THE EAST SUDDENLY SEES RED — RUSSIA AND CHINA IN CLASH OVER OIL PRICING AND OIL SUPPLY – TRANSNEFT CHARGES CHINA NATIONAL PETROLEUM WITH “SOCIALISM”
http://www.businessinsider.com/the-east-suddenly-sees-red-8212-russia-and-china-in-clash-over-oil-pricing-and-oil-supply--transneft-charges-china-national-petroleum-with-socialism-2011-4
By John Helmer, Moscow
Just four months since the first Russian crude oil started pumping into Daqing, the northeastern Chinese oil town, the Russian pipeline company Transneft has charged the China National Petroleum Company (CNPC) with violating their supply contract, and is threatening to open court proceedings in London.
The state-owned Transneft revealed to Fairplay today that the breakdown in trust between Russia and China is focused on the pricing for the oil which Transneft is pumping by its new Siberian pipeline from Skorovodino to the Chinese border, according to a contract signed in 2008 with CNPC. The presidents of China and Russia officially inaugurated the completion of the pipeline on both sides of the border on September 25, last year.
The pipeline project was first conceived by Mikhail Khodorkovsky’s Yukos more than a decade ago, and initial negotiations with Beijing were conducted by Khodorkovsky’s representatives. Their attempt to break the Transneft monopoly on pipeline oil exports was one of many problems that triggered the arrest of Khodorkovsky in October of 2003, and his subsequent prosecution and imprisonment.
The takeover of Yukos by Rosneft, and the replacement of Khodorkovsky as the prime mover in the project by Deputy Prime Minister Igor Sechin did not clear the many negotiating obstacles that arose from both sides. When finally completed in 2009, the Sino-Russian negotiations carried a $25 billion financing from Beijing, the largest loan ever made to a Russian company. Repayment is tied to the oil flow, its volume and also its price.
Ahead of the ceremonial completion of the pipelaying, Prime Minister Vladimir Putin said last year: “For China, these are stable deliveries to the country’s energy balance, and for us an exit to new promising markets and in this particular case, to the expanding Chinese market.
It now appears this was wishful thinking.
On January 1, this year, according to a CNPC announcement, “At 6:30 am local time, the oil supply valve at Russia’s Skovorodino off-take station was turned on. At 5:48 am January 1st, 2011 Beijing time, the Russian crude was pumped into oil tanks in Mohe County in China. At about 11:00 am, the Mohe transfer station started to delivery the oil to Daqing, marking the official run-through of the crude inlet channel. After arriving Linyuan station at Daqing, the Russian crude will be transported to refineries at Dalian and Fushun through the northeast pipeline network and then become refined products for market. China used to import crude oil from Russia via railroad. The operation of the Russia-China Crude Pipeline will not only boost transportation capacity but also enhance security and reduce transportation cost.”
The Chinese have also been planning to extend their section of the pipeline from Daqing to Tainjin, where a new oil refinery is planned.
However, now, according to Transneft in Moscow, the Chinese are demanding that the piped crude should be priced the same as crude delivered for tanker loading at Kozmino Bay, on the Sea of Japan.
Kozmino port commenced loading oil tankers in 2010, and by year’s end had despatched 15.3 million tonnes of crude (about 300,000 barrels daily). Destination for the cargoes were: Japan, 30%; South Korea, 29%; US, 16%; Thailand, 11%; China, 8%; Philippines, 3%; Singapore, 2%. The port is now operating at full capacity, so that when the second stage of the East Siberia-Pacific Ocean (ESPO) oil pipeline reaches Nakhodka in 2014, with up to 30 million more tonnes of crude, the plan is to deliver at least a third of that to a new petrochemical refinery.
Transneft spokesman Igor Dyomin told Fairplay: “We signed a contract with CNPC to value the oil [we deliver] at the market price with the use of market mechanisms. So Transneft uses the Petro-Argus prices to measure the oil cost at the Pacific Ocean. The Chinese side have agreed on that. Now they go back on their word, claiming that the pricing mechanism is unfair and pointing out the difference in oil prices between Skovorodino and Kozmino. The fact is that the oil price does not include extraction and transportation costs, but the market situation alone. Most East Siberian-Pacific Ocean [ESPO] pipeline oil is taken from the [Rosneft] Vankor field. But there are other fields closer to Kozmino, and still the price is the same.
“Even if we admit that transportation costs do count, Russia applied the uniform tariff for East Siberia and the Far East, and there is no price difference for oil companies as to where they enter ESPO and where they exit, the tariff is the same. So that means the Chinese side would like to interfere in Russia’s domestic affairs and enforce their socialism upon us. Russia is long out of socialism — we want fair market pricing.”
Dyomin also reveals there is a dispute over oil shipment volumes with CNPC. “Now CNPC wants us to increase oil shipments from 15 million to 30 million tonnes a year. The agreement we signed provides the yearly volume of 15 million tonnes for a period of 20 years, and we cannot revise the agreement soon. Right now CNPC is failing to pay about $20 million a month, and if we supply twice as much, their payment shortfall is likely to double. We have given them very good reasons for the prices, and all we hear is that the prices are “unfair”. The Pacific region is one of our current goals. The top Transneft’s customers are Japan and South Korea; China is number three and the US is number four. The ESPO oil is seen as a good replacement for the Alaskan oil, so we believe the US will soon rank higher than China among our customers.”
CNPC has yet to respond. Instead, a Chinese Foreign Ministry spokesman, Hong Lei, said in Beijing yesterday: “At present all operations are going smoothly, and oil supplies are stable. As for some concrete problems encountered during cooperation, we believe both sides can fully resolve this in a positive way via friendly negotiations and on a mutually beneficial, win-win basis.”
Read more: http://www.businessinsider.com/the-east-suddenly-sees-red-8212-russia-and-china-in-clash-over-oil-pricing-and-oil-supply--transneft-charges-china-national-petroleum-with-socialism-2011-4#ixzz1KEoVg8Cb
UPDATE 1-LUKOIL, Rosneft to join in offshore exploration
http://af.reuters.com/article/energyOilNews/idAFLDE73K1PP20110421
Thu Apr 21, 2011 5:21pm GMT
* LUKOIL CEO says deal gives access to new deposits
* Rosneft says deal helps profitability as costs high
(Changes sourcing, adds quotes, details on deal)
MOSCOW, April 21 (Reuters) - Russia's two largest oil companies, state-owned Rosneft (ROSN.MM) and independent producer LUKOIL (LKOH.MM), have signed a deal for joint exploration and production offshore, the companies said.
Under the deal, Rosneft will open its licensing zones to Lukoil off of Russia's oil-and-gas-rich Arctic Yamal peninsula, the companies said in a statement on Thursday.
"It is clear that under the current tax conditions, given infrastructure limitations and a growth in the number of hard-to-reach deposits, it is necessary for us to broaden our cooperation and join forces to increase the profitability of projects," Rosneft Chief Executive Eduard Khudainatov was quoted as saying.
LUKOIL CEO Vagit Alekperov said the deal would offer access to "major new deposits of hydrocarbons".
This marks LUKOIL's first offshore deal in Russia since launching the Korchagin oil field in the Caspian Sea last year, while top producer Rosneft has clinched a flurry of offshore partnerships with foreign majors including BP (BP.L), Chevron (CVX.N) and Exxon (XOM.N).
LUKOIL has said all of its future output growth will come from its foreign projects, because Russian brownfields are quickly maturing and the country's taxation system does little to stimulate investment.
According to current legislation, private Russian oil companies cannot operate on the Arctic continental shelf. Production and exploration licences in the Arctic offshore zone, which holds Russia's largest untapped oil and gas reserves, are only available to Rosneft and energy giant Gazprom (GAZP.MM).
(Writing by Jessica Bachman and Alissa de Carbonnel, editing by Jane Baird)
Rosneft, Lukoil to tap 3 deposits
http://www.rbcnews.com/free/20110422120347.shtml
RBC, 22.04.2011, Moscow 12:03:47.Rosneft and Lukoil intend to jointly tap three deposits in the Nenets Autonomous District, Rosneft President Eduard Khudaynatov told reporters late Thursday.
The companies plan to team up for prospecting, exploration, development and transportation of hydrocarbons from the Naulskoye, Sovetskoye and Labaganskoye deposits, under their long-term cooperation agreement. Rosneft is soon expected to obtain a license to the Naulskoye deposit and it already holds licenses to two other fields.
Lukoil is the only company that has developed transportation facilities in the Nenets Autonomous District.
Lukoil, Rosneft ink gas transport deal
http://www.rbcnews.com/free/20110422104807.shtml
RBC, 22.04.2011, Moscow 10:48:07.Russian oil majors Lukoil and Rosneft announced late Thursday that they had concluded an agreement to jointly transport natural gas from Rosneft's Vankor field in the Krasnoyarsk Region and Lukoil's Bolshekhetskaya Depression fields in the Yamalo-Nenets Autonomous District.
Under the agreement signed on April 12, Rosneft is to ensure gas transportation from the Vankor field to Lukoil's pipeline. Lukoil will transport gas to the gas pipeline system controlled by gas monopoly Gazprom. Lukoil and Rosneft are currently building their sections of gas pipelines.
In early March, Lukoil agreed to provide Gazprom with gas from the Bolshekhetskaya Depression fields in 2012-2016. In 2012, Lukoil is expected to deliver 8.35 billion cubic meters.
TNK-BP Abroad Not Daunted by Local Woes
http://www.themoscowtimes.com/business/article/tnk-bp-abroad-not-daunted-by-local-woes/435551.html
22 April 2011
Bloomberg
TNK-BP aims to spend about $1 billion on an acquisition abroad even as a shareholder dispute rages over the company's future at home.
TNK-BP, which is owned by BP and a group of billionaires, is looking for opportunities in Africa, the Middle East and Latin America to diversify operations away from Russia, deputy chief executive Maxim Barsky said. Russia's third-largest oil producer agreed last year to acquire fields in Vietnam and Venezuela from BP.
Barsky set out the company's strategy as the shareholders remained locked in a legal dispute. AAR, the company that represents the billionaire partners in TNK-BP, has gained an injunction halting a deal for BP to swap $7.8 billion of its shares and explore the Arctic with Russia's largest oil producer Rosneft. AAR, led by TNK-BP's interim chief executive Mikhail Fridman, claims that the deal violates exclusivity rights inside Russia.
"It has not stopped any of our projects," Barsky said, declining to comment on the shareholders' disagreement. The company has the capacity to handle a third international deal, he said, adding that, within 10 years, TNK-BP should have 30 percent of its production outside Russia.
Barsky was tapped to head the company in 2009 after an earlier shareholder dispute led to the departure of then chief executive Bob Dudley. The timing of Barsky's appointment as chief executive, delayed from Jan. 1, will depend on completing a share option plan and resolution of the shareholder conflict, he said. Dudley is now chief executive of BP.
TNK-BP may attempt to gain blocks around the offshore field in Vietnam it agreed to buy from BP in October. It will also try to raise its share in Venezuela's PetroMonagas to 40 percent once it completes a deal with BP to buy almost 17 percent of the Venezuelan heavy oil producer. It may swap assets it holds in Russia to expand internationally, Barsky said in an interview last week.
TNK-BP agreed to buy the Vietnamese and Venezuelan assets from BP for $1.8 billion in October as the British producer spun off assets to cover costs linked to its Gulf of Mexico oil spill.
TNK-BP has submitted agreements to become operator of the Vietnam project to the state, Barsky said. An approval from Venezuela on its deal will likely come only after Rosneft finishes its purchase of a stake in German refiner Ruhr Oel from Venezuela's state oil producer, he said. BP hasn't impeded any of the sales, he said.
TNK-BP management insists that it has the expertise and the capital to replace BP in its agreement with Rosneft to explore the South Kara Sea, Barsky said. TNK-BP has no offshore projects in Russia.
The geology in the Kara Sea appears similar to West Siberia, where TNK-BP has plenty of experience. The challenges will involve creating ice-resistant rigs and building artificial islands. Additionally, icebreakers will be needed to lead convoys of tankers that would get oil to markets, Barsky said.
UPDATE 1-Russia's Bashneft Q4 net profit doubles to $570 mln
http://in.reuters.com/article/2011/04/22/bashneft-idINLDE73L02N20110422
12:31pm IST
* Full-year net profit jumps to $1.429 bln
* Shares outperform broader market (Adds details, share price)
MOSCOW, April 22 (Reuters) - Russian mid-sized oil company Bashneft said its net profit more than doubled in the fourth quarter, year-on-year, to $570 million on the back of rising oil prices.
Bashneft, owned by oil-to-telecoms holding company Sistema (SSAq.L: Quote, Profile, Research) , also said full-year 2010 net profit rose to $1.429 billion from $420 million in 2009.
The company's Moscow-traded shares rose almost 1 percent as of 0700 GMT, outperforming the broader market , which edged up 0.1 percent.
After Sistema acquired Bashneft from the regional authorities in 2009 for around $2.5 billion, the company achieved the highest production growth level among its Russian peers.
In 2010, its daily crude production jumped 15.6 percent to 276,000 barrels, while refining volumes last year rose 2 percent to 21.193 million tonnes.
The full-year refining output was offset by maintenance works in the last quarter, when Bahneft's refining volumes fell 5.5 percent compared with the previous three months. (Reporting by Katya Golubkova; writing by Vladimir Soldatkin; Editing by Vinu Pilakkott)
Bashneft Q4 2010 profit soars 106% to $570 mln
http://en.rian.ru/business/20110422/163643754.html
11:20 22/04/2011
MOSCOW, April 22 (RIA Novosti) - Russian mid-sized oil firm Bashneft's fourth quarter 2010 net profit soared 106 percent compared to the previous quarter to $570 million to IFRS, the company said on Friday.
Fourth quarter revenue increased 2.5 percent to $3.595 billion, whilst revenue for the year 2010 jumped 97 percent to $13.341 billion.
Fourth quarter OIBDA increased 46 percent on the previous quarter to $992 million, whilst OIBDA for the year rose 139 percent to $2.981 billion.
On Thursday, Vladimir Yevtushenkov, chairman of Sistema, which holds 76.5 percent in Bashneft, said it could sell 25 percent plus one share in Bashneft to India's ONGC oil and gas company this year.
Bashneft won a tender at the end of 2010 to develop the giant Trebs and Titov oilfield in the Arctic
Bashneft was the only company admitted to participate in auction for the Trebs and Titov, the most promising in the Timan-Pechora province with C1 reserves estimated at 78.9 million tons (578 million barrels) and 63.4 million tons (465 million barrels) of oil respectively.
The government disqualified all other contenders, including Russia's largest private oil firm LUKoil, which has infrastructure in the region where the fields are located, and ONGC. Last Friday LUKoil's head Vagit Alekperov said the company would pay Bashneft 4.7 billion rubles for 25.1 percent plus one share in the Trebs and Titov development project.
Gazprom
10:52
GAZPROM DIRECTORS DECIDE TO PLACE 3 ISSUES OF 3-YR EXCHANGE BONDS TOTALING 15 BLN RUBLES
http://www.interfax.com/news.asp
http://www.upstreamonline.com/live/article253340.ece?WT.mc_id=rechargenews_rss
Russian gas monopoly Gazprom is out to create “the largest thermal generating company in Russia” through the planned merger of two affiliates.
Eoin O'Cinneide 21 April 2011 12:13 GMT
The gas giant is looking to slash costs and cut down on red tape as it merges power generation outfits OGK-2 and OGK-6.
D Day for the mooted merger is set for Monday when OGK-2 will host a board meeting, the company wrote in a statement in Russian on its website.
Under the planned deal OGK-2 will look to increase its authorised share capital through the conversion of shares in affiliate WGC-6 which, if the merger goes through, “will cease to exist”.
OGK-2 said the planned merger was aimed at: optimising the financing of investment activities; streamlining and centralisation of procurement activities; reducing duplicate functions and staff in the administrative apparatus; implementing a unified sales strategy and warehouse management; implementing effective management of fuel costs in the distribution of the load between the stations in favor of capacity with a lower specific fuel consumption; and unifying services provided by outside contractors.
The deal would have to be given the go-ahead by Russia’s Federal Anti-monopoly Services, however.
Italian energy giant Eni revealed on Wednesday that a planned sale of shares in one of its Libyan operations to Gazprom had been put on hold due to continued military action in the North African country.
Published: 21 April 2011 12:13 GMT | Last updated: 21 April 2011 12:16 GMT
China’s hunger for gas serves OGZPY
http://community.nasdaq.com/News/2011-04/chinas-hunger-for-gas-serves-ogzpy.aspx?storyid=72159
Posted 4/21/2011 1:54 PM by Emerging Mone
Gazprom is powering ahead today on news that Chinese energy giant Sinopec is buying its way into a massive Australian shale gas project. Sinopec ( SNP , quote ) 4.3 million tons of liquefied natural gas a year for the next 20 years from the gigantic coal seam gas project owned by Australia Pacific LNG. Australia Pacific itself is a joint venture between ConocoPhillips and Origin Energy. The deal will represent about $90 billion in gas for SNP over its lifetime and will also give the Chinese company a 15% equity stake in the venture. Meanwhile, Russian gas producer Gazprom ( OGZPY , quote ) is ready, able and working toward pumping more gas into China's thirsty new pipelines. News like this only demonstrate just how crucial to the global economy OGZPY is. But the stock has underperformed in the last year, so has plenty of room left to catch up.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Read more: http://community.nasdaq.com/News/2011-04/chinas-hunger-for-gas-serves-ogzpy.aspx?storyid=72159#ixzz1KECgmqtt
Russian JSC Gazprom Co team meets PM
http://www.thefinancialexpress-bd.com/more.php?news_id=133365&date=2011-04-22
A delegation of the Russian JSC Gazprom company, the largest natural gas extractor of the country, led by its Chief Executive Officer Valeriy Gulev Thursday paid a courtesy call on Prime Minister (PM) Sheikh Hasina at the latter's office in the city, reports BSS.
During the meeting, they discussed energy situation in Bangladesh and the issues relating to power generation and gas exploration, said PM's Press Secretary Abul Kalam Azad after the meeting.
The PM told the delegation that her government is working relentlessly to improve the country's existing energy situation at the shortest possible time.
Foreign Minister Dr Dipu Moni, PM's Energy Ad-viser Dr Tawfiq-E-Elahi Chowdhury, Ambassador at Large M Ziauddin, Principal Secretary to the Prime Minister MA Karim, PMO Secretary Mollah Waheeduz zaman, Energy Secretary Dr Mezbauddin, Prime Minister's Press Secretary Abul Kalam Azad, Chairman of Petro Bangla Prof Hossain Monsur, Bangladesh Ambassador to Russia Dr SM Saiful Hoque, among others, were present on the occasion.
Russian Ambassador in Bangladesh Gennady P Trotsenko accompanied Valeriy Gulev during the meeting.
http://www.bloomberg.com/news/2011-04-22/gazprom-purchase-of-refinery-not-appropriate-kocourek-tells-hospodarske.html
By Lenka Ponikelska - Apr 22, 2011 8:31 AM GMT+0200
Gazprom OAO (GAZP)’s possible purchase of a stake in Ceska Rafinerska AS, a Czech-based refinery, would not be “appropriate at this time,” Czech Industry and Trade Minister Martin Kocourek told Hospodarske Noviny in an interview.
Still, it is necessary to wait for “clear” signals that the purchase may happen before evaluating possible impacts of the Russian investor entering the company, Kocourek told the newspaper.
Eni SpA (ENI), Italy’s biggest oil company, may be in talks to sell its 32.5 percent stake in Ceska Rafinerska to Gazprom. Ceska Rafinerska is controlled by Poland’s Unipetrol AS. Royal Dutch Shell Plc (RDSA) also holds a stake in the refinery.
To contact the reporter on this story: Lenka Ponikelska in Prague lponikelska1@bloomberg.net.
To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net
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