Moscow airport Vnukovo to impose noise restrictions in 2011

Activity in the Oil and Gas sector (including regulatory)

      RBC, 26.10.2010, Moscow 10:58:39.Bashneft has made an advance payment in the amount of RUB 18.171bn (approx. USD 601m) for participation in the tender for the development of Trebs and Titov strategic oilfields, the oil company's press office reported to RBC on Monday. The money was transferred to the bank account of the federal agency for subsoil resources (Rosnedra). As reported earlier, the deadline for making an advance payment was set for October 25.

      Bashneft is the only other company besides Surgutneftegas that has been admitted to participate in the bid for the two oilfields. The tender is scheduled for December 2, 2010, with the license for Trebs and Titov oilfields to be granted for 25 years.

Shell to prospect oil and gas in Russia’s Astrakhan

The world’s oil and gas giant Shell will use its cutting edge technology in prospecting oil and gas in Russia’s southern region of Astrakhan.

A relevant agreement was reached by Astrakhan’s governor Alexander Zhilkin and Shell representative Charles Watson. 

The known deposits of Astrakhan amount to 900 million tons of oil and 5 billion cubic meters of gas.

t is reported that Novatek acquired 100% in Novatek Ust Luga. Earlier, it had none stakes in this Company.

Novatek is ranked as the second producer of natural gas in Russia after Gazprom. The fields are located in Yamalo Nenetsky region. The stocks are under trading on LSE. It managed to increase the proved reserves by 38.1% to 6.853 billion barrels.

In 2009 the gross output gained 32.78 billion cubic meters, hydrocarbons 3.049 million tonnes.

In Q1 2010 the output of gas rose 20.8% to 9.98 billion cubic meters in 2009 production reached 32.78 billion cubic meters. The fields and licensed sectors are located in Yamalo Nenetsky reg. The stocks are traded on LSE.

(Sourced from AK&M)

Vladimir Socor

Using the Odessa-Brody oil pipeline as originally intended, south-north, is under active consideration again; this time, by the governments of Ukraine and Belarus.

The pipeline is being used since 2004 in reverse, north-south, by Russian oil companies, for exports out of Odessa. Such reverse-use blocks the access of non-Russian oil into the Odessa-Brody pipeline for supplying Ukraine and other countries in the region. These countries have sought unsuccessfully to correct the situation during the intervening years.

Four recent developments are spurring the same countries to re-open the issue:

1. 
   Russia has imposed a steep price hike through export duties on crude oil to Belarus, compounded by taxation of Belarusian exports of oil products refined from Russian crude. This has compelled Belarus to seek non-Russian supplies for its massive oil-processing industry, so as to maintain operations and avert a Russian takeover of the assets.
   
2. 
   The growing volumes of Venezuelan oil are potentially available for delivery at Ukrainian Black Sea and Baltic ports and onward transportation to the land-locked Belarus. While the cost-effectiveness of existing transportation by railroad is questionable, the Odessa-Brody pipeline would alleviate this problem, if used northward to Brody as originally intended.
   
3. 
   Russian oil transit through the Druzhba pipelines via Belarus and, especially, via Ukraine to Europe is expected to decline in the years ahead, as Russia re-directs export volumes toward its own Baltic Pipeline System (BPS 1 and 2). This underscores the need for diversification of suppliers and supply routes, preeminently Odessa-Brody south-north.
   
4. 
   Russian oil shippers are sharply reducing their export volumes through the Odessa-Brody pipeline north-south, thereby releasing Ukraine from contractual obligations on reverse-use, and freeing pipeline capacity for non-Russian oil to flow in the originally intended direction, south-north.
   

Belarus plans to access about half of that annual volume via Odessa and the remainder via Baltic ports. Belarus has already started significant imports of Venezuelan oil, with a planned volume of 4 million tons in 2010 (Belapan, October 13).

Among Baltic ports, Lithuania’s Klaipeda is the leading option for Belarus to import Venezuelan and other non-Russian oil. Lithuanian President, Dalia Grybauskaite, and accompanying officials, visiting Minsk on October 20, reached preliminary agreement with their Belarusian counterparts on oil transportation from Klaipeda. The agreement is expected to be finalized by November (Interfax, October 20).

On October 18 in Kyiv, President Viktor Yanukovych held talks with the visiting President Chavez regarding Venezuelan oil transportation via Ukraine for Belarus. According to Yanukovych, Ukraine has considerable spare capacity in its oil transit pipelines (Druzhba system) and is also keen to use the Odessa-Brody pipeline for inflow into the country (Interfax-Ukraine, October 18, 21). Yanukovych was alluding to the decline in Russian oil exports via Ukraine to Europe, as Moscow redirects oil volumes for shipment by tankers via the Baltic Sea.

The Odessa-Brody pipeline has been under-utilized continuously since 2004. TNK-BP and other Russian oil companies, using this pipeline in reverse, supplied far less than its capacity volume of 9 to 12 million tons per year. This prompted suspicions that commerce was only one reason for Russian reverse-use, the other presumed reason being denial of access to non-Russian oil supplies for Ukrainian refineries. Meanwhile, the oil flow to Odessa has further declined in the second quarter of 2010 for unclear reasons, and is said to have practically stopped in October (Nezavisimaya Gazeta, October 20).

This situation allows the Ukrainian government to prepare for using this pipeline for inflow of oil from Odessa, instead of outflow. Once that happens, however, there is no optimal transport solution yet from Brody to Belarus.

Oil is being moved from Odessa by railroad at present. Belarus started imports of Venezuelan oil from Odessa’s Pivdenny terminal in April of this year. These imports hit the 1 million ton mark by mid-October and are planned at 1.5 million tons for 2010. The Ukrainian government has reduced taxes on oil transportation of oil bound for Belarus at the Pivdenny port and on Ukrainian railroads (Interfax-Ukraine, October 21).

On October 12 in Kyiv, First Deputy Prime Ministers Andriy Kliuyev of Ukraine and Uladzimir Syamashka of Belarus signed an inter-governmental agreement on oil transportation for the years 2011-2015. The agreement envisages transit of 4 to 5 million tons of oil per year, from Odessa/Pivdenny via Ukraine to Belarus (Interfax-Ukraine, October 21).

Also on October 12, the Ukrainian government approved the test-pumping of a consignment of 80,000 tons of Venezuelan oil through the Odessa-Brody pipeline, and onward through a section of the Druzhba pipeline, to the Mozyr refinery in Belarus. Proposed by Ukraine’s Fuel and Energy Minister, Yury Boyko, and scheduled for November, the move necessitates “batch-pumping” –a method to forward oil of different densities through a pipeline in separate batches, without mixing them. The amount of 80,000 tons corresponds with the capacity of tankers being handled at Odessa’s Pivdenny terminal (Interfax-Ukraine, UNIAN, October 12, 14; BELTA, October 13).

Russian Energy Minister, Sergei Shmatko, however warned publicly, while in Kyiv, that pumping Venezuelan oil via Odessa-Brody-Druzhba to Mozyr would necessitate Russian approval. Boyko retorted also publicly that Ukraine has a right to act in its national interest and that of its partner Belarus (Interfax-Ukraine, October 14, 15). The main technical issue is almost certainly the composition of Venezuelan oil.

Using the Odessa-Brody pipeline south-north, as originally intended, is also a matter of interest to Poland. The Sarmatia consortium, last restructured in 2007 with Polish, Ukrainian, and Lithuanian participation, had expected to import oil through this pipeline ever since Ukraine completed it in 2002. The Polish refineries at Plock and Gdansk were the designated customers, pending an optimal transport solution from Brody onward. Polish Prime Minister, Donald Tusk, recently urged the visiting Ukrainian Prime Minister, Nikolai Azarov, to consider this issue again (PAP, September 30), as did the Sarmatia consortium chief in a statement to the Ukrainian government (UNIAN, October 14).

These countries had intended to import Caspian oil through the Odessa-Brody pipeline and a northbound continuation route. From 2002 onward, however, Russia blocked the access of Kazakhstani oil via Novorossiysk to Odessa. Deliveries of Azerbaijani oil would have been feasible via Georgia’s Black Sea coast to Odessa, but Russian companies blocked the inland access into Ukraine through the Odessa-Brody pipeline, by using it in reverse. Venezuelan oil deliveries inland by railroad, or batch-pumped by pipeline, are temporary, emergency-dictated solutions. A real solution would have to start with the Ukrainian government regaining sovereignty over the Odessa-Brody pipeline, for northward use.

Source: http://www.jamestown.org/programs/edm/

Lukoil Junk Threat Eases Before Eurobond Sale: Russia Credit

Oct. 26 (Bloomberg) -- Investors are growing more confident that OAO Lukoil will avoid having its credit ratings cut to junk as the oil producer’s debt yields approach those of higher- graded OAO Gazprom.

Lukoil’s $500 million of bonds due in 2022 yield 23 basis points more than state-controlled Gazprom’s $1.3 billion of notes due the same year, the smallest spread in a month, data compiled by Bloomberg show. Lukoil yields are falling as Russia’s largest non-state oil company meets bondholders in Asia, Europe and the U.S. this week to garner support for a dollar debt sale, said two people with knowledge of the offer.

While Standard & Poor’s said Oct. 22 it may cut Moscow- based Lukoil’s ratings to below investment grade, the bonds are outperforming debt from Petroleo Brasileiro SA, Brazil’s state- run oil producer, and Russian competitor TNK-BP. Chief Executive Officer Vagit Alekperov agreed to buy $1.4 billion of Lukoil’s shares with a group of investors and pledged $4.47 billion of his stock as collateral to back loans, according to regulatory filings this month, easing concern that the company would increase debt to buy back its own equity from ConocoPhillips.

“Lukoil is looking quite sound in terms of its credit quality” because the buyback was “funded by management, not the company’s balance sheet,” said Andrey Basatskiy, a Moscow- based fixed-income money manager at Third Rome, which oversees about $200 million of assets.

Bond Meetings

Lukoil hired Barclays Capital, ING Groep NV and Royal Bank of Scotland Group Plc to manage its sale of bonds, according to the two people with knowledge of the sale, who declined to be identified because the deal hasn’t been announced. The maturity hadn’t been decided, they said on Oct. 21. Lukoil’s press service declined to comment on the bond offering.

The company probably will raise between $750 million and $1.2 billion, said Sergey Dergachev, who helps manage $6 billion of emerging-market debt at Union Investments in Frankfurt. The yield for 10-year bonds probably would be about 6 percent, he said.

Lukoil last sold international debt in October 2009, offering $900 million of five-year bonds and $600 million of 10- year dollar securities, data compiled by Bloomberg show. The yield on Lukoil’s 7.25 percent bonds due in November 2019 fell 7 basis points, or 0.07 percentage point, yesterday to 5.64 percent, down from the peak of 8.13 percent on May 25.

Yields Fall

The yield on Lukoil’s bonds due in 2022 fell 5 basis points to 5.92 percent yesterday, down from 6.23 percent on Oct. 1, Bloomberg prices show. The spread over Gazprom has narrowed from 54 basis points at the start of this month.

Lukoil’s dollar bonds due November 2014 yield 99 basis points more than Rio de Janeiro-based Petrobras’s September 2014 dollar notes, compared with a spread of 160 in August and 271 on May 25.

“Lukoil compares very well against similar companies like Petrobras,” Dergachev said in a phone interview. “The ConocoPhillips buyback was not hugely detrimental to the company’s standing.”

Lukoil’s bonds also outperformed those of TNK-BP, the oil producer that is owned by London-based BP Plc and a group of Russian billionaires. TNK-BP’s bonds due in 2020 are yielding 15 basis points more than Lukoil’s 2019 notes, a reversal from August when the notes sold by TNK-BP were yielding as much as 51 basis points more.

All three oil companies are rated BBB- by Standard & Poor’s. Gazprom, based in Moscow, is graded a level higher at BBB.

Extra Yield

The yield on Russia’s dollar bonds due in 2020 was little changed at 4.34 percent yesterday. The country’s ruble notes due November 2014 were unchanged, yielding 7.14 percent.

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell 2 basis points to 209, according to JPMorgan Chase & Co. EMBI+ indexes. The difference compares with 139 for debt of similarly rated Mexico and 181 for Brazil, which is rated two steps lower at Baa3 by Moody’s.

The yieldspread on Russian bonds is 45 basis points below the average for emerging markets, down from a 15-month high of 105 in February, according to JPMorgan indexes.

Ruble Gains

The ruble gained for a third day against the dollar, strengthening 0.4 percent to 30.2475 per dollar in Moscow trading yesterday. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, showed the ruble at 30.5138 in three months.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell 1 basis point to 142, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third-lowest investment grade, cost 6 basis points more than similar contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

Moody’s rates Lukoil Baa2, its second-lowest investment- grade ranking, with a “stable” outlook.

Gazprom

Returns on Lukoil bonds had been underperforming Gazprom after S&P placed the oil company’s debt on “watch negative” on July 29 because of concern the company would increase debt to buy back shares. Lukoil agreed to buy 7.6 percent of its own shares for $3.44 billion on July 28 as Houston-based ConocoPhillips sold its stake to repay debts.

Alekperov, Russia’s sixth-richest man with a fortune of $10.6 billion according to Forbes magazine, was among a group of investors that helped buy an additional 5 percent stake with UniCredit Bank AG from ConocoPhilips for $2.4 billion under an option that expired Sept. 26, according to a regulatory filing on Sept. 27.

As part of the deal, Redruth Investments, a company linked to Alekperov, gained 2.9 percent of Lukoil for $1.4 billion on Sept. 28 and raised an undisclosed amount of money from a group of banks led by UBS AG after pledging 77 million shares as collateral a week earlier, valued at $4.5 billion based on the share price at the time. Lukoil paid $980 million for the other 2.1 percent, according to a regulatory filing.

“We view Lukoil’s liquidity management as less robust, historically, than that of its investment-grade peers,” S&P analysts including Andrey Nikolaev said in the Oct. 22 report. “We understand from management that it may take several actions in the coming weeks to strengthen its debt-maturity profile.”

Lukoil expects to have $5 billion in free cash flow by the end of this year and isn’t in danger of a rating cut because of the share buyback, Deputy Chief Executive Officer Leonid Fedun told reporters in Moscow on Oct. 6.

“Lukoil is a name we like, they’re much more conservative” in terms of debt compared with competitors, said Jerome Benathan, who manages the equivalent of about $1.5 billion of debt at Swisscanto Asset Management in Zurich. “They are moving from a shareholder-friendly attitude to a more opportunistic bondholder-friendly one before the new issuance.”

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Last Updated: October 25, 2010 17:05 EDT

Gazprom

October 26, 2010 10:29

Gazprom scouting Sakhalin sites for oil refinery

YUZHNO-SAKHALINSK. Oct 26 (Interfax) - Russian gas giant Gazprom (RTS: GAZP) has begun the legwork and investment studies for an oil refinery it might be building on Sakhalin, director of Gazprom's headquarters in the Sakhalin region Vladimir Kozlov told deputies from the regional Duma.

The work is being done in conjunction with related subdivisions in the regional administration. The general idea is that the refinery will be able to produce 4-5 million tonnes of oil products per year.

These new facilities will be some of the most modern in Russia's Far East, and will process gas condensate and oil produced by the Sakhalin-3 project.

"Whether the plant will be near to Sakhalin-3 facilities or a warm-water port in the island's south will be decided by specialists from OJSC Gazprom's scientific research institutions," Kozlov said.

Cf

Gazprom Seeks ONGC’s Sakhalin Stake, IANS Says (Correct)

By Amit Prakash

(Corrects second paragraph to show Rosneft owns project stake.)

Oct. 26 (Bloomberg) -- OAO Gazprom is considering supplying liquefied natural gas to India in exchange for the 20 percent stake in the Sakhalin-1 project held by state-owned Oil & Natural Gas Corp., the Indo-Asian News Service reported citing Stanislav Tsygankov, the head of foreign relations at the Russian company.

OAO Rosneft and India’s ONGC own 20 percent each of the project controlled by Exxon Neftegas Ltd. and Japan’s Sakhalin Oil & Gas Development Co., which hold 30 percent apiece, according to the IANS report.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

"It is one of the elements of the talks, though it is not yet being implemented," Gazprom's head of foreign relations Stanislav Tsygankov said of the possible trade-off of the Sakhalin-1 stake.