Activity in the Oil and Gas sector (including regulatory)

Inter RAO may join oil shale project in Jordan (Part 2)

ABU DHABI. Feb 13 (Interfax) - Russia's Inter RAO is considering possible involvement in the construction of a $250 million complex for processing oil shales in Jordan, company CEO Boris Kovalchuk said at the opening ceremony of a Middle East representative office.

He said Inter RAO would set up a joint venture with an investor from Saudi Arabia with the sides getting 33% and 67% respectively.

He said the complex will include a power plant with the capacity of 90-150 MWt.

Kovalchuk said that the electricity from the plant will be sold to the Jordanian state company NEPKO and the synthetic oil - to the state oil refining company ZAPKA.

The partners are expected to make a feasibility study of the project by the end of the year. Currently geological prospecting at the field continues.

Kovalchuk said that the field extends to Israel and his company plans to hold talks with Israel on its possible involvement in the project.

Speaking of other Inter RAO power engineering projects in the Middle East he said that an SPV is being set up with the government of Yemen to upgrade and operate Al Hiswah thermal power plant in that country. Investment in the project is estimated in $100 million. The company plans to upgrade three power units raising their capacity from 50 to125 MWt.

One more project in the Middle East is the construction of Al Kamsha wind farm. The energy from it will be sold at a fixed price to NEPKO. The project is estimated at $105 million. It will be co financed by an investor at the ratio of 51% to 49%.

Inter RAO also shows interest in the restoration of the Dokan and Derbandikhan HPP in Iraq with a combined capacity of 670Mwt.

The energy holding is considering the possibility of setting up two JVs for electricity deliveries to Turkey and Syria but no understandings have been reached yet.

Speaking of general plans for the Middle East Kovalchuk said that his company plans to expand its presence through privatizing the energy assets in several countries. This will allow Inter RAO boost its energy deliveries to neighboring nations.

14.02.2011

Shotkman Profitable Without Regard to Tax Relief

The Shtokman project is feasible and profitable in any case, but tax reductions will be appropriate, a source in Shtokman Development says.

As an answer to Statoil’s statement that the Shtokman project is not economical justifiable with today’s Russian tax policy, a source in Shtokman Development says to Russian Business Consulting that the project feasibility study shows that a development of the Shtokman gas condensate field is technically feasible and profitable.

The representative from the development company added that such a large project will need special framework conditions and that tax relief from the Russian Government is expected to come.

"It would be appropriate to give additional benefits to Shtokman, directed at compensating the involved companies’ expenses for development of infrastructure that will benefit the whole region, make future shelf projects easier and act as stimuli for the development of the Murmansk region", the source says.

As Barents Observer reported, President of Statoil Russia Jan Helge Skogen last week said that a realization of the Shtokman project will require considerable tax relief from the Russian Government and that the investments needed in infrastructure makes the project economic unjustifiable in combination with Russian tax policy.

Rosneft deal has issues for BP

More details on the surprise tie-up between BP and Russian behemoth Rosneft. This definitely looks like it is about both companies finding scale outside the U.S. sphere.

BP   (quote) is issuing $7.8 billion in its own shares to Rosneft, which trades extremely thinly in ADR form as  RNGZY   (quote). This makes the Russians a 5% shareholder in the entire BP operation.

In return, BP gets a 9.5% stake in RNGZY and the right to team up on the company's three Arctic fields.

What this is about is a pivot away from U.S. interests. It is almost as if Congress deliberately wants to go after BP after the Gulf disaster, and now it is quickly becoming a political issue in Washington.

The company is a punchline for American kids -- and still has the $150 billion market cap heft that it can take its toys and go home, so to speak.

A win-win scenario?

Those toys include a lot of world-leading technology for exploring and producing in extreme Arctic climates. After all, BP learned how to drill ultra-deep wells in the North Sea, so Rosneft's fields will be relatively straightforward for it to unlock. And despite the jokes, its management is still world-class.

BP, of course, gets access to those vast fields. Ultimately, early action seems to indicate that the market thinks this is a spectacular deal for BP and a so-so arrangement for Rosneft.

But ultimately, what may be happening is that foreign capital has a hard time buying Rosneft outside Russia anyway. BP is more liquid on a global basis, so may be the only way for many people to trade this story.

Two other threads to watch:

1. Teaming up with Rosneft gives BP a straight line of communication straight up to the Russian government, so TNK-BP, its existing toehold in Russia, may now be a third wheel.

2. The Kremlin was looking for a strategic investor to take about 10% of Rosneft. This satisfies that goal and may make its proposed IPO of another 15% of the company sweeter to Western investors.

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.


TNK BP unifies gas and energy divisions

http://www.steelguru.com/russian_news/TNK_BP_unifies_gas_and_energy_divisions/190866.html

He said that "The company made this decision since these two divisions, gas and electricity are interrelated. TNK-BP currently has projects for developing gas operations, as well as projects for expanding generation. It is entirely logical that these two areas would be connected."

TNK-BP merged its gas and electricity divisions at the start of February. Slobodin now heads this area of operations.

http://www.steelguru.com/russian_news/Tatneft_registered_the_branch_in_Turkmenistan_/190865.html

It is reported that Tatneft registered its branch in Turkmenistan.

It should provide the realization of the contract signed with Turkmenneft in November 2010 on the Goturdepenebit sector servicing. The parties developed the 1st year production program which should be carried out under Elkhovneft control.

Tatneft is ranked as the 6th oil producer in Russia. It has 790 million tonnes in proved reserves. In 2008 25.766 million tonnes were gushed out, revenues are assumed to gain 217 billion, operating profit RUB 49 billion. The share capital is worth RUB 2.33 billion split in 2178690.7ths common and 147,508,500 preferred stocks of RUB 1 par. The major holder is Svyazinvestneftekhim.

http://www.bne.eu/dispatch_text14230

Renaissance Capital

No signs of improving corporate governance at Gazprom...yet. Last Friday (11 February), Gazprom held its annual investor day. One of the key topics of the day's Q&A session was the sale of 9.7% of Novatek to Gazprombank, which has raised concerns about a continued worsening of corporate governance at Gazprom. According to Gazprom's 3Q10 financial statements, the stake sale price was RUB57bn, or about RUB195/share, representing a 36% discount to the share price on 20 December, when the deal was completed. We were somewhat confused that Gazprom spokesman Sergey Kupriyanov provided an explanation of the transaction in the presence of the company's CFO - who we think would have been better suited to addressing such questions. While formal arguments from Gazprom about low liquidity in Novatek shares, the need for cash rather than options, and previous agreements reached before Novatek's share price had reached its all-time high, might have some merit, we doubt they will soothe deep investor disappointment about the way this transaction was handled. As a result, we think Gazprom's share price performance may lag the market for the next few weeks. That said, Gazprom remains our top sector pick for 2011, due to improving gas industry fundamentals coupled with very low valuations and the remaining possibility of improving corporate governance as a result of management changes and/or government actions.

Performance and ratings update. EMEA oil and gas stocks were flat, on average, last week, outperforming the Brent price (down 0.8%), the Bloomberg World Oil and Gas Index (down 1.9%), the MSCI Renaissance Index (down 2.9%) and the MSCI Emerging Markets Index (down 3.6%). The best performers were Tatneft (pref), Gazprom and TNK-BP Holding which were up 8.8%, 7.7% and 3.4%, respectively. Surgutneftegas (pref), Transneft (pref) and Surgutneftegas (common shares) demonstrated the worst performance, down 6.4%, 3.9% and 3.3%, respectively.

Our watch list for the current week includes Rosneft's and LUKOIL's annual reserves update.

Chart of the week. At a government meeting in St Petersburg on 9 February, Russian Prime Minister Vladimir Putin called for faster oil taxation changes, discussions on which have been dragging on for too long, according to Putin. While at the end of last year we were less confident that any material changes will be approved, we now see real signs that a new tax system could become effective from 2012. If approved, the proposed new system will immediately boost EBITDA at Tatneft by 12%, making it the biggest likely beneficiary of the new framework. However, if tax benefits for greenfield projects are included, Rosneft and TNK-BP also stand out as the biggest potential beneficiaries. We also view the forthcoming changes as an important catalyst for the whole sector, which could lead to its outperformance against the broader market.