."


Gazprom

Gazprom ties up $2bn bond



http://www.upstreamonline.com/live/article176105.ece
By Upstream staff 

Russia's Gazprom expects to close the order book on its 10-year $2 billion bond at 0900 GMT on Friday, with yield guidance unchanged from 9.25% 9.5%, market sources said.

The bond, which will carry a three-year put option, is being arranged by Credit Suisse.


Friday, 17 April, 2009, 08:25 GMT  | last updated: Friday, 17 April, 2009, 08:26 GMT



Russia Gazprom sees Eurobond pricing at 9.25%-source


http://www.reuters.com/article/rbssOilGasExplorationProduction/idUSLH41906720090417
Fri Apr 17, 2009 4:29am EDT

MOSCOW, April 17 (Reuters) - Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), Russia's gas export monopoly, expects the pricing of its 10-year, $2 billion Eurobond bond at 9.25 percent, the lower end of the range, a banking source told Reuters on Friday.

Gazprom expects to close the order book on the Eurobond at 0900 GMT on Friday, market sources said.

The price range was set as 9.25-9.50 percent.

The bond, which will carry a three-year put option, is being arranged by Credit Suisse. (Reporting by Dmitry Sergeyev, editing by Robin Paxton)

Azerbaijan And Russia To Conclude Gas Sales Deal

http://www.eurasianet.org/departments/news/articles/eav041609.shtml

4/16/09

Russia’s gas monopoly Gazprom and the State Oil Company of the Azerbaijani Republic (SOCAR) will formalize a gas sale agreement this May, said the newly appointed Russian ambassador to Baku, Vladimir Dorokhin.

Gazprom and SOCAR signed a memorandum of understanding on March 27 to pave the way for the upcoming agreement. Under the memorandum’s terms, Baku and Moscow will refurbish the pipeline link between the two countries to help connect Azerbaijan’s gas export infrastructure to Russia’s pipeline network. Since the memorandum’s signing, the two sides have been working to reconcile the particulars of the upcoming deal, the ambassador said.



Azerbaijani President Ilham Aliyev’s April 16-17 state visit to Moscow could advance that work still further.

"We hope that this process will be depoliticized," Dorokhin was quoted by the Trend news agency as saying.

Political potholes, nonetheless, remain. The deal, which relies on SOCAR-produced gas, has already raised alarm among supporters of the Western-backed Nabucco gas pipeline and similar projects, which focus on different gas sources. Moscow has promised to purchase Azerbaijani gas at a price competitive to those of the proposed Turkey and Black Sea routes.


Mr. Petar Skundric: “South Stream will most certainly go through Serbia”


http://emportal.rs/en/news/serbia/85560.print.html

16. April 2009. | 07:32

Source: EMportal

Minister of Energy and Mining, Mr. Petar Skundric, announced that during the last talks with representatives of Gaspromexport he had been given strong confirmations that the South Stream gas pipeline would most certainly go through Serbia.

Minister of Energy and Mining, Mr. Petar Skundric, announced that during the last talks with representatives of Gaspromexport he had been given strong confirmations that the South Stream gas pipeline would most certainly go through Serbia.

At the Third Annual Conference “The Future of the Energy Sector in the Balkans”, organized by Ekonomist Media Group, Mr. Skundric said that the South Stream route running through Serbia from Dimitrovgrad to Subotica had turned out to be the most optimal and most economical solution.

The Minister also said that 53 companies had applied for the pre-qualification tender for selection of a strategic partner for construction of two blocks of the thermal power plants Kolubara B and Nikola Tesla 3. “Twenty-six companies have applied for Kolubara B and 27 firms for the third block of TENT,” Mr. Skundric says.

“Fourteen respectable energy companies have expressed interest in construction of one or both facilities, while other letters of intention have been sent by construction companies, equipment producers and electricity traders,” he said, adding that by the end of April the Power Industry of Serbia would present a list of candidates that had fulfilled the pre-qualification tender terms.

He said that the Government had also given its consent for announcing a public invitation for construction of a gas-fired thermal power-heating plant of 450 megawatts in Novi Sad.

“I expect that by the end of the year we will be able to give the same consent to beginning of construction of one gas-fired thermal power-heating plant in New Belgrade as well,” Skundric said.

South Stream construction contracts to be signed

Serbian Minister of Energy and Mining Petar Skundric said also that separate contracts concerning the construction of the South Stream gas pipeline are expected to be signed between Gazprom and various national gas companies at the energy summit, to be held from April 24 to 25 in Sofia.

Speaking to the press after the conference on the energy future of the Balkans, being held at the Hyatt hotel, Skundric said that the contracts will be signed in the presence of the heads of states of the countries which are taking part in the project.

He said that the national gas companies of these countries will sign separate agreements with Gazprom at the summit in Sofia, adding that it is expected that delegations of over 100 countries, including Serbia, will be present.



Russian Prime Minister Vladimir Putin will also be present on the occasion, said the Minister.

Skundric explained that after the signing of separate contracts every country will conduct a feasibility study in order for a final agreement to be signed.

He said that Serbia has to complete the feasibility study by September this year and general preparations for the project must be completed by the end of June next year.

He said according to all estimates the gas pipeline link through Serbia is considered to be the most realistic and most economical option.

Skundric said that work has begun on demining the area through which the gas pipeline link will be built in Serbia, adding that Russian experts engaged by Russian Minister for Emergency Situations Sergei Shoigu are currently working on clearing the area of bombs left over from the 1999 NATO bombing.



Gazprom Unit Gets Sale License in Ukraine, Kommersant Reports

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4yjx._tj6Nw

By Kateryna Choursina

April 17 (Bloomberg) -- OAO Gazprom’s sales unit received a one-year license to sell natural gas to Ukrainian industry, Kommersant-Ukraine reported, citing Andriy Halushchak, the head of Gazprom Sbyt Ukraina’s legal department.

The license allows for the sale of 7.5 billion cubic meters of gas in a year, according to the Kiev-based newspaper. Gazprom Sbyt will sell about 4 billion cubic meters of the fuel in 2009, Kommersant cited Halushchak as saying.

Gazprom Sbyt signed a 10-year contract with NAK Naftogaz Ukrainy in February under which it will sell no more than 25 percent of the gas consumed by Ukraine’s industry, Kommersant reported.

To contact the reporter on this story: Kateryna Choursina in Kiev kchoursina@bloomberg.net



Last Updated: April 17, 2009 01:38 EDT

[16.04.2009 12:49]  


Gazprom: Ukraine takes too less gas


http://www.unian.net/eng/news/news-311512.html

Gazprom deputy CEO Valeriy Golubev believes that the negative foreign trade balance of the Ukrainian economics is a certain threat for Russia, as Ukraine may fail to pay for the consumed natural gas in full and on time.

According to an UNIAN correspondent, he said this in Kyiv at a press conference on Wednesday.

According to V.Golubev, due to the economic recession, Ukraine buys by 40% less gas than in the previous years. According to him, the Ukraine’s demand in 2009 made up 33 billion cubic meters of gas.

“Considering the reduction of such a significant volume of gas – less by 22 billion cubic meters than usual, we have to correct the gas balance, exploration plans, as well as transportation plans”, the Gazprom deputy CEO said.

Gazprom may benefit from Russian government borrowing


http://www.glgroup.com/News/Gazprom-may-benefit-from-Russian-government-borrowing-37549.html

April 16, 2009



  • Analysis by: Michael Lynch

  • Analysis of: Russia May Turn to Foreign Banks for Loans to Cover Deficit

  • Published at: www.nytimes.com

Implications


Andrew E. Kramer in Moscow reported in the New York Times on April 15 that Russia may borrow money from foreign banks in 2010. Their finance minister Aleksei L. Kudrin in a cabinet meeting signaled that the Kremlin was planning for a long recession. The government will hold a road show this year to familiarize investment banks with Russia’s situation. The return to foreign borrowing could help the Russian economy by setting a benchmark rate for corporate lending. Russia would test the water with relatively small amounts. Mr. Kudrin said Russia might seek $5 billion in 2010. Russia currently holds $385 in gold bullion and foreign reserves. The government’s credit rating is strong while the ratings of Russian companies is near-junk. According to Rory MacFarquhar, “Russia is not in a desperate state.” If crude oil prices rose slightly, Russia could get through 2010 without borrowing. Russia is linked to the global economy. Moderate improvement would be good for Russia.

Analysis


 The worldwide financial crisis has introduced severe planning problems for all energy-related projects. No one can determine how much lead time is needed to finance oil and gas field developments because it is presently impossible to forecast exactly when more oil and gas will be required. Major international companies can predict with some accuracy funds needed to buy crude oil, maintain essential levels of equity production and keep refineries running. But Russia, and other large exporters, aside from domestic requirements, can only sell oil and gas for general export. Russia, like many others state-run economies, also must budget for extraneous but essential social programs. Export demand is firmly in the hands of buyers, many of which are in Asia. When the Russia-China oil pipeline goes into operation in a few weeks, Russia will find out quickly how much China will import immediately. But requirements in 2010 and beyond will depend on a number of imponderables. It is known that Exxon Mobil (XOM) plans capital spending of $25-30 billion/year for at least the next five years to support production runs of 3 million bbl/day. For Russia to hold 9.5-10 million bbl/day for five years will require $120 billion using the XOM model. Half of that will likely be provided by co-venturers Royal Dutch Shell, Total, ConocoPhillips, StatoilHydro and BP. So Gazprom and other state-controlled companies will need to find $60 billion/year. Russia has a long list of projects to become part of its overall energy portfolio. In addition to the Nord Stream (under the Baltic Sea) and South Stream (under the Black Sea) pipelines, another long line to China is planned and then development of Shtokman natural gas/gas condensate field in the Barents Sea plus other super giant natural gas fields in Eastern Siberia. Russia is blessed with a vast potential of projects and co-venturers with solid balance sheets. Five years looks to be the appropriate time frame for oil and gas prices to return to 2007-08 levels. Thus oil and gas projects will have to be financed with substantial borrowing. Taking the view that prudent borrowing to create wealth will not undermine the national financial system, Russia’s plans to enter the credit markets in 2010 is a reasonable calculation of future probability. By 2015, oil and gas prices will be higher for the simple reason that there will be less of it available.
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