Activity in the Oil and Gas sector (including regulatory)

Tribunal to Rule on BP Dispute With Russian Partners

By ALEXIS FLYNN

The arbitration tribunal in February upheld an injunction granted by a British court in January that blocked the Rosneft deal. Now that the tribunal has agreed to hear full evidence in consideration of a final ruling, it is only likely to issue a final ruling by late spring or early summer, one person said.

"The parties will meet in January or February to agree on process and schedule" for the proceedings, said the person.

The decision is the latest development in the standoff between BP and its partners in Russian joint venture TNK-BP. BP's partners in the venture are a group of Soviet-born billionaires collectively known as AAR.

If the arbitration tribunal issues a final ruling that BP did contravene its shareholder pact with AAR, that could in turn lead to a further escalation in hostilities between the two camps, which have had a fractious relationship since the joint venture was formed in 2003.

AAR had sought the decision by the tribunal that it will hear full evidence and then issue a definitive ruling, and BP had contested it, both people said late Thursday.

BP and Rosneft announced in January that they would swap shares in each other and jointly explore for oil in the Russian Arctic. But AAR claimed the deal with Rosneft breached AAR's shareholder agreement with BP, which stipulates that TNK-BP should be BP's sole vehicle for investing in Russia. AAR successfully sued to block the alliance, and Rosneft later partnered instead with Exxon Mobil Corp.

"AAR requested that the tribunal hear its claim that BP breached the shareholder agreement, and if the tribunal rules that BP has breached the agreement, then it would award AAR $1 in nominal damages," said one of the people familiar with the matter.

The other person said AAR would only be awarded "token damages" if the tribunal rules that BP had committed a "technical breach" of its shareholder pact with AAR.

The other person said, "The tribunal said to AAR, 'you can bring the case if you want to, and we will consider it.'"

AAR has said in the past that it was entitled to sue BP for damages over the failed Rosneft alliance, though BP has insisted that no damages were inflicted because the tie-up never materialized.

But one person expressed a view that a definitive ruling by arbitrators that BP had breached the shareholder agreement would strengthen a potential lawsuit against BP. The other person didn't express a view on the matter.

Write to Alexis Flynn at Alexis.Flynn@dowjones.com

Gazprom

http://www.steelguru.com/russian_news/EC_greenlights_Gazprom_buying_stake_in_dealer_Promgas_from_Eni/241192.html

Friday, 16 Dec 2011

Interfax quoted the regulator said the European Commission has given the go-ahead for Gazprom group company Gazprom Schweiz to buy 50% of the Italian dealer Promgas SpA from Italian energy company Eni.

Promgas is owned by Gazprom Export and Eni on equal terms. Italian energy company Edison is its sole client. Promgas buys gas from Gazprom at the Austrian gas hub in Baumgarten under a long term contract valid until 2022 and supplies 2 billion cubic meters of gas per year.

Gazprom is unfolding a campaign to streamline gas, possibly by eliminating intermediaries and/or increasing its stake in the intermediaries.

Edison this year agreed review the terms of the contract with Promgas, after bringing court action. Edison was paying USD 400 per thousand cubic meters last year, far more than other intermediaries were charging.

Promgas last year supplied 1.71 billion cubic meters of the 13.05 billion cubic meters of Russian gas that Italy imported.

(Sourced from Interfax)

Gazprom to increase Azerbaijani gas purchase

Gazprom intends to increase purchase of Azerbaijani gas by 1.5 times - up to 3 billion cubic meters compared to the planned 2 billion cubic meters for 2011, the company said.

A corresponding agreement was reached at a working meeting of Gazprom Board Chairman Alexei Miller and President of the State Oil Company of Azerbaijan (SOCAR) Rovnag Abdullayev on Thursday.

"According to preliminary data, in November Gazprom increased purchase of Azerbaijani gas by 70 percent compared to 2010 and it amounted to 1.36 billion cubic meters," the report says.

Following the meeting, Miller and Abdullayev stated that mutually beneficial partnership of companies is a huge contribution to strengthening the strategic cooperation between the two countries.

The medium-term contract on purchase-sale of Azerbaijani gas to Russia (with the possibility of extension) was signed between SOCAR and Gazprom in Baku Oct. 14. Azerbaijan launched gas supplies to Russia Jan.1, 2010 in accordance with the agreement on export of Azerbaijani gas to Russia in 2010-2015 with its possible extension. . In 2010 SOCAR exported 799.75 million cubic meters of gas to Russia, the plan for 2011 is 2 billion cubic meters.

Azerbaijan has proven natural gas reserves of about 1.5 trillion cubic meters, including the Shah-Deniz field, located in the Azerbaijani sector of the Caspian Sea, with the estimated reserves of about 1.2 trillion cubic meters of natural gas.

SOCAR is the largest state oil company of Azerbaijan. It deals with exploration, extraction, refining, transportation and sale of oil, natural gas and gas condensate.

http://www.bne.eu/dispatch_text18324

VTB Capital
December 16, 2011

News: Interfax has quoted Alexander Krylov, the Regional Sales Director at Gazprom Neft, as saying that the company is to run a brand franchise for a chain of Ukrainian filling stations next year. There is no information yet on how big the intended retail network is to be, although Krylov said that it was located on the Odessa-Kyiv highway. Sites are currently being modernised so that they comply with Gazprom Neft’s standards. The company also plans to expand its retail network in Kazakhstan, increasing the number of sites in the region from 20 at present to 100 by 2015. According to its long-term retail strategy, Gazprom Neft is to sell around 8mnt of fuels through its retail network in 2020. The company’s retail sales YTD amount to 6mnt (incl. NIS), up from 2.2mnt in 2007.

Our View: This news confirms Gazprom Neft’s commitment to develop the high margin segments of its businesses, one of which is retail. We believe this is one of the examples of management-driven value-creative activities for the company, which we discussed in our Gazprom Neft as a Mirror of Russian Oil Evolution, of 8 December. While we do not expect any short-term stock reaction, this development is positive for the company in the longer term. We believe Gazprom Neft is one of the most fundamentally attractive names in the Russian oils sector and are reiterating our bullish view on the stock.

Gazprom Holds Key To Meeting Global Energy Needs

I’ve been bullish on Russia long before the market appeared on the radar screens of most investors. I believe that Russia, with its vast treasure trove of resources, is one of the main beneficiaries of Asia’s emergence as an engine of global economic growth.

Heading into 2012, the Russian economy seems well-positioned for growth, and its stock market is cheap enough to attract more attention from investors. Most important, the majority of foreign investors are either underweight the market or have no presence at all in Russia.

Historically, these conditions have allowed the Russian market to outperform global indexes, and the same should be true next year, especially if oil prices do not collapse in 2012. Given that the Russian market currently trades at a little over 6 times earnings, I believe that the risk-reward trade-off is quite appealing.

Given my less-than-sanguine outlook for Europe in 2012, Russian exports should be weak next year. Europe remains Russia’s key trading partner, and I expect a European recession to slow Russian economic growth in 2012. Nevertheless, Russia should be able to match the global economy’s growth of about 3.5 percent. Indeed, Russia’s status as a high-beta market could allow it to grow even faster than the global economy.

Consumer demand and domestic investment will be the two pillars of Russian economic growth next year. Unemployment remains relatively low in Russia at about 6.4 percent, down from about 9 percent in 2010.

Furthermore, wages have grown at about 5 percent per year, which will support consumer spending. As the chart below indicates, retail sales in Russia have been growing by close to 9 percent per year, and I expect consumer spending to continue along this trajectory.

Like many emerging markets, Russia has grappled with high levels of inflation for some time. However, prices are on a downtrend. Although the current inflation rate of 6.8 percent remains above the central bank’s target of 6 percent, it’s fallen significantly from 2008, when inflation clocked in at 15 percent. I believe that inflation will continue to moderate along with a weaker economic outlook, and will fall below 6 percent in the first half of 2012.

The second piece of the puzzle is domestic investment and public spending. Russia is in the midst of an infrastructure boom. Infrastructure investment last year came in at USD111 billion, representing more than 7 percent of GDP. More important, infrastructure-related investment remained above USD 100 billion per year throughout the global economic crisis. By contrast, in 1999 only about USD7 billion–representing about 3.5 percent of GDP–was allocated to infrastructure-related investments.

Russia’s strong fiscal position and a debt-to-GDP ratio of about 8 percent allowed it to make the most out of strong oil prices. The country has sought to modernize its infrastructure by focusing on projects related to power, telecommunications, ports and airports. In the future, I expect funds to flow to projects that concentrate on power, railways and roads.

Of course, energy remains the linchpin of the Russian economy; the country is second only to Saudi Arabia in terms of total oil production.

The US Energy Information Administration estimates that every $1 rise in the price of oil boosts the Russian government’s receipts by 0.35 percent of GDP. Additionally, most estimates suggest that the oil and gas industries account for about 20 percent of Russia’s GDP. These industries generate nearly two-thirds of export revenues and comprise close to a third of foreign direct investment (FDI) inflows into Russia.

With domestic consumption of crude oil running at just 2.7 million barrels per day, Russia is also a huge net exporter of crude oil; the country had about 7 million barrels per day available for export in 2006.

Russian oil production over the past 20 years has exhibited an unusual U-shape. During the Soviet era, the government mandated that producers pump oil as quickly as possible. These surges in production meant that, in the early to mid-1980s, Russian production was as high as 12.5 million barrels per day.

But those surges came with a cost, as aggressive production damaged many reservoirs. Furthermore, during the waning days of the Soviet Union, Russian producers simply didn’t invest what was needed in oil-related infrastructure. Pipelines fell into disrepair and producers didn’t perform necessary maintenance on wells.

But since the late 1990s, Russia’s production growth has been impressive. Two factors have conspired to bring about that shift. First, oil prices have risen sharply, increasing incentives to produce and generating capital to be reinvested in growing production. Second, Russia has modernized its infrastructure, adopting more modern technologies imported from the West to squeeze more production out of maturing fields.

Russian gas monopoly Gazprom (OGZPY.PK) is my favorite Russian energy stock. Gazprom is Russia’s largest company by a wide margin and controls almost 85 percent of the country’s total natural gas production. The company alone accounts for nearly 20 percent of global gas production.

Europe remains the company’s main market; Gazprom supplies about 25 percent of Europe’s natural gas. The recently completed Nord Stream pipeline that connects Russia to Germany is the clearest sign of Russia’s importance to meeting Europe’s energy needs. The USD10 billion 760-mile pipeline runs under the Baltic Sea and is expected to carry about 970 billion cubic feet of natural gas per year. A second leg of the pipeline through the Baltic Sea is expected to be completed next year.

Gazprom’s stock trades at a little more than 3 times estimated 2011 earnings, which makes it one of the cheapest energy companies in the world. It’s true that Gazprom is not a high-beta stock, and the company’s deep ties with the Russian government makes Gazprom a complicated investment. Nevertheless, the current valuation represents a good opportunity for long-term investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Gazprom demand Red Star play in Europe with Dzajic at helm

http://english.blic.rs/Sports/8274/Gazprom-demand-Red-Star-play-in-Europe-with-Dzajic-at-helm

Branko Markovic/Igor Velimirovic | 16. 12. 2011. - 02:00h | Foto: A. Dimitrijević

Red Star fans are bracing themselves for the outcome of the Board of Executives’ meeting today and believe it will finally provide answers to questions springing up after the club’s abysmal first half of the Serbian SuperLiga season. Arguably the most anticipated decision of Red Star’s backroom staff is whether the rumours of former chief executive and chairman Dragan Dzajic’s reappointment to a top job will come to fruition. Former playing and directorial legend Dzajic is being called upon by the Red Star fans and labelled as the one man who could salvage the sinking ship and turn the club’s fortunes around.

As Blic understand, the atmosphere at the Marakana is not that peaceful and straightforward, while principal Red Star sponsors Gazprom are pushing towards a decision to have Dzajic reinstated at the helm in one of the top officials jobs.

Unofficially, Russian oil giant Gazprom’s demands do not end with the return of Dzajic, but the sponsor is said to be requesting the departure of the entire current administration, which would, in their view, represent foundations for the club’s overhaul and consequent stabilisation, but also long-awaited participation in European competitions. Gazprom are working towards restoring the blemished image of the 1991 European Cup winners and balancing the financial situation.

Red Star officials believe there is no doubt Dzajic is coming back.

 

- When it comes to Dzajic, there is nothing doubtful, all there is to be done is finalise his status at the club. His first task will be to define a plan together with coach Robert Prosinecki about player signings in the January transfer window, says Djordje Stefanovic, the club’s general secretary.

 

According to Stefanovic, Prosinecki’s extended authority and an already compiled wishlist of players do not change anything.

 

- Dzajic and Prosinecki are in touch, they meet and drink coffee together and that’s why we don’t intend to choose another sporting director. It is possible Dzajic drafts up a long-term plan for squad reinforcement, just like he did in 1989.

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attach -> Russia 110204 Basic Political Developments
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attach -> Russia and Islam are not Separate
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