Russia 101118 Basic Political Developments

Nokia agrees to open research centre in Russia

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Nokia agrees to open research centre in Russia
By Nadia Popova, Dow Jones Newswires

Thursday 18 November 2010

Finnish vendor signs MoU with president of Skolkovo Fund.

Finnish telecommunications company Nokia Corp. Thursday agreed to open a research center at Russia's high-technology hub Skolkovo, which Moscow hopes will compete with California's Silicon Valley.

Nokia's executive vice president, Esko Aho, signed a memorandum of understanding with the president of the Skolkovo Fund, Russian billionaire Viktor Vekselberg, Nokia said in a press release.

The center will conduct research into mobile sensors and solutions for data analysis, among other areas, Nokia said."The scale of the center and the scope of objectives shall be comparable with the scale and scope of Nokia's largest R&D centers in Cambridge [England] and Lausanne [Switzerland]," Nokia said.

Russia hopes to attract engineers, programmers and venture capitalists to participate in Skolkovo, which has already drawn support from Cisco Systems Inc. and Germany's Siemens AG.

In Skolkovo, a suburb west of Moscow, offices, apartments and laboratories are expected to be constructed over the next three years on what is now a collection of empty fields near one of Russia's few private business schools.

Economic Zone agreement signed
Nov 18 2010

Moscow: Yesterday, the agreement on creation of special economic zone was signed between Russian Economic Ministry, municipal and regional administration of Murmansk, and Kola district authorities.

Earlier, on October 12 Russian PM Putin signed a resolution on creation of the Port Economic Zone in Murmansk. October 26, the resolution entered into its force.

The Zone will encompass 30,5 of the territories of Kola district and Murmansk municipality.

Murmansk Economic Zone plans to construct a container terminal, and to modernize the existing (or to construct new) port capacities for transshipment of bulk and fluid cargo. Besides, the zone may be able to mount drilling rigs that is considered vitally important for oil-and-gas development projects.

So far, there are a few investors that have confirmed their willingness to participate in the project:

  • ZAO Sintez Petroleum will create an oil transfer complex;

  • Murmansk Commercial Port Lavna will construct a coal transfer complex;

  • fishery company OOO Golfstream is about to reconstruct sea port terminal for work with vessels, processing and storage of sea products;

  • OOO Suprimex National Seafood plans to upgrade its infrastructure facilities.

The investments of these companies sum up to 150 bln RUB; 1,500 of vacancies will be opened for employment.

The creation of the Economic Zone is also an impulse to launch Murmansk Transport Hub project, says Viktor Olersky, deputy Transport Minister. Presently, there are two huge investors that target the hub project: Kuzbassrazrezugol (second biggest coal company in Russia) and Siberian Business Union (holding of companies dealing with transport, cargo, machinery, insurance, construction, etc).

The investors of the Zone will get tax and customs benefits for the whole period of the Zone’s legal existence.

There are 23 special economic zones in Russia; 3 of those are port zones. Two earlier two port economic zones were opened in Khabarovsk and Ulianovsk region in December 2009.

For the Record
18 November 2010

Bashneft’s bid documents for the Trebs and Titov oil fields meet the tender commission’s criteria, Interfax reported, citing Anatoly Ledovskikh, head of the Federal Subsoil Resource Use Agency. (Bloomberg)

MICEX is in contact with Euroclear Bank about the possibility of establishing a link that would enable Euroclear clients to trade Russian bonds without a local  account, Yekaterina Demushkina, head of the MICEX national depositary, said Wednesday.(Bloomberg)

PhosAgro chief executive Maxim Volkov said Wednesday that he wasn’t aware of any approach by Canada’s Indigenous Potash Group to get funds to buy a minority stake in Potash Corporation of Saskatchewan, and that he is “ready to cooperate with any interested parties.” (Bloomberg)

The 2011 budget would balance with an average oil price of $109 per barrel, while the actual budget is based on $75 oil, Deputy Finance Minister Alexei Savatyugin said Wednesday. (Bloomberg)

Sberbank may hire PIK Group founder Yury Zhukov to run its new property unit, which it is forming to manage real estate acquired from delinquent lenders during the global credit squeeze, Kommersant reported Wednesday, citing unidentified people familiar with the plan. (Bloomberg)

Activity in the Oil and Gas sector (including regulatory)

China, Russia still divided on pipeline gas price
2:31pm IST

BEIJING, Nov 18 (Reuters) - China and Russia have still not reached a pricing agreement for the gas that Russia will supply China along a planned pipeline, a Chinese official said on Thursday.

"With regards to the pricing negotiation, the two sides have made efforts. We are still largely divided on pricing. The difference in the pricing between the two sides is $100 per 1,000 cubic metres," said Gu Jun, deputy director general of the National Energy Administration.

"We need to demonstrate sincerity on both sides to see whether we can push forward with the negotiations," she said at a Foreign Ministry briefing ahead of a visit to Russia next week by Premier Wen Jiabao, Vice Premier Wang Qishan and other officials.

"The pricing negotiation is an important part of vice-premier Wang Qishan's trip and we hope to narrow the divide then."

(Reporting by Sui-Lee Wee; Editing by Ken Wills)

Armenia trying to persuade Russia to leave its gas price for Armenia unchanged

YEREVAN, November 18. /ARKA/. Armenia is now negotiating with Russia in an effort to persuade the latter not to raise its gas price for Armenia, Armenian Energy and Natural Resources Minister Armen Movsisyan said Wednesday in the National Assembly.

“Negotiations began by the end of each year for setting gas prices for the next year,” he said answering the question about Russian Gazprom’s intention to raise exported gas prices to European levels. “This year we started negotiating as well. We presented our arguments.”

The minister found it too premature to predict the next year’s gas price. He said that it would be known after completion of the negotiations.

On 2008, Russian Gazprom and Armenian ArmRosgasporom signed a contract on gas supply to Armenia.

The contact implied gradual gas price rise that would culminate in European levels in 2011.

On April 1, 2010, prices for Russian gas in Armenia leapt 37%.

ArmRosgasprom CJSC enjoys the sole right for importing and distributing Russia gas in Armenia.

Russia conveys its gas to Armenia through Georgia.

The company was established in 1997.

Russian Gazprom holds 80% of the company’s shares, and the remaining 20% belong to Armenian government. -0---

18/11/2010 11:59

Surgut cannot register MOL stake

Russian Surgutneftegas cannot register the stake it bought last year in Hungarian oil and gas group MOL's , an appeals court has ruled.

News wires  18 November 2010 08:25 GMT

Surgut bought a 21.2% stake in MOL from Austria's OMV last year for €1.4 billion ($1.9 billion) in a deal that MOL considers unfriendly. Surgut has been blocked from voting at MOL's last two shareholder meetings.

Surgut launched legal proceedings in 2009 against MOL's refusal to have it listed in the company's share book. The Metropolitan High Court of Appeal has now approved a ruling of the Metropolitan Court rejecting Surgut's claim, MOL said.

Published: 18 November 2010 08:25 GMT  | Last updated: 18 November 2010 08:27 GMT

TNK-BP and AVTODOR sign Cooperation Agreement
November 17, 2010, Wednesday

TNK-BP and state company Russian Highways (AVTODOR) signed a Cooperation Agreement today aimed at developing Russia’s transport infrastructure, introducing innovative technologies in the roads sector and improving the standards of service and safety on the country’s long-distance highways.

The document was signed for AVTODOR by Sergey Kostin, Chairman of the Management Board, and for TNK-BP by Amir Feizulin, Vice President, Marketing and Dmitry Ustinov, Vice President, Business Marketing and New Business Development.

Under the Agreement, TNK-BP and AVTODOR will develop proposals on modernizing roadside infrastructure, including the development, construction and operation of new formats of multifunctional roadside complexes.

The companies have also expressed their intention to promote the development and rapid introduction of innovative technologies and materials, including polymer-bitumen astringents to extend the service life of road surfaces and reduce the cost of building and operating roads.

“Raising the standard of roadside service and introducing innovations are vital components of developing high-speed motorways. We hope that the experience of our colleagues in TNK-BP will help to substantially improve this work”, noted Sergey Kostin.

“We greatly value our cooperation with AVTODOR and are confident that today’s agreement is an important step on the way towards modernizing Russia’s roads”, stated Amir Feizulin. “TNK-BP is a recognized leader in the construction and operation of retail sites and in the production of high-tech innovative products, some of which will help to make a substantial contribution to improving the quality of road building.”

Working groups including representatives of both AVTODOR and TNK-BP will be set up to coordinate the two companies’ joint activities.

Oil producers need single trading price system
Emirates 24-7, 18 November 2010

Russian energy analyst says oil market has become part of financial system

Oil producers worldwide need to join hands and create a common transparent crude trading system to guarantee fair prices for all and stabilize the market, according to a Russian energy analyst.

Maria Belova, deputy head of the energy department at the Russian Institute for Energy and Finance, said the oil market has become deeply connected to both the global economy and the world financial system.

In comments published by the Emirates Centre for Strategic Studies (ECSSR) and Research, she said the oil market turbulence caused by the 2008 global fiscal distress showed it has become "almost a branch of the financial market" and underscored the need for efforts to stabilize prices.

"To achieve market equilibrium, closer cooperation among oil producers is required, not to consolidate their power through collective blackmail but to send credible signals to stabilize the market by providing specified oil production volumes and predictable prices as OPEC does," she said.

She noted that oil producers face different environmental conditions, enjoy different levels of proximity to basic markets and produce oil of different qualities.

"Today, many of these factors are considered only in bilateral transactions in which price parameters are only indirectly coordinated with stock exchanges where world market price indicators are defined," said Belova, who attended an international oil conference at ECSSR last week.

"With this in mind, it is necessary to consider the creation of a uniform oil trading system, including trading platforms with specific pricing rules that are transparent and clearly-defined for all addition, uniform registration and settlement systems for oil contracts may also be could also be useful to establishment joint investment banks to develop new oil projects."

Belova described the current pricing system as imperfect and unexplainable, adding that prices are determined by both the spot contracts market as well as "paper futures." She said it would be more reasonable to form prices on the basis of a future commodity contracts (forward transactions) system.

"Defining the future oil price would not only take into account the basic trends of oil exploration and lifting costs, but also consider supply-demand parity more precisely...the four-fold fall in oil prices in the autumn of 2008, ongoing speculations over peak production, concerns surrounding growing resource nationalism and uncertainty regarding oil consumption forecasts all distort the market and can cause new shocks which work against the interests of oil producers and consumers alike.

© Emirates 24|7 2010


Gazprom places 5-year Eurobonds

      RBC, 18.11.2010, Moscow 11:48:04.Gazprom has placed Loan Participation Notes (LPNs) worth $1bn to be redeemed on November 29, 2015. The bonds will be issued by the special legal entity Gaz Capital S.A. (registered in Luxembourg) as part of the Russian energy holding's LPN program, the company announced in a statement today.

      The Eurobonds have been placed at a 5.092-percent coupon rate per annum. Credit Agricole CIB and J.P.Morgan Securities Ltd. are acting as the bookrunners and lead managers for the placement.

      Gazprom intends to use the proceeds from the flotation for general corporate purposes.

      The last time Gazprom issued Eurobonds was in July 2009, worth USD 1.25bn and EUR 850m, with the interest rate set at 8.125 percent.

Gazprom and Naftogaz Ukrainy agree on JV assets evaluation
17.11.2010 18:00

The Gazprom headquarters hosted today a working meeting between Alexey Miller, Chairman of the Company's Management Committee and Yury Boiko, Ukrainian Fuel and Energy Minister.

The meeting addressed various aspects of creating a joint venture between Gazprom and Naftogaz Ukrainy. The parties agreed to start evaluating the assets that could be contributed to the JV.

Gazprom and Naftogaz start joint venture
Nov 18, 2010 00:37 Moscow Time

Russia's Gazprom and Ukraine’s Naftogaz have started a joint venture. According to Gazprom CEO Alexei Miller, the Corporation will "have an opportunity to implement joint projects on mutually beneficial terms and with maximum efficiency”.

   Previously, it was reported that the gas fields in the Astrakhan region and the Yamal Peninsula could be the basis for a joint venture of Naftogaz and Gazprom. The idea to bring together the two companies was voiced by Russian Prime Minister Vladimir Putin in late April.

Gazprom, Ukraine Agree to Start Valuing Assets for Joint Venture
November 17, 2010, 12:45 PM EST

By Anna Shiryaevskaya

Nov. 17 (Bloomberg) -- OAO Gazprom and NAK Naftogaz Ukrainy agreed to start valuing assets for a possible joint venture, as the Russian gas-export monopoly bets against an international group to manage Ukraine’s pipelines.

Gazprom Chief Executive Officer Alexei Miller met with Ukraine’s Fuel and Energy Minister Yuriy Boyko in Moscow today to discuss the planned venture, the gas producer said in an e- mailed statement.

“Unlike a multilateral consortium, fruitless talks of which have been going on for many years now, our joint venture will become a real business tool,” Miller said. “Setting up the joint venture is a necessary and absolutely logical step in the development of cooperation between the companies.”

Russian Prime Minister Vladimir Putin had offered to merge Gazprom with Naftogaz in April. State-run Naftogaz transports about 80 percent of Russia’s Europe-bound gas exports via its Soviet-era transportation network and Russia has sought control over it.

Naftogaz may contribute the pipeline in the joint venture while Gazprom would offer the Ukrainian company access to producing fields in Russia.

Ukraine has sought to set up an international group with partners from the European Union and Russia to manage and upgrade the gas pipeline network.

--Editors: Torrey Clark, Alex Devine

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at

To contact the editor responsible for this story: Will Kennedy at

Gazprom considering selling its stakes in FSK and MRSK Holding on the market

VTB Capital
November 18, 2010

News: Kommersant reports that Gazprom is considering selling some of its non- core electricity assets on the market in order to finance its 2011 investment programme. The decision could be taken at the Board of Directors meeting scheduled for 23 November. The assets might include the 3.9% stake in FSK and the 10.5% stake in MRSK Holding. The gas giant reportedly needs RUB 30-40bn to finance the investment programme for its generating companies, although there is as yet no final agreement within the company about the possible sale.

On a separate note, Moscow Mayor Sergey Sobyanin does not see the rationale for consolidating local heat networks and heat generating assets at this stage, saying that it would require a serious discussion. We remind investors that Gazpromenergoholding recently restarted talks on the possible acquisition of MTK (which owns heat networks in Moscow) and is waiting for the position of the new local government.

Our View: Were Gazprom to decide to sell its stakes in FSK and MRSK Holding on the market, this would trigger the risk of a share overhang. However, until the Board of Directors has taken its decision, we would treat the news as neutral to marginally negative for sentiment on these stocks.

For Mosenergo, the news means that it is unlikely to be able to buy MTK in the near future. We highlight the company as having one of the best exposures to heat reform (mainly through its exposure to the heat generating segment) and are reiterating our Buy rating for the stock.

Dmitry Skryabin

Shtokman – pros and cons

Gazprom halves Shtokman investments. U.S. company wins contract to design Shtokman LNG plant. All tenders to be ready in December. No gas from Shtokman before 2020.

As usual, news about the development of the Shtokman project is contradictory. BarentsObserver brings you an overview over media coverage on the Shtokman project in Russian and Norwegian media the last couple of days.

Gazprom halves Shtokman investments
Russian gas major and main partner in the Shtokman project Gazprom has halved the company’s investments in the project, Russian Business Consulting reports. The investment plan was originally on RUB 11.5 billion, but has now been cut to RUB 5.5 billion.

- Obviously, the gas monopolist is not too certain about the realization of the project, the web site notes. Gazprom plans to invest RUB 5.5 billion in the Shtokman project in 2010 – 2 billion in capital investments and 3.5 billion in long-term financial investments. In 2009 Gazprom investments in the project amounted to RUB 13 billiont.

The leadership in Gazprom denies that the cutbacks imply another postponement of the project, Russian Business Consulting writes.

U.S. company to design LNG plant
Chicago Bridge and Iron has been awarded a contract to design the onshore gas storage facilities and LNG export terminal for the Shtokman project, web site reports.

Chicago Bridge and Iron (CB&I) is one of the largest companies in the world specializing in projecting for oil and gas companies. The company has won the Front End Engineering and Design deal for the Shtokman LNG plant at Teriberka which was awarded by Giprospetsgas Joint Stock Company, which is the overall designer of the project. Design work is due for completion next year.

The work involves Front End Engineering and Design for multiple 160,000 cubic meter full containment LNG storage tanks, process pipelines and related loading facilities at the site.

CB&I is also working on the Barents Sea Goliat development for Eni.

The LNG plant is part of the second phase of the Shtokman development project, where only Gazprom is involved.

Shtokman Development plans to close all tender procedures for the first phase of the project in December 2010, web site LawTEK writes. In January-February everything must be ready for the first calculations of the costs, so that the final investment decision on the project can be made in March.

Norwegian analyst: No Shtokman gas before 2020
Norwegian oil major Statoil says that the development of the Shtokman gas field in the Barents Sea is going according to plan and that production will start in 2016. Norwegian oil analyst Torbjørn Kjus in DnB Nor Markets doubts that there will by any start-up on the field before 2020 because of changed market conditions.

According to Bård Glad Pettersen, public relations manager for foreign projects in Statoil, the project is going according to plan and the final investment decision will be made in 2011, web site e24 reports. He believes that production will start in 2016.

Torbjørn Kjus has little faith in Statoil’s predictions: - I doubt there will be any start-up before 2020. Much of the gas from Shtokman was planned to be exported to the U.S. market, but with the development of unconventional resources that we see now, this gas will have to be sent somewhere else, he says.

Glad Pettersen believes that LNG will be in great demand also in the future, especially in Asia. He does not want to comment on the question about whether the partners are considering the possibility for transporting LNG eastwards through the Northeast Passage.

Glad Pettersen also rejects the recent Russian speculations that Statoil will be less active in the project after the signing of the Norwegian- Russian agreement on delimitation of the Barents Sea.

Text: Trude Pettersen

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