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Monday, September 25, 2006

Gazprom may redirect natural gas resources to Europe-Putin

COMPIEGNE (France) September 23 (RIA Novosti) - Russian energy giant Gazprom may in the foreseeable future decide to redirect a part of resources from the Shtokman gas field to European markets, President Vladimir Putin said Saturday. The Shtokman deposit holds an estimated 3.2 trillion cubic meters of natural gas, and 31 million metric tons of gas condensate in the Barents Sea. Some $12-14 billion will be invested in the project's first phase, and production will start in 2011. "Some time ago, German Chancellor Angela Merkel posed the question about the possibility of reorienting a part of resources from one of Russia's largest oil and gas deposits - the Shtokman field - to European markets," he said. "Gazprom is now considering this possibility." He also said Russia had no intention to cut energy transit via traditional routes and pledged to honor all commitments in the energy sphere. "None of our plans to expand transport infrastructure are aimed against anyone," he said. "They serve only one purpose - the diversification of transport flows to our main consumers in Europe. But our traditional transit countries will not face a shortage of resources on their markets and will continue playing an important role as transit countries. We are not planning to cut transit via transit countries." Gazprom is considering partners for the unique project off Russia's Arctic shelf, which could be operated under a production-sharing agreement, although such schemes elsewhere in Russia have come under considerable scrutiny in the past few weeks. A shortlist of companies competing for the project unveiled last September includes Norway's Statoil and Norsk Hydro, France's Total, and U.S. giants Chevron and ConocoPhillips. Gazprom will select two or three partners from the shortlist to form a consortium for the project. Gazprom, however, has repeatedly postponed the selection of Shtokman partners. The event was initially scheduled to take place in spring, then in August, but no partner has been selected so far.

Wednesday, September 13, 2006

U.S. Hess oil and gas co. invests $500 mln in Russia

Hess OilMOSCOW, September 12 (RIA Novosti) - A leading U.S. energy company has invested $500 million in exploration and production in Russia, the company head said Tuesday. John B. Hess, chief executive officer of the Hess Corporation, a global oil and gas exploration and production company, held a working meeting Tuesday with Yury Trutnev, the head of the Russian Ministry of Natural Resources. Hess told Trutnev about the company's results and plans of operation in Russia, the ministry said. Hess told the minister his company intends to develop its business in Russia, and eventually in East Siberia, the ministry said. Hess Corporation acquired a 65% stake in Russian oil company Samara-Nafta in 2005. John Hess took over the company in 1995 from his father, Leon Hess.

Gazprom considers role in pipeline to link Panama, S. America

MOSCOW, September 12 (RIA Novosti) - Russia's Gazprom is considering taking part in the construction of a natural gas pipeline linking Panama with South America, the state-owned energy giant said Tuesday. The project was the focus of a meeting between Gazprom chief Alexei Miller and Panama's deputy trade and industry minister, Manuel Jose Paredes Tuesday. Miller and Paredes discussed Gazprom's participation in the construction of the infrastructure for the pipeline's maintenance. Panama, a major fruit producer, as well as an offshore financial and tourist center, lacks its own hydrocarbon resources. Imported oil accounts for 25% of its electricity output, with the rest being generated by hydropower plants and alternative energy sources. Panama has a developed oil infrastructure, which includes a pipeline that crosses the country from Columbia, and its storage facilities can accommodate a total of 16.9 million barrels. The country is also considering building a refinery to receive Mexican crude. The gas pipeline from Venezuela and across Columbia will eventually be extended to reach terminals in Panama, whose canal connects the Atlantic and Pacific oceans. While working to boost its presence in Europe, Gazprom is also increasingly looking to Latin American markets. The focus is on cooperation talks with Brazil, Argentina and Venezuela, who plan to build a transcontinental pipeline, which will also cross Bolivia. They are therefore interested in Gazprom's valuable expertise in laying long-distance pipelines. Venezuela and Brazil have made unofficial overtures to Gazprom, which in turn has suggested carrying out feasibility studies for the multinational project. Gazprom has 35 years of experience in geological prospecting and gas production. Its pipe-laying expertise is also considerable. Last year alone, the concern put into service 1,400 kilometers of long-distance pipelines and feeder branches, and built eight large compressor stations and underground facilities. Gazprom in turn is interested in the countries' liquefied gas production expertise.

Wednesday, September 06, 2006

Gazprom, Independents to Split Gas Exchange 50-50

September 6, 2006 - Reuters - Prime Minister Mikhail Fradkov has signed a decree setting up an experimental domestic gas exchange for the country's independent gas producers and export monopoly Gazprom, Vedomosti reported Tuesday. The newspaper quoted government officials as saying Gazprom and independent producers would be allowed to sell a total of 10 billion cubic meters of gas on the exchange in 2006-07. Gazprom will provide half of the volume. The decision has been in the works for years as part of a government plan to gradually liberalize domestic gas prices, which are now capped at one-fifth to one-tenth of gas prices in Europe. The volumes sold at the exchange at unregulated prices will represent only 2.5 percent of the gas used by domestic consumers and some 5 percent of Gazprom exports to Europe, which cover one-quarter of the continent's gas needs. The experiment will begin later this year at Gazprom's marketing subsidiary Mezhregiongaz's electronic exchange. Once it is completed and the results have been analyzed, the government will decide whether to proceed and expand gas sales at the exchange. "The development is promising, both for the independents such as Novatek and for Gazprom, with the latter set to gain more should it manage to use the gas exchange as a platform from which to speed up and expand unregulated gas pricing in Russia," brokerage Troika Dialog said.

Europe hopes Gazprom can handle possible gas shortages

MOSCOW. 06-09-2006 (Igor Tomberg for RIA Novosti) - Russian energy giant Gazprom and Germany's E.ON and BASF signed a final agreement on the North European Gas Pipeline in late August. This document sets out the project's legal and financial aspects. Although the official statement said the final document specified the basic agreement and set forth the project's legal and financial parameters, the document does not spell out the financial commitments of the parties involved. The cost of construction of the pipeline's shelf section had been previously estimated at 4 billion euros, but a feasibility study is still lacking. Analysts believe the North European Gas Pipeline project had been mothballed for political considerations. This pipeline with a projected annual capacity of 55 billion cubic meters of gas was Europe's main hope for expanded gas supplies. It was intended to launch construction of the pipeline's shelf section in 2008 and to start exporting gas in 2011. But unless the partners reach an agreement soon, construction deadlines may be delayed. Gazprom, however, has contracts to supply 13 billion cubic meters of gas annually for a period of 25 years after 2011, and if the North European Gas Pipeline is not commissioned by 2011, the Russian giant will have to use existing pipelines, which will inevitably lead to gas shortages. BASF and E.ON were the first to perceive this threat. E.ON Ruhrgas signed a contract to buy 400 billion cubic meters of Russian gas by 2036. Apart from the 2004 long-term contract, Wintershall, a BASF subsidiary, and Gazprom signed another document for the purchase of 90 billion cubic meters of gas for Ferbundents Gas over the 2014-2030 period. European energy majors are striving to extend their long-term contracts with Gazprom because the North European Gas Pipeline may never be completed. This is hardly surprising against the backdrop of snowballing gas consumption in the EU. Household gas consumption in the United Kingdom, the largest European gas consumer with 94 billion cubic meters in 2005, has doubled in the last three years and continues to grow in spite of skyrocketing prices. Last winter, 1,000 cubic meters of gas cost over $1,200 on the wholesale market, whereas Gazprom charged $250-270 for the same amount of gas on the continent under long-term contracts. Gas production in Europe has been falling. The Norwegian gas industry, which is posting 10% annual growth, is unable to compensate for the production slump in the British sector of the North Sea and a gradual recession plaguing the Dutch gas industry. The UK and Netherlands have reduced gas production by 14 billion cubic meters on 2004. The UK gas industry has posted a 20% recession since 2000, and this share will continue to increase. Consequently, the UK may face gas shortages in the foreseeable future. At the same time, the clash between Brussels and Moscow on energy issues has not abided. Russia meets 25% of European gas demand and accounts for 50% of EU gas imports. European politicians, who are feeling very nervous about this, have so far proved unable to find alternative gas suppliers other than Norway and Algeria. However, an Algerian-Russian gas rapprochement has now begun. Although the recently signed memorandum on cooperation between Gazprom and Sonatrach, Algeria's state-owned oil-and-gas giant, is not a direct action agreement, it has sparked off another anti-Gazprom campaign in European media and political circles. Although Brussels is opposed to long-term gas contracts, European energy companies are rushing to extend them. Apart from Germany, France, Italy and other European countries are trying to ensure gas-import guarantees for themselves. The French gas company Gaz de France SA is set to announce its new contract with Gazprom. Jean-Francois Cirelli, the company's president, told the press that the new gas-sale contract would replace the existing one, due to expire in 2012. I believe we can soon announce the signing of an important gas-supply agreement that will guarantee long-term supplies of Russian gas, Cirelli said. But he declined to explain specific motives for concluding a new contract when the previous document will remain valid for over five years. On August 28, Americo Amorim, co-owner of Portuguese Galp Energia energy major, said it was ready to offer a stake to Gazprom in exchange for sustained supplies in the future. This may become the first breakthrough in Gazprom's drive to obtain a stake in European gas distribution and pipeline assets. It appears that possible gas shortages have compelled Europe to assess the regional energy supply situation more soberly, as well as the role of Russia and Gazprom in this process. Russia, a traditional raw-materials appendage, is turning into a desirable partner. Moreover, foreign companies are offering a stake in national energy infrastructure to Gazprom because their assets are absolutely useless without Russian gas. The spectre of energy shortages compels EU bureaucrats to heed the demands made by Russia and other gas suppliers, which want gas producers and consumers to assume equal responsibility. A gas cartel may be established later on. Lessened EU solidarity on energy security issues in the face of possible gas shortages will force Brussels to strike a bargain with gas-producing countries because the latter may unite against the EU. However, this deal will carry increasingly harsher terms. Prof. Igor Tomberg, leading research associate, Center for Energy Research, Institute of World Economy and International Relations, Russian Academy of Sciences.

Gazprom to choose Shtokman partners for reasons of cost-benefit

MOSCOW, 09-05-2006 (RIA Novosti) - Gazprom [RTS: GAZP] will select partner companies to develop the giant Shtokman gas deposit off Russia's Arctic coast only for reasons of optimum cost-benefit, a Russian presidential aide said Tuesday. A shortlist of companies competing for the project unveiled last September includes Norway's Statoil and Norsk Hydro, France's Total, and U.S. giants Chevron and ConocoPhillips. Gazprom will select two or three partners from the shortlist to form a consortium for the project. Igor Shuvalov said the Russian energy giant needs a partner that will help it "develop the field as successfully and beneficially as possible, with the lowest expenses, and which will supply products to the world market most effectively." "This is a business project, and Gazprom is responsible for it. Therefore, I would not like to reveal any information on the issue," he said. The deposit holds an estimated 3.2 trillion cubic meters of natural gas, and 31 million metric tons of gas condensate in the Barents Sea, off Russia's Arctic coast. Some $12-14 billion will be invested in the project's first phase, and production will start in 2011.

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