Moscow Times: For the Record

Activity in the Oil and Gas sector (including regulatory)

Oil and Gas Eurasia: Russia Losing $1.3bn in Flared APG

According to a report from the Russian Accounting Office (RAO), Russia lost 38.3 billion rubles in 2009 from flaring associated petroleum gas. The office drew this conclusion based on figures from seven companies. Rosneft, LUKOIL, TNK-BP, Gazprom neft, Russneft, Bashneft and Slavneft flared 19.96 billion cubic meters of gas last year, or 64.3 percent of what was produced.

The figure of 38.3 billion rubles ($1.3 billion) was derived from the price of natural gas in Russia (1,920 rubles per 1,000 cubic meters). In calculating the average price of Gazprom supplies of gas to Europe ($285), the losses are four times the size – $5.7 billion.

It is impossible to calculate the figures with any greater precision, since Russia still does not have reliable statistics on either the production or flaring of APG.

The Natural Resources Ministry shows the country produced 39.6 billion cubic meters in 2008, while the Energy Ministry quotes a figure 50 percent higher – (60.3 billion). Figures for flaring differ from 12.1 billion cubic meters cited by the Natural Resources Ministry to 15.6 billion cited by Rostechnadzor, the Russian technical standards watchdog. Oil companies themselves do not disclose this information.

The government has insisted that 95 percent of APG be recovered by 2012, but this

Comes at a high price. The total spent by six of the above seven companies (not including Bashneft) from 2009-2012 will be 245.1 billion rubles or $8.5 billion.

Russia flares more than any other country in the world. According to the World Bank, in 2005 Russia flared 55.2 billion cubic meters of APG, putting it in first place.

Meanwhile, Russian authorities are trying to rectify the situation. In January 2009, Prime Minister Vladimir Putin signed a resolution setting a limit of flaring 5 percent of APG produced by 2012.

Copyright 2010, Oil and Gas Information Agency. All rights reserved.
22.03.2010

Oil and Gas Eurasia: Putin, Oil Majors Tussle Over Ag Discounts

Russian oil companies gave in to Prime Minister Vladimir Putin over the week-end after the head of the Russian government criticized them for failing to provide the agriculture sector with discounts on fuel for the spring sowing season. The governors of agricultural regions complained to Putin that oil companies raised prices on the eve of the sowing season effectively nullifying the 10 percent discount they were supposed to provide to farmers.

“Rosneft gave us an 8 percent discount, but at the same time, raised the wholesale price on diesel fuel 7 percent over the past two weeks”, Stavropol Governor Valeriy Gayevskiy told Putin durig a meeting between the prime minister and the heads of agriculture regions. Aleksandr Tkachev, the governor of the neighboring Krasnodar Territory added: “The minus 10 percent for ag produces was turned into zero. It is obvious there is a trend among oil companies to ratchet up prices”.

After this attack, Putin was forced to ask, “So, have oil companies tried to take advantage of our ag sector or have there been some technical problems?”

Deputy Prime Minister and Chairman of the Rosneft board of directors tried to blame world oil prices, saying, “Oil prices have grown 9.4 percent on foreign markets since the beginning of the year. You can’t just up and fix oil prices, since oil is a commodity that is not regulated”.

Putin did not give in however and reminded the oil sector that, “Before, we have worked well with oil companies: we supported them when needed and they supported other sectors of the economy”.

After Sechin met with oil company representatives, a decision was made to offer the 10 percent discount based on prices on 31 December 2009.

Copyright 2010, RBK Daily. All rights reserved.  

RenCap: LUKOIL's Caspian launch delayed by one month

http://www.businessneweurope.eu/dispatch_text11379

Renaissance Capital, Russia

Event: Argus Media reported on Friday (19 Mar) that LUKOIL plans to start production from its Yuri Korchagin field in the Russian sector of the Caspian Sea in late April/early May, contrary to the previous target of Mar 2010. According to Argus, technical glitches are causing the delay, but no additional information had been provided.

Action: We retain our BUY rating on LUKOIL and believe this news is neutral for its share price.

Rationale: The oil production from the Yuri Korchagin field will mark LUKOIL's first oil in the Caspian province, which is set to be LUKOIL's only significant growth area in Russia accounting for 13% of its total Russian crude output in 2015E. At the same time, the expected contribution from the Yuri Korchagin field itself is not that material with planned peak output of 45kbpd, just 2.5% of LUKOIL's estimated average daily production in 2010. Within this context, a further one month delay to the field's launch is neutral (originally, the launch was planned for Dec 2009), and is not unexpected given the complexities of the infrastructure build-up.

Alexander Burgansky

RBC: Lukoil posts jump in Q4 2009 net profit

http://www.rbcnews.com/free/20100322104602.shtml

      RBC, 22.03.2010, Moscow 10:46:02.Lukoil's net profit under RAS increased 3.4 times to RUB 5.89bn (approx. USD 201m) in the fourth quarter of 2009 compared to the previous quarter's RUB 1.76bn (approx. USD 60m), the Russian oil giant indicated in a statement today. Considering the company's previously published data for the first nine months of the year, Lukoil's net profit under RAS slumped 32.8 percent to RUB 45.14bn (approx. USD 1.54bn) in 2009, while it amounted to RUB 67.22bn (approx. USD 2.3bn) in 2008.

      The company attributes the rise in net profit in Q4 against Q3 2009 and Q4 2008 to the decrease in expenditures connected with exchange rate differences and lower expenses on the services of loan organizations.

Moscow Times: State Won’t Buy Into LUKoil

The Energy Ministry said Friday that it saw no reason for the government to buy shares in private oil firm LUKoil if U.S. major ConocoPhillips decides to reduce its 20 percent stake.

“I think there is no reason for Russia [to buy the shares] … I am not aware of any negotiations,” Deputy Energy Minister Stanislav Svetlitsky told reporters.

(Reuters)

Steel Guru: LUKoil to drill first exploration well at Iraq West Qurna 2

http://steelguru.com/news/index/MTM3ODI0/LUKoil_to_drill_first_exploration_well_at_Iraq_West_Qurna_2.html
Monday, 22 Mar 2010

RIA Novosti cited Mr Vagit Alekperov CEO of LUKoil as saying that Russia largest privately held oil company, LUKoil, plans to drill the first exploration well at the West Qurna-2 oil field in Iraq.

He said that "We'll start drilling the first exploration well at the end of the year."

On January 31, LUKoil signed a 20 year contract to develop Iraq massive West Qurna-2 oil field.

LUKoil will develop the 12.88 billion-barrel oil field in the Basra province in southern Iraq as a consortium with Norway StatoilHydro. The consortium in which the Russian company holds 56.25% and StatoilHydro 18.75%, won the tender for the oil field in December 2009.

The Iraqi National Oil Company will also join the consortium and hold a 25% stake in the project.

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.

Alekperov earlier said that the international consortium led by LUKoil would invest some USD 30 billion in the development of the West Qurna-2 oil field.

(Sourced from RIA Novosti)

Reuters: UPDATE 1-Surgut shares soar on index reweighting –traders

* Shares climb 7 percent, volumes triple

* Investment weight raised on FTSE GEIS index

* Gazprom Neft, NLMK also gain

(Adds closing prices, detail on reweighting, trader comment)

MOSCOW, March 19 (Reuters) - Shares in Russia's Surgutneftegaz (SNGS.MM) closed 7.6 percent higher on three times average volume as the firm was given a new investment weighting by the FTSE Global Equity Index.

The company was the highest riser of a trio of Russian stocks to receive a higher weighting in the reshuffle, which is detailed on the FTSE website.

The other two, Gazprom Neft (SIBN.MM) and NLMK (NLMK.MM), closed up 3 percent and 3.7 percent, respectively, in a falling market.

The FTSE Global Equity Index series said Surgut would be given an investment weight of 100 percent as of the market close on Friday, up from a previous 50 percent.

Gazprom Neft was upgraded to 30 percent from 8 percent, while steel firm NLMK was raised to 30 percent from 13 percent.

"Obviously (the rises) are connected to the rebalancing of the index," a UBS trader told Reuters.

Moscow's MICEX closed down 0.9 percent (Reporting by Zlata Garasyuta, writing by John Bowker; editing by Will Waterman)

The crude oil production of TNK-BP subsidiaries in the Orenburg Region, OJSC Orenburgneft and LLC Buguruslanneft, exceeded 3.1 mln tonnes in January-February, which represents a year-on-year growth of 11.4%.

The total gas production approximated 394.4 mcm over the first two months of 2010, which is 4.3% higher than in January-February 2009. Well interventions were performed on 231 wells in January-February to ensure increase of crude oil production, which is 9% higher than the result of the first two months of 2009.

2010-03-22 07:15

NEW DELHI, March 22 (Reuters) - Indian state-run Oil and Natural Gas Corp is in talks with three Russian companies for oil and gas partnerships in Russia and the CIS region, its chairman said on Monday.

(Reporting by C.J. Kuncheria; Editing by Ranjit Gangadharan)

((sumeet.chatterjee@thomsonreuters.com; +91-22-6636 9068; Reuters Messaging: sumeet.chatterjee.reuters.com@reuters.net)) Keywords: ONGC RUSSIA/PARTNERSHIPS (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)
India Times: OVL to bid for Sakhalin-3 with Russian cos

http://economictimes.indiatimes.com/Oil-Gas/OVL-to-bid-for-Sakhalin-3-with-Russian-cos/articleshow/5709976.cms

22 Mar 2010, 0140 hrs IST, ET Bureau

CHENNAI: After ONGC’s success in bidding for oil fields in Latin America, the government is now looking for opportunities in Russia. Petroleum

& natural gas secretary S Sundareshan said ONGC Videsh will jointly bid for the Sakhalin-3 project as soon as the Russian government gives the go-ahead.

“In Sakhalin, as and when the Russian government opens up their process of decision making, we are sure that ONGC Videsh (OVL) will participate. Recently, when the Russian PM visited India, we strongly put forward the case that OVL should bid jointly with Rosneft or Gazprom, so that will be our strategy in Russia. It’s not the question of having success in one block but the process of bidding,” Mr Sundareshan said on Saturday.

Talking about compensating oil marketing companies over mounting under-recoveries, Mr Sundareshan said discussions are on and the money will build into the next financial year.Under-recoveries are the losses incurred by oil companies for selling fuel at subsidised prices. The under recoveries for the year 2009-10 is likely to be of the order of 45,000 crore. The formula for the current year is that the under recoveries on petrol and diesel will be absorbed by the upstream companies and the under recoveries on kerosene and LPG will be absorbed by the government.

Under-recoveries on petrol and diesel is likely to be between Rs 13,000-14,000 crore, of which Rs 8,500 crore has been released by up stream companies. The balance is expected to be released in the course of the fourth quarter.

This will leave Rs 30,000-31,000 as the under recoveries on kerosene and LPG of which Rs 12000 crore has been released by the government in the last supplement of the current financial year.

“Historically, the balance is discussed in the course of the first few months of the next financial year, because the oil marketing companies will be finalising their accounts only in April or early may. Discussions continue with the ministry of finance. There is no reason for any doubt that this (compensation) will be provided in the first few months of the next financial year,” Mr Sundareshan said.

On the subject of fuel pricing, he said domestic consumers cannot be forever insulated from volatility in international market and that the government can have specific schemes to protect the poor. But, “hard decisions are necessary.”

He added that the government will take up the recommendations of the Kirit Parikh report but did not specify a timeline. Economist Parikh presented a report on fuel pricing to the petroleum minister last month, where he made a case for deregulation of oil prices besides recommending an immediate hike in the price of kerosene by Rs 6 per litre and LPG by Rs 100 a cylinder.

Stressing the need for better gas pipeline connectivity in the South, Mr Sundareshan said Tamil Nadu will get three gas pipelines by 2012, as the Southern part of India was short of gas compared to the West and North India.

“I am extremely concerned about pipeline connectivity to Tamil Nadu. I am giving a time frame of pipe lines being commissioned from March 2012 to the end of the year, everything to be completed by end of 2012. There will be connectivity to Madras Fertilizers and Spic through this,” he said.

State-owned Gail would be laying one pipeline between Bangalore and Chennai, Reliance Industries Ltd will be put-ting up pipelines between Kakinada and Chennai, which would be extended to Tu-ticorin.

Gail will also be executing the Dhabol-Bangalore pipeline with connectivity to Goa, Cochin-Mangalore pipeline with connectivity to Bangalore, Haldia-Jagdishpur pipeline. Reliance will also be executing the Chennai and Bangalore and the Kakinada-Haldia pipeline.

After ONGC’s success in bidding for oil fields in Latin America, the government is now looking for opportunities in Russia. Petroleum & natural gas secretary S Sundareshan said ONGC Videsh will jointly bid for the Sakhalin-3 project as soon as the Russian government gives the go-ahead.

“In Sakhalin, as and when the Russian government opens up their process of decision making, we are sure that ONGC Videsh (OVL) will participate.

Talking about compensating oil marketing companies over mounting under-recoveries, Mr Sundareshan said discussions are on and the money will build into the next financial year.Under-recoveries are the losses incurred by oil companies for selling fuel at subsidised prices.

The under recoveries for the year 2009-10 is likely to be of the order of 45,000 crore. The formula for the current year is that the under recoveries on petrol and diesel will be absorbed by the upstream companies and the under recoveries on kerosene and LPG will be absorbed by the government.

Under-recoveries on petrol and diesel is likely to be between Rs 13,000-14,000 crore, of which Rs 8,500 crore has been released by up stream companies. The balance is expected to be released in the course of the fourth quarter. This will leave Rs 30,000-31,000 as the under recoveries on kerosene and LPG of which Rs 12000 crore has been released by the government in the last supplement of the current financial year.

“Historically, the balance is discussed in the course of the first few months of the next financial year, because the oil marketing companies will be finalising their accounts only in April or early may. Discussions continue with the ministry of finance. There is no reason for any doubt that this (compensation) will be provided in the first few months of the next financial year,” Mr Sundareshan said.

On the subject of fuel pricing, he said domestic consumers cannot be forever insulated from volatility in international market and that the government can have specific schemes to protect the poor. But, “hard decisions are necessary.”

He added that the government will take up the recommendations of the Kirit Parikh report but did not specify a timeline. Economist Parikh presented a report on fuel pricing to the petroleum minister last month, where he made a case for deregulation of oil prices besides recommending an immediate hike in the price of kerosene by Rs 6 per litre and LPG by Rs 100 a cylinder.

Stressing the need for better gas pipeline connectivity in the South, Mr Sundareshan said Tamil Nadu will get three gas pipelines by 2012, as the Southern part of India was short of gas compared to the West and North India.

“I am extremely concerned about pipeline connectivity to Tamil Nadu. I am giving a time frame of pipe lines being commissioned from March 2012 to the end of the year, everything to be completed by end of 2012. There will be connectivity to Madras Fertilizers and Spic through this,” he said.

State-owned Gail would be laying one pipeline between Bangalore and Chennai, Reliance Industries Ltd will be put-ting up pipelines between Kakinada and Chennai, which would be extended to Tu-ticorin.

Gail will also be executing the Dhabol-Bangalore pipeline with connectivity to Goa, Cochin-Mangalore pipeline with connectivity to Bangalore, Haldia-Jagdishpur pipeline. Reliance will also be executing the Chennai and Bangalore and the Kakinada-Haldia pipeline.

Gazprom

Moscow Times: EU Clears Poland’s Long-Term Gazprom Deal

Reuters

Polish media have speculated that the EU could object to the agreement, which ensures gas deliveries to Poland for the next 22 years, because it fears that the deal breaches EU rules on third-party access to gas transit.

"There are no obstacles for Poland to sign the supply deal," Oettinger told a news conference in Warsaw. "A working group has been settled to check the deal's compliance with EU rules. … Arrangement in this respect will be made by midyear."

Last month, Poland's government approved a long-delayed gas deal with Russia ensuring higher deliveries until 2037, with the settlement still awaiting a final rubber stamp.

Warsaw faced an annual shortfall of 2.5 billion cubic meters of gas as of 2010. The new accord with export monopoly Gazprom has been delayed repeatedly because of lengthy negotiations and a spat between the Russian gas giant and Poland's gas monopoly, PGNiG.

Poland imports about 65 percent to 70 percent of the 14 billion cubic meters of its annual gas consumption from Russia.

Oettinger, who became Europe's energy commissioner in February, has reached out to Moscow since taking the post, including being friendlier to the Gazprom-led South Stream pipeline.

"Security is not only about energy — we need other products to survive too," Oettinger said in an interview last week. "Russia is an important neighbor and partner."

Managers of Gazprom Dobycha Yamburg Ltd are very interested in projects of Aker Arctic a Finnish research centre. Tankers designed by the company in the future may be used for Parusovaya group of fields near the operating infrastructure of Yamburg oil and gas condensate field.

Gazprom Dobycha Yamburg Ltd is a Gazprom subsidiary which accounts for more than 40% of the holding's production volumes. Total reserves of the Parusovaya group exceed 400 billion cubic meters of natural gas.

The press service of Gazprom Dobycha Yamburg informed RusBusinessNews that no particular details were discussed during the visit of Aker Arctic representatives to Yamal. Only Gazprom management can make a decision regarding a deal of this kind.