Russ Oil-Gas

MOSCOW. June 22 (Interfax) - Russian gas giant OAO Gazprom (RTS: GAZP) is holding talks to receive access to the gas distribution market in China, company Deputy CEO Alexander Medvedev said at a press briefing on Thursday. He said that possible ways to enter the market include acquiring a gas distribution company or setting up joint ventures with Chinese companies. He said that at the moment negotiations are underway with several large Chinese partners. But first an understanding should be reached on the price for gas supplies to China, he said. Medvedev said that at the moment Gazprom is actively working on the issue of supplying gas to the Chinese markets by two routes - a pipeline from Western Siberia and another from Eastern Siberia. The volume of gas supplied will depend on the price. "We are calculating what price level is acceptable for us, so as to implement projects to build the pipelines to China on time," he said. However, he refused to say what this price level is. Medvedev also said that an intergovernmental agreement between Russia and South Korea on cooperation in the sector should be signed at the end of 2006. He said that Gazprom is also considering joining Sakhalin projects: including existing projects and projects to develop fields the rights to which have not yet been distributed. Commenting on the possibility of competition for Russian gas in China, in light of plans to supply gas to China from Turkmenistan and Kazakhstan, Medvedev said: "To supply gas under long-term contracts, it is necessary to have it." Medvedev refused to say what production center in Eastern Siberia and the Far East would be the main source for supplies to countries in the Asia-Pacific region until a program to set up a unified gas supply system in Eastern Siberia and the Far East has been approved, taking possible exports to countries in the Asia-Pacific region into consideration. Speaking about the possibility of Gazprom joining the Sakhalin-2 project, Medvedev said that Sakhalin-2 gas has already been contracted, but only for the first phase of the project, therefore if Gazprom joins the project it could take part in exporting gas from other phases of this project. He also said that gas from other Sakhalin sections could provide an additional resource base for the Sakhalin-2 project.

20.06.2006 The St. Petersburg Times - TOKYO - Gazprom may invest in a 300 billion yen ($2.6 billion), 850-kilometer pipeline to transport natural gas from Sakhalin Island to northern Japan, the head of the Japanese project said. Japan Pipeline Development Organization, based in the northern island of Hokkaido, is in talks with Gazprom, Russia's natural gas monopoly, Chief Executive Hideo Ogawa said. The pipeline may link to Exxon Mobil's Sakhalin-1 project or Royal Dutch Shell's Sakhalin-2 venture, he said. "We're seeking Japanese investors for about half the funding," he said. "For the other half we're talking with Gazprom and several other U.S. and European companies." The proposal may revive a plan to market gas from Sakhalin in Japan, which stalled because of a lack of support from Japanese utilities around Tokyo, the biggest market. Japan Pipeline's new project would tap demand in northern Japan. Japan Pipeline initially will spend 70 billion yen building a 360-kilometer pipeline between the Russian port of Korsakov and the Hokkaido town of Wakkanai by 2011. The pipeline will extend to Aomori, on the northern tip of Japan's main island of Honshu, by 2013. The company may also build a power plant with General Electric as part of the project, Ogawa said.

06-20-2006 Regnum News - On June 16, Russian Gazprom and Danish DONG Energy concluded their first contract on Russian gas supplies to Denmark, the Gazprom press office reported on June 19. The contract was signed by the vice chairman of the Gazprom board Alexander Medvedev and the executive vice president of DONG Energy Kurt Bligaard Pedersen. According to the contract, the supplies will be started in 2011 and will be carried out via the Northern European gas pipeline. DONG Energy will buy gas for 20 years — 1bn c.m. a year with the possibility of annual volume increase. The sides have also agreed that DONG Energy will supply gas to Gazprom Marketing and Trading, UK-based company of Gazprom Group. The gas will be sold in the UK – 600mln c.m. a year for 15 years starting from 2007. The gas will be transferred by Langeled, a gas pipeline project that will connect Ormen Lange gas field in Norway with the UK. "By signing a long-term contract with DONG Energy we are entering an absolutely new region – the gas market of Denmark. On the other hand, the contract allows Gazprom Marketing and Trading to diversify its purchase portfolio and to get Northern Sea gas on a long-term basis," says Medvedev. "These contracts will allow DONG Energy to continue diversifying future gas supplies to its consumers. Our purchase portfolio includes gas from the Danish and Norwegian sectors as well as from Russian," says Pedersen. DONG Energy is one of the leading energy companies of Northern Europe. The company produces, distributes, sells and supplies fuel in Northern Europe. In the coming years DONG Energy is planning to start selling its shares on Copenhagen Stock Exchange. DONG Energy has a share in Ormen Lange gas field and Langeled gas pipeline. The pipeline is to be launched in 2007. Gazprom Marketing and Trading is a part of Gazprom Group. It was set up in the UK in 1999. The company supplies gas to over 40 big fuel buyers in Western Europe and continues enlarging its geographical presence, variety of goods and services and gas clientele.

June 22, 2006 Kommersant - Turkmenistan has apparently adopted the ultimatum methods of Gazprom to hike gas prices. The Foreign Ministry of the country demanded from Russia's gas monopoly to raise gas prices from $65/ths cu meters to $100/ths cu meters starting from the second half-year. Otherwise, it threatened to stop deliveries to Russia August 1. If Gazprom yields to the price growth, the gas price for Ukraine will go up to between $140/ths cu meters and $150/ths cu meters. But Naftogaz Ukrainy will attempt to cut a direct gas deal next week. Turkmen Foreign Ministry released a statement yesterday, which explained the Monday failure of negotiations between Gazprom CEO Alexey Miller and Turkmen President Saparmurat Niyazov. In Turkmenistan, they view the price of $100/ths cu meters as the normal cost of gas, while Gazprom presses for maintaining previous price of $65/ths cu meters. The exact offer of Ashkhabad to Moscow today is to fix the price at $100 for 2006 to 2008. The annual sales are estimated at 50 bcm, as it is the delivery capacity of Middle Asia-Center gas pipeline. Ukraine buys some portion of Turkmen gas from Russia. It will face the prices of $140/ths cu meters to $150/ths cu meters if Gazprom yields to Turkmen terms. But if the gas monopoly turns down the ultimatum, Turkmenistan may deliver gas to Ukraine directly.

 RBC, 22.06.2006, Moscow 15:17:54.- Gazprom was offering $2.7bn for Udmurtneft, Gazprom's Deputy CEO and Gazprom Neft President Alexander Ryazanov told a press conference today, commenting on TNK-BP's agreements with China's Sinopec and Rosneft for the sale of Udmurtneft. Gazprom was not ready to pay more than that, and by the time it had reached an understanding with Hungary's MOL with regard to the acquisition of Udmurtneft, TNK-BP, Sinopec, and Rosneft must have already struck a deal, Ryazanov stressed. According to him, Gazprom and MOL had agreed on the following payment plan: Gazprom was to pay $1.25bn for a 50-percent stake, and MOL $1.75bn for the other 50 percent.

June 2006 RBC News - Russia's gas monopoly Gazprom and Hungary's MOL Group have signed an agreement on the South European Gas Pipeline project. The two companies agreed to set up a joint venture to prepare the technical and feasibility study for new transnational gas transportation and underground gas storage facilities in Hungary, Gazprom said. Gazprom's spokesman Sergei Kupriyanov said the idea was to build a new gas transportation system that would carry gas to Europe. The Blue Stream gas pipeline across the Black Sea would be used, he noted. "Considering Gazprom's reserves, its contracts and prospects for new export agreements, this seems to be the only real project in south-eastern Europe. And Hungary plays a key role here," Kupriyanov said. Gazprom and MOL Group also agreed to cooperate in regional investment projects in Southern, Eastern and Central Europe. Russia began supplying gas to Hungary in 1975. Over the past 30 years it has sold about 165.4 billion cubic meters of gas to the republic. About 80 percent of Hungary's gas imports come from Russia. In 2005 Gazprom supplied 9 billion cubic meters of gas to Hungary. MOL Group is the leading oil group in Central and Eastern Europe. It has its retail units in 10 countries of the region. MOL Group shares are traded on the stock exchanges of Budapest, Warsaw and Luxembourg.

15.06.2006 14:05 [Neftegaz.ru] - Gazprom has agreed with Far East gas transporting company Daltransgaz to acquire the 350km gas pipeline. Gazprom needs it to lay an eastern route to China by bringing together three branches. The gas for the future pipeline, running from Komsomolsk-on-Amur to Khabarovsk, will be secured by Sakhalin-3 project, where Rosneft holds the license for one of its blocks, but will hardly be able to export the gas in line with intention.Today only one gas pipeline, from Sakhalin to Komsomolsk-on-Amur, is operating now. Together, the above three pipelines will form the so-called eastern route to China. It will be filled by gas produced under the Sakhalin-3 project. The project has four blocks overall, Rosneft holds the license for Veininsky block (49 percent; CINOPE? – 25 percent). The remaining three blocks will be auctioned in the near term.

RBC, 21.06.2006, Moscow 18:59:54.Turkmen gas talks for 2007 and 2008 have not yet been completed, Gazprom spokesman Sergei Kupriyanov told journalists today. He noted that at this week's round of negotiations in Ashkhabad, Gazprom and the Turkmen government addressed terms for obtaining extra gas this year, and delivery terms for 2007 and 2008 as part of a long-term contract. At the moment, Gazprom and Turkmenistan are guided by a purchase contract for 30bn cubic meters of gas at $65 per 1,000 cubic meters. Kupriyanov said he was sure Gazprom would have fulfilled the contract by the end of the year. As reported earlier, Turkmenistan said today it intended to raise the gas price to $100 per 1,000 cubic meters.

RBC, 21.06.2006, Moscow 09:27:22. – Gazprom CEO Alexei Miller and Italy's ENI CEO Paolo Scaroni during a working meeting on Tuesday discussed prospects of cooperation in oil and gas industry. The meeting's participants affirmed the need to further develop long-term partnership between Gazprom and ENI taking into account the experience gained in previous cooperation, The Russian gas holding's press service reported. An agreement on strategic cooperation between Gazprom and ENI was signed in February 1998. Under the accord, the companies shall participate in the Blue Stream pipeline project, a trunk pipeline for Russian gas exports to Turkey laid along the Black Sea bed bypassing transit countries.

MOSCOW, June 15. (Viktor Ivanter for RIA Novosti) - Recently, we have seen that Russia and the West - principally the European Union - have chosen a conflict method of negotiating energy problems. We often hear statements such as "We can redirect resources from Europe to the East," or "We need to end our dependence on Russia," etc. Should Western distribution facilities be open to Russian companies? Should Russian resources be open to foreign companies? Is Russia trying to monopolize the European market? Will Russia dictate prices to Europe or will Europe dictate prices to Russia? All these approaches bring to mind conflict resolution studies. We consider them non-productive and favor the establishment of an energy union based on long-term strategic relations between energy suppliers and consumers. It is therefore very important to establish the parameters of a Russia-EU energy union that would guarantee the economic and political stability of their energy relations, thus ensuring energy security. Today, the EU imports up to half of the energy it needs, including 73% of its oil and 44% of its gas. By 2030, the share of imported energy is expected to reach 70%: 92% for oil and 81% for gas. Russian oil accounts for over 20% and Russian gas for over 25% of current EU energy consumption. Russia intends to remain a crucial energy partner for the EU in the first third of the 21st century. Its significant energy resources mean it has all the prerequisites to do so. Unlike world trade, conducted under WTO trade rules, rules on energy trade keep changing. They are set by regions, countries, unions of energy producers, and consumers and are changed at will (Bolivia is the latest example). The current status of relations with energy producers, including Russia, does not ensure the reliability or stability of supply. For example, the tensions around gas supply to Europe in January 2006 were caused by a number of factors, such as the lack of regulation in relations between suppliers, transit countries and consumers. The Energy Charter, which the largest exporting countries have not ratified or even signed, obviously, in our opinion, encroaches on the interests of oil and gas producers. The problem is not that Russia has not ratified the Charter; it is unclear why it has signed this lopsided document in the first place. The Charter in its present form is unacceptable, but we cannot do without common rules for energy trade. This is why producing and consuming countries must engage in an energy dialogue to work out a document acceptable to all parties. Common rules respected by countries and followed by businesses may provide the real legal framework for a Russia-EU energy union. Political tensions in international energy relations seem to have many economic components, but some of them can be alleviated with the help of purely economic mechanisms. For instance, the existence of gas pipeline networks - lengthy routes with numerous consumers and steadily growing demand along a pipe with a fixed capacity - cannot but lead to conflicts, especially during the onset of extremely cold weather. Timely investment in oil and gas infrastructure will help solve many problems without bringing them to the geopolitical level. This means constructing large gas storage facilities in European consumer countries. Russia's participation in such projects is an essential aspect of the energy union. At the same time, oil and gas companies need political certainty in their areas of investment. So Russia needs to work out common rules for investors willing to put their money in assets that are not seen as strategically important to the state, both in Russia and in Europe. If Moscow manages to define the criteria for strategically important assets in the oil and gas sector, it will be able to move from mutual mistrust to long-term energy partnership. From the economic point of view, strategically important assets are ones that ensure uninterrupted energy supply to Russian consumers while simultaneously honoring all contract commitments, including those with foreign partners. Answers to the question of giving foreign companies access to the Russian energy sector in general and allowing European investment in Russian energy production in particular depend on the foundation for Russian-European relations. If these relations look more like an energy conflict where none of the parties accepts any commitments, then energy exports to Europe will depend not on European consumers' needs but on the amount of energy that is left over after domestic and non-European demand is met. In this case, the situation in the European energy sector is likely to become rather unstable. One could counter that foreign consumers account for the lion's share of Russian energy producers' profits. But given the growing domestic and foreign demand for energy, Russian companies are unlikely to boost exports to Europe despite high energy prices, so the strategy of an energy union is preferable for both Europe and Russia. What might this cooperation be like? To meet Europe's growing demand, Russia will have to move into areas with more difficult production conditions - the continental shelf, heavy crude, etc. Then it will encounter the problems of lack of money and, more importantly, lack of technology. Russia needs capital combined with technology and experience. This is the essence of a union whose priority will be a strategic system of relations, not a one-time commercial profit. Another principle of cooperation in the energy sphere is the implementation of energy-saving technologies by foreign firms. Given the possible shortage of oil and gas for export, it is quite acceptable to turn over facilities that consume a lot of energy (such as heating networks and electricity grids) on concessions to foreign companies that possess energy-saving technologies. Resources saved in this way can later be exported. Moreover, an energy union with the EU does not only imply a stable energy supply, technology sharing and financial investment; we believe that it can also imply the shift of energy-consuming manufacturing closer to where energy is produced. Russia is interested in attracting energy-consuming manufacturing as long as it is based on modern technologies, complies with tough environmental requirements and is managed under highly transparent corporate principles. The EU countries should be interested in this as well. For example, if energy-consuming enterprises are moved to Asia, the growing demand in the region will force Russian companies to re-direct energy exports eastwards. There are now all the conditions necessary to make Russian-European energy relations a factor that ensures the stability of Europe's economy and the development of Russia's. Viktor Ivanter is member of the Russian Academy of Sciences, director of the Institute of National Economic Forecasts at the Russian Academy of Sciences.

22/ 06/ 2006 MOSCOW, June 22 (RIA Novosti) - Gazprom [RTS: GAZP] is looking for ways to reach gas end consumers in China, a deputy board chairman of the Russian gas giant said Thursday. Alexander Medvedev said Gazprom was holding consultations with major Chinese partners on acquisitions of Chinese gas-distribution companies or on establishing joint ventures. He added that it was also necessary to determine the price range of gas supplies to China before the parties switched from consultations to negotiations on specific issues. In March 2006, Gazprom and China National Petroleum Corporation signed a protocol on gas supplies from Russia to China. The protocol covers the timeframe, volume and routes of gas supplies and the gas price formula. The principal gas route is the western route - the "Altai project" - based on resources in West Siberia. At the second stage, Gazprom will also deliver gas via an eastern route. Gas supplies via both routes will total 68 billion cubic meters a year, and are expected to start in 2011.

06–20–2006 MOSCOW. (Dr. Igor Tomberg for RIA Novosti) -"Gazprom is ready to support the construction of a gas pipeline from Iran to Pakistan and India with financial resources and technology. This project will definitely pay off and is quite feasible," said Russian President Vladimir Putin in Shanghai on June 15, clearing the way for serious changes to the Eurasian gas market. First proposed by Iran in 1996, the projected pipeline is estimated to have a cost of $7 billion and will be 2,775 km long. Construction is to be completed in 2009, and starting in 2010 India and Pakistan are set to receive 35 billion cu m of gas annually, and in 2015, as much as 70 billion cu m. The project was developed by Gazexport, Gazprom's export arm, and now it has been transferred to the gas monopoly's foreign economic relations department. From an economic point of view, the pipeline is absolutely necessary. The project is very lucrative for India because the route will be rather cheap. According to Iranian sources, it will allow India to save $300 million annually. Pakistan also needs the pipeline because it will not only receive natural gas (Islamabad will sorely need gas imports by 2010) but will also be paid as much as $500-600 million for gas transit. Given China's growing energy demand, there are plans to continue the pipeline to the Chinese province of Yunnan. Pakistani President Pervez Musharraf made this proposal at a meeting with businessmen from member states of the Shanghai Cooperation Organization. The project's political risks have recently been significantly reduced. For a long time, the Indian authorities refused to participate for fear that Pakistan would not be able to guarantee the pipeline's safety. In June 2005, during Indian Petroleum Minister Mani Shankar Aiyar's visit to Pakistan, Musharraf said that "Islamabad guarantees the safety of the pipeline and wants to launch its construction next year." Iran's proven gas reserves are estimated at about 28 trillion cu m, while its gas output grows by 10% every year. At present, almost all of it is sold to the domestic market: about 100 billion cu m is supplied to commercial consumers (out of which 35 billion cu m goes to power plants) and 40 billion cu m is pumped into oil beds to maintain the well flow rate. Iran has over 22,000 km of gas pipelines. Its export capacity is growing quickly, which makes it a potentially powerful rival of Russia. It is no coincidence that many of Europe's plans to diversify its gas supply involve Iran. In this context, Gazprom's participation in the Iran-Pakistan-India pipeline can be viewed as a successful move in the competitive struggle for the European market: The new pipeline will direct the bulk of Iranian resources to Asia and therefore at least postpone their appearance in Europe. In the geo-economic context, the gas initiative voiced by Tehran in Shanghai is of extreme importance. At a meeting with Putin, President Mahmoud Ahmadinejad proposed to jointly determine gas prices and the main routes of gas pipelines. Experts believe that Russian-Iranian rapprochement in the gas sphere will create the conditions for an influential international organization of gas producers along the lines of OPEC. The merging of the Russian and Iranian gas transportation networks will allow Gazprom to take part in managing almost the entire Asian gas pipeline network. Gazprom's role will be increased even further because Turkmenistan is seriously considering joining the system (through the Turkmenistan-Iran pipeline), which will bring in Central Asia. This will create a gas market uniting Turkmenistan, Iran, Pakistan, India and China. Tehran's initiative means that the Islamic Republic, which controls the world's second-largest gas reserves after Russia, does not intend to compete with Moscow too toughly in the gas sphere. Moreover, Iran is proposing that the two share a coordinated strategy on the global gas market, including a coordinated price and transportation policy. In this case, the Russian-Iranian gas alliance could control 75.5 trillion cu m of gas, or 43% of the world's proven reserves, and therefore set major parameters for the development of the Eurasian and global markets in the long term. However, it is unlikely that a cartel will officially be formed any time soon. The Russian President dismissed this idea in Shanghai by saying, "OPEC is a cartel, but we will have a joint venture." Apparently, such an initiative could tarnish Russia's image as the host of the G8 summit as well as its claim to be the guarantor of international energy security. It is also important to bear in mind Russia's bilateral agreements with existing and potential gas producers - Algeria, Libya and Iran. They have the potential to put in place an efficient mechanism to regulate the piped gas market in producers' interests. So Gazprom's participation in the Iran-Pakistan-India pipeline project will be doubly beneficial for Russia: The potential rival - Iran - will direct its resources eastwards, seriously reducing Europe's chances of diversifying its gas supply. Simultaneously, Russia will gain new leverage on gas distribution in Eurasia, implementing its own strategy of diversifying sales. This is a very good geopolitical move ahead of the G8 summit in St. Petersburg. Dr. Igor Tomberg, senior researcher at the Center for Energy Studies, the Institute of World Economy and International Relations, the Russian Academy of Sciences.

01.06.2006 MosNews - The Boeing Co., the world's second-largest commercial-aircraft maker, expects to spend $27 billion in Russia on raw materials and services over the next 30 years to profit from the country's engineering resources and metal supplies, Boeing Russia President Sergei Kravchenko said on Wednesday, May 31. The information was reported by the Bloomberg agency. Boeing will buy $18 billion worth of Russian titanium and $5 billion worth of intellectual and engineering services for its commercial aircraft programs and spend $4 billion for Boeing's other departments, Kravchenko said in a telephone interview from Moscow. Chicago-based Boeing and larger rival Airbus are competing for a $3 billion plane order from OAO Aeroflot, Russia's largest airline, which said last year that it will choose between Boeing's 787 Dreamliner and Airbus' A350. Airbus Senior Vice President Axel Krein said Feb. 21 that his Toulouse, France-based company is in talks with Russian officials on $25 billion worth of partnerships including development of new aircraft. "This is not a reply to Airbus' $25 billion proposal," Kravchenko said. "These are concrete plans for cooperation work we already have in Russia." Boeing's design center in Moscow contracts out work with 1,200 Russian engineers helping develop wing flaps and the nose section of the planned 787 model. VSMPO-Avisma, the world's biggest titanium producer, is already shipping parts for the 787 made of the metal.

30.05.2006 MosNews - On Monday, May 29, Alexander Medvedev, Gazprom's deputy chief executive, has rejected European Union demands that Russia's state-controlled gas monopoly open its pipeline network to independent producers and other countries. He also called plans to bypass Russia with a gas pipeline from Kazakhstan to Europe "unrealistic". The planned trans-Caspian pipeline has strong backing from the EU, which is seeking ways to loosen Russia's stranglehold on gas supplies from Central Asia. U.S. vice president Dick Cheney recently met the Kazakh President Nursultan Nazarbaev to push for the project. However, Medvedev said Kazakhstan did not have enough gas to justify the planned pipeline, nor Europe enough demand. "I'm rather sure that without Russian gas, no projects in new supply will fly," he said, quoted by the Financial Times. "Today, due to the absence for the additional markets for this gas in Europe, it is absolutely unrealistic." The EU gets a quarter of its gas from Russia, the country with the biggest reserves in the world. However, fears over its reliability as a supplier were prompted by an interruption on January 1 after a spat with Ukraine over gas prices. Gazprom's chief executive, Alexei Miller, deepened concerns by warning EU ambassadors that if monopoly's plans to expand to the European downstream market were thwarted, Gazprom would respond by shifting its investment focus to new markets in Asia. At a recent pro-democracy convention in Lithuania Cheney warned Russia against using its vast energy reserves to "blackmail" neighbors. Medvedev said Gazprom had been unfairly portrayed and hit out at Cheney. "When Mr. Cheney is saying that Russia is using blackmail [as a] negotiating technique, that is nothing to do with our normal business practice," he said. "I believe that Russia didn't use gas supplies as a weapon, and didn't blackmail anybody. We have done our utmost to secure transit routes through Ukraine." Russia will host a meeting of the Group of Eight industrialized nations in July to discuss energy security.

31.05.2006 11:49 [Neftegaz.ru] – Russian gas monopoly Gazprom has rejected European Union's claim to open its pipeline network to independent producers and other countries. Gazprom's deputy CEO Alexander Medvedev called plans to bypass Russia with a gas pipeline from Kazakhstan to Europe "unrealistic". The planned trans-Caspian pipeline has strong backing from the EU, which is seeking ways to loosen Russia's stranglehold on gas supplies from Central Asia. However, Medvedev said Kazakhstan did not have enough gas to justify the planned pipeline, nor Europe enough demand.