Basic Political Developments

Potanin rejects bln offer for Norilsk stake

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Potanin rejects $19 bln offer for Norilsk stake

11:22 27/05/2011

Billionaire Vladimir Potanin has declined a $19.2 billion for a 30 percent stake in Russia's Norilsk Nickel metals producer from Viktor Vekselberg and Leonard Blavatnik, Vedomosti business daily quoted sources as saying on Friday.

Norilsk Nickel has been the center of a conflict between Potanin and RusAl aluminum company owner Oleg Deripaska, which started last June after an annual shareholders' meeting when Potanin's investment vehicle Interros increased its representation, weakening Deripaska's position. Deripaska holds a quarter of Norilsk.

Vedomosti quoted sources close to RusAl's shareholders as saying that Vekselberg and Blavatnik, who have small holdings in RusAl, made the offer in late April in an effort to put an end to the conflict and create Russia's largest metals holding company.

The companies declined to comment.

Interros has also tried to resolve the conflict by offering to buy RusAl's stake in Norilsk for $12 billion and 20 percent of its shares for $12.8 billion but the aluminum company rejected both offers.

At a recent extraordinary shareholders' meeting, Interros gained four seats on Norilsk board, while RusAl and Norilsk management, regarded as being close to Interros, got two seats each. RusAl's nominee chairs the board.

MOSCOW, May 27 (RIA Novosti)

Billionaire Timchenko May Buy Raspadskaya Stake, RBC Daily Says
By Yuliya Fedorinova - May 27, 2011 7:56 AM GMT+0200

Russian billionaire Gennady Timchenko is in talks to buy a controlling stake in OAO Raspadskaya (RASP) from Evraz Group SA (EVR) and the coal company’s management, RBC Daily reported, citing people they did not identify.

Timchenko seeks to create a holding company which will include coal assets and is also in talks to buy SDS-Coal Holding Co., the Russian newspaper wrote.

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UPDATE 1-Indonesia-Market Factors to watch - May 27
Fri May 27, 2011 8:42am IST


Russian state power trader Inter RAO has expressed

interest in investing in the energy sector in Indonesia's West

Java with total investment of $2 billion, said Raam Saraogi,

representative of Inter RAO. West Java province has the

potential to generate 3x300 megawatts of power, said deputy

governor Yusuf Macan Efendi. (Jakarta Post p.5)

Rosselkhozbank raises $800 mln via bond – IFR
2:41am EDT

MOSCOW, May 27 (Reuters) - Rosselkhozbank, Russia's fourth-largest lender by assets, raised $800 million via a subordinated bond issue, according to IFR markets, a Thomson Reuters news and market analysis service.

The yield for the 10-year bond with a call option after five years was set in line with initial guidance at 6 percent. [ID:nLDE74P0A6]

The lender will use part of the proceeds to exercise a call option for a $500 million subordinated issue of loan participation notes (LPN) raised in September 2006, IFR added. [ID:nLDE74B1NJ] (Reporting by Katya Golubkova; Editing by David Holmes)

The volume of web-development market in Russia totaled 9.72 billion rubles in 2010
PRLog (Press Release)May 27, 2011 – The volume of Russian web-development and site support market totaled 9.72 billion rubles in 2010. This figure is 35% higher than during the same period last year. These figures are taken from the new study of CMS Magazine analytical portal and Rating Runet Project.

The study is based on a survey conducted by CMS Magazine among the leaders of 400 Web Studios, and the data collected within Rating Runet Project. The main topics of them are market volume of web development, site development costs and the levels of specialists’ salaries.

According to this research there are about 2,300 web studios that work in Russia. Most companies are concentrated in capital cities and regions with high penetration of broadband Internet access. 32% of all web developers’ offices are located in Moscow, 11% of companies are registered in St. Petersburg, 5% in Yekaterinburg, 4% in Novosibirsk and 2-3% (or 40-60 web studios) are located in other Russian cities millionaires.

Compared with last year the average cost of site development services has slightly decreased. According to experts, there are 2 main reasons for this. Firstly, after the crisis in the market the number of companies focused on work at the lowest prices has increased. This category has always been present in the market, but price sensitivity of customers, which had increased after the crisis 2009, significantly increased the number of dumping studios. Secondly, in 2010, many market participants have adjusted their price-lists, designating as official positions those quotations, which in 2009 had been made "off the record" in the form of significant discounts on initial prices.

At the same time, the majority of respondents (60%) expect increase of prices for web development services in the near future.

According to forecasts of the survey participants, the market for web development in Russia in 2011 could grow by 40% to 13.65 billion rubles. This may happen by the increase of average check for site development, as well as due to the growth of individual economics segments, which gradually return    to pre-crisis level and will increase the budgets for the development of new and ongoing Internet projects.

John Helmer, Dances With Bears | May 27, 2011, 2:32 AM

By John Helmer, Moscow

South African James Nieuwenhuys has taken over as chief operating officer of Moscow-based Polyus Gold, Russia’s largest goldminer. The mining company, owned in roughly equal parts by Mikhail Prokhorov and Suleiman Kerimov, has been unsuccessful in months of effort to find a major international mining company to partner, or to take over and buy the oligarchs out.

Market sentiment has been negative as production growth at Polyus’s three Russian mines has been sluggish, and a merger with a Kazakhstan gold company generated recriminations in the courts. Polyus Gold’s share price has been falling even as the price of gold has gone up. For 2010, the company has reported sale revenues up 43% to US$1.7 billion; net profit was up 91% to $356 million. Current market capitalization is $12.8 billion, down 7% in the year to date.

Nieuwenhuys has been managing director of the South African subsidiary of Canada’s SNC-Lavalin, an engineering and mine design consultancy. Sources at his Johannesburg office confirm that he wound up there early this month, and has now moved to Moscow.

The Nieuwenhys appointment, which Polyus Gold confirmed today, signals that Prokhorov, who took over the CEO position last December, has run into trouble with his public promises to list Polyus Gold directly on the London Stock Exchange by August; the company shares are listed on the Moscow stock exchange and traded in depositary receipt form in London. Prokhorov has also said he is trying to sell a strategic stake in the company to an international miner, although North Americans Kinross Gold, Barrick Gold, and Newmont have proved reluctant, and Anglo American Ashanti has not been tempted.

Prokhorov’s running of Polyus Gold has been criticized by mine sector analysts for exaggeration of the company’s reserves and reluctance to invest in costly new mine projects. He and co-director of Polyus Gold, Maxim Finsky, are currently under investigation by the Canadian stock market regulator after complaints by minority shareholders in junior goldminer, Century Mining, that the two have acted improperly as they acquire mining company assets for a Toronto IPO of their new mining company called Intergeo. A formal application for a ruling was issued on May 25.

Kerimov, an investor for syndicates of silent Russian partners, is reported to be under investigation in India at present in connexion with money-laundering and tax evasion charges against Hassan Ali Khan, a hawalla money-changer. Kerimov’s spokesman told Business Day the two had a business relationship before 2004. “We deny ever having strong ties to Hasan Ali Khan. Indeed, we have had no dealings with him since that introductory period over 7 years ago,” the spokesman, Eliot Lauer, said, adding “the reports that appeared in the Indian media last month contained unverified and untrue statements regarding Mr. Kerimov.”

Brian Gilbertson was the last of the well-known South Africans to have been engaged by Russian oligarchs to lift their financial performance and corporate transparency, and pilot IPO attempts in London. Gilbertson was CEO of Victor Vekselberg’s SUAL aluminium concern, before it was merged on Kremlin order with Oleg Deripaska’s Rusal in 2006. Deripaska then put Vekselberg in Gilbertson’s seat at the head of the Rusal board, but the Russians failed in their attempt at listing on the London Stock Exchange in 2007. Rusal finally listed on the Hong Kong Stock Exchange in January 2010. The only foreigners in senior management at Rusal are Australian salesmen.

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Activity in the Oil and Gas sector (including regulatory)

Ministry puts forward 2 shelf exploration programs

      RBC, 27.05.2011, Moscow 12:31:22.Russia's Natural Resources Ministry has proposed to develop two programs to prospect and develop the country's continental shelf and criticized the program being advanced by the Economic Development Ministry as outdated, RBC Daily reported today.

      The first program should focus on tapping discovered mineral resource fields and domestic service and shipbuilding facilities. The second program should be devoted to exploration of the continental shelf. It should include two scenarios. One scenario envisages that only state-controlled Rosneft and Gazprom are authorized to explore offshore fields, while under the other scenario the list of such companies could be expanded and the amount of government and private financing would increase.

TNK-BP Submits Bid for Poland’s Grupa Lotos, Kommersant Reports
By Denis Maternovsky - May 27, 2011 6:36 AM GMT+0200

TNK-BP, BP Plc (BP/)’s Russian joint venture, submitted a non-binding bid to buy a stake in Poland’s second-largest oil refiner Grupa Lotos SA (LTS), Kommersant reported.

The Moscow-based oil producer is the only Russian bidder for the asset, the newspaper said, citing an unidentified person with knowledge of the auction. OAO Gazprom Neft and OAO Rosneft, which earlier were considering taking part in the tender, did not submit their bids, Kommersant reported, citing the companies.

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Bashneft to spend $1.2 billion on downstream by 2015
10:47am IST

UFA, Russia (Reuters) - Russian mid-size oil producer Bashneft, owned by conglomerate Sistema, plans to invest 35.14 billion roubles ($1.18 billion) in oil refining by 2015, a company executive said on Friday.

Vadim Nikolaichuk, head of Bashneft's subsidiary UfaNefteKhim, told reporters the company invested a total of more than 12 billion roubles in oil processing in 2009-2010.

(Reporting by Olesya Astakhova; Writing by Maria Kiselyova; Editing by Jon Loades-Carter)

Bashneft to sink $1.2bn into refineries upgrade

      RBC, 27.05.2011, Ufa 10:46:05.Bashneft plans to invest RUB 35.14bn (approx. USD 1.24bn) in the upgrade of its Bashkortostan-based oil refineries Novoil, Ufa Oil Refinery and Ufaneftekhim by 2015, Ufaneftekhim CEO Vadim Nikolaychuk said at a chemical forum on Friday.

      Of this total, Bashneft intends to allocate RUB 19bn (approx. USD 673m) for projects to increase the level of crude oil conversion into light oil products. It plans to launch a delayed coking unit and a vacuum gasoil hydrocracker at Ufaneftekhim.

      As a result of these measures, the level of crude oil conversion is expected to reach 94.7% in 2016, up from 80.21% in 2008. Investments in a project to enhance the quality of fuel are planned at RUB 9.7bn (approx. USD 344m) until 2013.

Anupama Airy, Hindustan Times

Email Author

New Delhi, May 26, 2011

First Published: 21:04 IST(26/5/2011)

Last Updated: 02:03 IST(27/5/2011)

Oil giants may put Rs 15,500 cr in Russia gas project
In a bold attempt to secure a share in Russia’s gas sector, a consortium of ONGC Videsh, GAIL and Petronet LNG is preparing to invest around Rs 15,500 crore for a 15% stake in Russia’s independent gas producer Novatek’s $30-billion (Rs 1,35,000-crore) LNG project in Yamal peninsula.

Novatek will retain 51% equity in the project while the balance 49% will be given to potential investors. France’s Total is also understood to be persuing a 20% stake in the project.

A non-binding indicative bid for a 15% stake in the project is underway and, if successful, the Indian consortium will invest R15,500 crore for a 15% in the project, a company official close to the development told HT.

“The 15% equity of this multi-billion dollar project (to be financed on a debt-equity ratio of 50:50) will be split between ONGC Videsh, GAIl and Petronet LNG as 7.5%, 5% and 2.5% respectively,” the official said.

Global consultants including Gaffney Cline Associates (GCA), Poten & Partners (UK) Ltd (P&P) and Allen & Overy were appointed by the Indian consortium for conducting a due-dilligence of the project, besides preparing an indicative offer.

A joint team comprising of representatives from OVL, GAIL and GCA also visited the data room in Tyumen, pertaining to upstream assets.

“While Novatek has indicated the project cost to be $16 billion, our consultants have worked out the capex for upstream development and the LNG liquefaction plant as $30 billion,” the official said.

The capacity of the plant will be 16.5 million tonnes per annum and the delivery of first LNG from Yamal is expected by 2016.

“The Yamal LNG project will receive supplies from the South Tambeyskoye field located in the north east of the Yamal Peninsula and holds estimated reserves of 1256 billion cubic meters of natural gas and 52 million tonnes of oil,” he said.

Does Russia need China’s energy market?
10:32 27/05/2011
By Andrei Ostrovsky

A new round of energy talks are soon to be held within the larger framework of Russian-Chinese economic cooperation. Russian Deputy Prime Minister Igor Sechin and his Chinese counterpart, Wang Qishan, will discuss the current conditions of and prospects for cooperation in the energy sector, particularly with regard to oil and gas, which have become a major component of Russian-Chinese bilateral relations.

In October 2009, when Prime Minister Vladimir Putin visited China, a number of agreements were signed in order to boost bilateral cooperation, including a cooperation program between the regions of Eastern Siberia and the Russian Far East and China’s northeastern provinces.

More recently, Rosneft and the China National Petroleum Corporation (CNPC) also signed an agreement on the annual supply of 15 million metric tons (110.25 million bbl) of Russian oil in exchange for a $25 billion loan to Rosneft and Transneft for the construction of a branch pipeline from Skovorodino to Daqing in northeastern China. A related agreement stipulates the supply of some 70 billion cubic meters (2.47 trillion cu f) of Russian natural gas to China annually.

Many people in Russia wonder whether such cooperation is in fact in their own interests, fearing that Russia might soon find itself in the position of a mere commodities supplier. But the question should be rephrased as follows: Has Russia missed the chance to strike a lucrative partnership with China over energy resources? Do its oil and gas companies still have time to strengthen their foothold in eastern markets?

China is the world’s second largest energy consumer after the United States, accounting for over 10% of global primary energy consumption.

While implementing its 11th five-year plan (2006-2010) and drafting a socio-economic development plan through 2020, China came to the conclusion that in order to achieve its goal of “prosperity in moderation” (xiaokang), it needs to increase its energy production accordingly. However, that could be more easily said than done: ever since the 1990s, China has been aware of its dwindling oil supplies, and now insufficient reserves of natural gas and coal may be added to the list.

Meanwhile, China’s demand for energy will keep growing. Its sizable coal reserves notwithstanding, its imports have exceeded exports since 2007. Given the trends of its economic development, China will be hard put to meet its energy requirements in the 21st century.

As for Russia, oil and gas account for over 70% of its exports in terms of value, but nearly all of it is directed westward along existing pipelines from Western Siberia. This irrational distribution of production power in Russia in part underwrites the hypertrophied growth of its European territory at the expense of the starkly underdeveloped east.

The development of large-scale projects designed to deliver Russian oil and gas to Northeast Asia could boost the economic development of Siberia and the Russian Far East while attracting the investment from countries interested in importing Russian energy resources. Russian-Chinese oil and gas projects could be the first step in this direction.

One of the biggest stumbling blocks to Russian-Chinese energy cooperation, however, will be a pricing agreement. It’s no coincidence that this issue has been at the center of ongoing and thus far unsuccessful negotiations between Gazprom and CNPC. Russian companies can demand the same prices for energy distribution as they do for their Western clients, however, as long as China produces more energy than it consumes, it will be reluctant to pay those prices.

In this regard, it should be noted that China has large coal reserves and that its so-called “coal kings” can always increase production to compensate for energy shortages on the domestic market. Furthermore, it has surged ahead in the production of alternative energy, including wind, solar, tidal, geothermal, hydrothermal energy and bioresources, as well as building small hydroelectric plants. It also has long-standing relations with oil suppliers in the Middle East, Russia, Central Asia, and Latin America.

Overall, China has enough energy to maintain the rapid growth of its economy. But it will need more energy to accelerate the growth of its GDP, which means that it will have to import oil, as well as natural gas and coal.

Under these circumstances, if Russia does not pay more attention to the eastward development of its energy exports, it will soon find itself elbowed out of the Chinese energy market by its international competitors.

Dr. Andrei Ostrovsky (Economics) is Deputy Director of the Institute of the Far East, Russian Academy of Sciences


Gazprom to launch 10 mln t LNG plant in 2016-source
Thu May 26, 2011 8:20am GMT

UFA, Russia May 26 (Reuters) - Gazprom (GAZP.MM) and Japanese companies plan to build a liquefied natural gas plant near Russia's Pacific port of Vladivostok in 2016 with capacity of 10 million tonnes a year, a Gazprom source said on Thursday.

He also told reporters that the investment required for the plant's construction is estimated at $7 billion. Japan is slated to get 7 million tonnes of the frozen gas a year, the rest will be shipped to South Korea.

Last month, a consortium led by the Japanese trading house Itochu Corp (8001.T), said it may build an LNG plant in Russia's Far East together with Gazprom to satisfy rising demand for the fuel.

(Reporting by Olesya Astakhova; writing by Vladimir Soldatkin; editing by Jessica Bachman)

11:30 27/05/2011ALL NEWS

Sakhalin, Gazprom to develop Sakhalin shelf projects.

27/5 Tass 152

YUZHNO-SAKHALINSK, May 27 (Itar-Tass) —— The authorities in the Sakhalin Region and the Russian gas giant Gazprom will develop and use the resources of the Sakhalin shelf projects under a memorandum, which Governor of the Sakhalin Region Alexander Khoroshavin and Gazprom Deputy CEO Alexander Ananenkov signed.

“The memorandum holds that the signatory parties intend to cooperate in the use of the resources under the Sakhalin shelf projects for gas supplies in the Sakhalin Region and gas supplies in other constituents in the Far Eastern Federal District and the development of the export supplies in the countries in the Asia-Pacific Region,” spokesman for the regional governor Alexei Bayandin told Itar-Tass on Friday. For this purpose the regional government and Gazprom will synchronize the development of the gas production capacities on Sakhalin (including the Sakhalin-Khabarovsk-Vladivostok gas pipeline) and the liquefied gas output rate near the settlement of Prigorodnoye.

Gazprom will also consider the construction of an oil refinery in the Sakhalin Region. Oil and gas condensate from the Sakhalin shelf fields can become the raw materials for the oil refinery. Meanwhile, the government of the Sakhalin Region will assist the company in these issues, the memorandum runs.

The signatory parties act under the cooperation agreement and the agreement for gas supplies in the Sakhalin Region. In 2009 the general schedule of gas supplies in the Sakhalin Region was approved.

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