Hungary completes acquisition of MOL stake from Surgut

UPDATE: Victoria Oil & Gas continues to make progress with Siberian exploration

UPDATE...with broker comment

Victoria Oil & Gas (LON:VOG) put out an encouraging update on its exploration work across its West Medvezhye block in Siberia. It is also making progress with taking its first discovery there, Well-103, to full commercialisation.

Victoria, through its wholly owned subsidiary ZAO SeverGas-Invest (SGI), holds a 20-year exploitation licence for West Medvezhye (West Med) covering 1,224 km2.

Located in Nenets region of Siberia, West Med is located in one of the most prolific oil and gas producing areas of the world and is adjacent to Gazprom's giant Medvezhye field that has already produced over 70 trillion cubic feet of gas.

Independent assessment in 2006 indicated West Med held total prospective resources of approximately 1.1 billion barrels of oil equivalent.

The latest phase of exploration work on West Med has involved integration of new data with previous seismic and well data to firm up prospects and leads that have already been identified.

Key initial findings include an estimated 400 million barrels of oil equivalent in-place in six features mapped by passive seismic and gas tomography surveys.

The continuing encouraging findings have led to the company commissioning a seismic reprocessing and geological modelling study for the prospect. The first phase of this technical work, which included reprocessing of 845 km of 2D seismic, was completed in June 2011.

Analysis of the reprocessed seismic data has begun and will incorporate the passive seismic and gas tomography results.

The results of the analysis are scheduled to be considered in a workshop in Tyumen, Russia in July 2011, said the company.  

In addition to the subsurface technical studies, Victoria Oil & Gas has also started development studies to support commercialisation of prospective resources and exploitation of its first discovery in the West Med, Well-103.

These studies cover areas such as drilling and well engineering, as well as design work to establish costs and schedules for oil, gas and condensate production facilities and supporting infrastructure.

The company has also been looking into downstream and export issues with regards to future production from West Med.

Several routes to market for commercialisation are available, it says, including the Chircha railroad station, located within the southwest boundary of the licence, and the river port and loading terminal of Old Nadym are located 22 km away.

In addition, one of Gazprom's principal gas transmission pipeline's in the area runs along the eastern border of the licence and the nearest Central Gas Processing Unit is located 18.5 km from West Med.

Initial studies suggest an early production scheme for the Well 103 discovery could involve the sale of small volumes of crude into the local market with prices of US$60 per barrel achievable. This would be followed by full scale oil and gas development for export as the oil and gas export market is well established in this part of Siberia.

The results of Victoria’s preliminary development assessment work on the Well 103 discovery indicate first oil sales in 2015, subject to further refinement and screening.

While the West Med is looking promising for the company, Victoria’s principal focus has been the development of and commencement of gas and condensate production at Logbaba in Cameroon, scheduled for the fourth quarter of 2011.

Logbaba is located in Douala, the economic capital of Cameroon. The field was discovered in the 1950s and all four exploration wells have encountered gas.

Broker Northlands welcomed the update saying that at its current valuation for the company it considers West Med as a ‘in for free upside’ for the shares.

It added: “Whilst detailed economics and a recoverable reserve figure may take a while, the honing in on the ‘in place’ estimate is encouraging whilst potential first oil sales in 2015 puts a timescale on monetisation.”

Westhouse also gave the update the thumbs up, saying given the resource potential, West Med “clearly holds great upside” for Victoria Oil & Gas.

“However, the work there still remains at a relatively early stage. The focus therefore remains on the group’s progress at Logbaba, in Cameroon, where we still expect first gas sales before the end of 2011,” it adds.

Westhouse reiterated ‘buy’ on the stock, with an unchanged target price of 7.4p.

Russian Parliament Approves Zero-Rate Subsoil Tax For Select Fields

By A.N.G.I.

The documents stipulate a zero-rate tax on mineral production when producing crude on fields which are either wholly or partially located on the Black and Okhotsk seas: for fields on the Black Sea, this will cover fields with production of up to 20 million tons of crude in the initial stages and on the Okhotsk Sea for production of up to 30 million tons.

The period over which reserves at such fields are produced should not exceed 10 years (or be equal to 10 years) when the field in question is in the e&p stage and not more than 15 years (or equal to 15 years) when geological studies are being performed.

According to the law, the zero-rate subsoil mineral tax covers crude produced in the Yamal-Nenets autonomous district north of the 65th latitude and at which production has reached 25 million tons under the circumstances that development of the field has not exceeded 10 years, RBK reports.

The zero-rate tax is also envisioned for gas produced on the Yamal peninsula exclusively for making LNG.

Furthermore, from January 1, 2013 through 31 December 2017, the zero-rate subsoil tax will cover some ore mining in the Far East.

This federal law comes into effect on January 1, 2012, but no earlier than one month after being officially published and no earlier than the first day of the subsequent tax period.

Gazprom

Gazprom Seeks $40 Billion Advance Payment in China Deal, Vedomosti Reports

OAO Gazprom may be seeking an advance payment of as much as $40 billion against future deliveries of gas to China, Vedomosti reported, citing unidentified people close to the Russian gas export monopoly and Russia’s government.

The proposed payment would be made between 2012 and 2015 for deliveries over 30 years, starting from 2015-2016, the newspaper said.

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net

Gas negotiations with China may be complicated by rumored prepayment demand

http://www.bne.eu/dispatch_text16100

Alfa Bank
July 8, 2011

Gazprom is demanding material prepayment for future gas supplies to China, according to anonymous sources close to CNPC cited by Interfax yesterday, hence complicating the ongoing negotiations. The exact amount of prepayment was not disclosed, but it is rumored to exceed the $25bn received previously by Rosneft and Transneft. Today's Vedomosti states that Gazprom is looking for as much as $40bn, which would be subsequently paid down in the next 30 years.

The Interfax report further states that the funds are needed to finance construction of the Altai gas pipeline. Gazprom claims that the company will need to raise additional debt, which would expose it to significant financing costs. Although the pipeline's cost is estimated at some $13.6bn, considerably below the demanded $40bn prepayment, the excess funds may be used to finance other ambitious projects (South Stream, Shtokman, etc.) or simply refinance/optimize the company's debt structure.

However, pricing still remains the major stumbling block in the negotiations process. The price gap has reportedly narrowed from $100/mcm to $65/mcm, but this is still rather significant. Favorable financing or division of the construction CAPEX looks reasonable, but most likely these options should be reflected in the contract price.

Considering all the details of the negotiation process that were recently made public (pricing, prepayment), we believe the risk that the agreement will be further delayed beyond 2011 is still there, although we believe the agreement is inevitable and only a matter of time. At the same time, any move toward an earlier agreement may serve as a major sentiment catalyst for Gazprom, as it will open up a third core market for the company.

Pavel Sorokin

08.07.2011

Gazprom, E.ON Ruhrgas Hold Coordinating Council

Nizhny Novgorod hosted the seventh meeting of the Coordinating Council between Gazprom and E.ON Ruhrgas AG on sci-tech cooperation, personnel training and career development, Gazprom reported in a news release.

The meeting was moderated by the Council Co-Chairpersons: Vlada Rusakova, Member of the Management Committee, Head of the Strategic Development Department on behalf of Gazprom; and Dr. Henning Deters, Member of the Board of Management, Head of Supply, Trading and Infrastructure Divisions, and Dr. Thomas Koenig, Member of the Board of Management and Director of Labor Relations on behalf of E.ON Ruhrgas.

The meeting participants discussed the recent results achieved in implementing the programs for sci-tech cooperation, personnel training and career development in the companies. The meeting highlighted the primary role of natural gas in the energy sector of the future and importance of its wider use in vehicles. Consideration was also given to energy saving potential in the gas industry as well as the energy-efficient technology of gas injection into an underground storage facility, development of complex reservoirs using advanced drilling and well completion methods, telecommunications and metrological support of natural gas supplies via the Nord Stream gas pipeline. Special attention was paid to crucial challenges in the gas production process: use of membrane technology for inert components separation, optimization of inhibitors, treatment and disposal of reservoir/industrial waters.

Based on the meeting results, the parties expressed their contentment with the achieved results of cooperation between Gazprom and E.ON Ruhrgas in human relations, science and technology.

Copyright 2011, Gazprom. All rights reserved.

06.07.2011

Positive Report on Nord Stream’s Environmental Impact

http://www.oilandgaseurasia.com/news/p/0/news/11981

The latest results from Nord Stream’s environmental monitoring programme in the Swedish Exclusive Economic Zone, EEZ show that the company has  complied with and even exceeded the conditions in the permit granted by the Swedish government, the company reported in a news release. Calculations and models in Nord Stream’s Environmental Study have proven accurate, and it is now estimated that the environmental impact so far has been smaller than anticipated.

Lars O Grönstedt, Senior Adviser to Nord Stream: “We are happy to be able to demonstrate that our Environmental Study, the basis for Nord Stream’s permit application, has been correct and that construction works have had no negative impact on the environment of the Baltic Sea.”

At a seminar in Visby today Nord Stream presented three new reports on the company’s environmental monitoring activities. The reports contain results from the measurement of seabed currents and inflow of saltwater to the Baltic Sea; potential turbidity caused by construction works in the vicinity of the Natura 2000 areas at Hoburg’s Bank and Norra Midsjöbanken, as well as the prevalence of contaminants in common mussels.

Measurements of seabed currents and saltwater inflow, so called hydrographical monitoring have taken place in the Bornholm Basin during 2010 – 2011. The pipeline has an average height of 0.7 meter above the seabed in the Swedish EEZ. The purpose has been to verify the assessment that Nord Stream’s pipeline will not cause any blocking of the inflow of saltwater. Two monitoring stations have performed measurements of temperature, salinity and direction and speed of the water currents. Additional measurements have also been carried out from vessels. The surveys have been executed by the Swedish Meteorological and Hydrological Institute, SMHI, on behalf of Nord Stream. The results confirm the previous analysis: Nord Stream’s pipeline will have no negative impact either on the inflow of saltwater or on the water quality of the Baltic Sea.

Monitoring of potential turbidity has been performed in Sweden in areas bordering to the Natura 2000 areas Hoburg’s Bank and Norra Midsjöbanken. The purpose has been to measure turbidity and sediment concentrations during Nord Stream’s trenching activities along certain parts of the pipeline. Four permanent monitoring stations, with direct data transmission were placed at the borders of the Natura 2000 areas and measurements of sediment were also made from vessels close to the trenching vessel. The survey was carried out by Danish DHI and Swedish SMHI on behalf of Nord Stream. Trenching in the Swedish EEZ took place during February – Mach 2011. The measurements show lower levels than estimated in the Environmental Study. The threshold value, 15 mg/l, established by the Swedish government in the permit has never been even close to being exceeded. In fact, average turbidity was below 2mg/l during Nord Stream’s trenching activities.

Eco-toxicological effects on mussels have also been monitored in the Natura 2000 areas south-east of Gotland during 2010 – 2011. The purpose has been to verify that mussels and other living organisms were not affected by potential spreading of sediments and contaminants which could be released due to Nord Stream’s trenching activities. By placing cages with mussels on six different locations (three impact stations and three reference stations) at both offshore banks, samples were collected before, during and after the trenching activities. The collected mussels have been analyzed in order to measure the concentration of metals and tin compounds. The survey was made by Marin Monitoring AB on behalf of Nord Stream. The weighted results from monitoring of eco-toxicological effects on mussels show no measurable impact on the environment of the two Natura 2000 areas Hoburg’s Bank and Norra Midsjöbanken.

Copyright 2011, Nord Stream AG. All rights reserved.

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