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Tuesday, February 27, 2007

Gazprom flies in to Japan

26 February 2007 - Upstream onLine - Russian gas monopoly Gazprom is expected to meet with executives of Japanese companies to discuss technical partnerships and fund-raising this week Sources familiar with the situation told Reuters the talks coincide with a visit by Russia's Energy Minister Viktor Khristenko, who arrived on Monday trailed by an entourage of Russian bankers and businessmen to kick off talks on a range of issues. Russian Prime Minister Mikhail Fradkov arrives on Tuesday. Gazprom President Alexei Miller is also due to arrive on Tuesday and is likely to meet with the heads of Mitsui and Mitsubishi, which agreed in December to sell part of their stakes in the Sakhalin 2 project to cede control to Gazprom, the sources said. Miller last month met with Harufumi Mochizuki, Japan's top energy policymaker, to discuss ways to attract Japanese funds and technology to develop Russia's gas processing, gas chemicals and machine-building facilities. The head of Gazprom-controlled Gazprombank, which is Russia's third-largest bank, will also be in Tokyo this week to discuss plans to borrow some $3 billion on international markets, a government source said.

Gazprom to Overhaul Its Oil Subsidiary

Feb. 26, 2007 – Kommersant – Gazprom has appointed Gazprom Export to control all export deals of the oil producer Gazprom Neft. The $10 billion contracts may ultimately go to Gazprom Export’s trading partner. Industry experts say that Gazprom’s announcement aims to cut the price for a 20-percent stake in Gazprom Neft’s which is up for sale after YUKOS’s bankruptcy. Gazprom’s board has decided to export oil and oil products from the company’s subsidiaries through one company, Gazprom Export, Gazprom said in a press release late last week. Up until now Sibneft Oil Trade Company, owned by Gazprom Neft, has been responsible for all oil exports of Gazprom Neft. Gazprom’s oil producer reaped $10.352 billion in exports in 2005. Later data is not available. Those in the market say that Gunvor, a trader which now buy almost all Gazprom Export’s oil, will become the chief beneficiary of this decision. Gunvor is believed to be an asset of Gennady Timchenko, a co-owner of Rossiya and President Vladimir Putin’s former colleague. Gazprom Export will start to manage export contracts in the second half of the year, according to sources of Kommersant. Gazprom’s decision may cut the ask price for 20 percent of Gazprom Neft – an asset of YUKOS which has been put up for sale. The Russian gas giant is set to buy the stake to overhaul the oil company to bring it under Gazprom’s control. Gazprom Neft CEO and Gazprom's deputy chairman of board Alexander Ryazanov insisted that the company be fairly independent from its major shareholder. Alexander Ananenkov, another deputy chair of the gas monolist, opposed the idea. However, after Mr. Ryazanov left the company, his successors gave the green light to the complete merger with Gazprom.

Russia’s-German WINGAS Opens Moscow Office

WINGASFeb. 22, 2007 - Kommersant - A venture of German BASF’s subsidiary Wintershall and Russia’s Gazprom, WINGAS has opened a Moscow office in premises of Gazprom Export, WINGAS announced. The company has its headquarters in Kassel, Germany. The Moscow office will strengthen cooperation with Russia’s partners, including related to Tomsk agreements on widening cooperation, said Rainer Seele, chairman of WINGAS board of directors. “Accommodating WINGAS in our head office will encourage rapid communication with our Western Europe’s clients, enabling us to make better and more prompt contribution to ensuring the safety of natural gas supplies to Europe,” said Gazprom Export CEO Alexander Medvedev. BASF-Wintershall AG holds 65 percent in WINGAS, Gazprom owns 35 percent. But under the deal of 2006, the share of Russia’s gas monopoly will step up to 50 percent less a stock in the venture. One of the biggest gas enterprises in Europe, WINGAS has become very aggressive on the markets of Germany in particular and Europe in general. In addition to sales expansion, WINGAS and Gazprom work in tandem to increase the capacity of gas storage facilities in Austria, Britain and Germany and diversify infrastructure for gas imports to Europe. www

Gazprom likely to increase presence in RAO UES's Board of Directors

RBC, 26.02.2007, Moscow 14:35:31 – Gazprom is most likely to boost its number of members on RAO UES's Board of Directors from two to three. Analysts say that the holding's candidates Kirill Seleznev, General Director of Mezhregiongaz, Gregory Beryozkin, Chairman of ESN Group, and Vladimir Rashevsky, General Director of SUEK, are most likely to be elected in the summer 2007 to RAO UES's Board of Directors. Some experts think that it is logical for Gazprom and SUEK to increase influence on RAO UES's Board in light of the recent announcement on Gazprom and SUEK's assets merger. Meanwhile, some analysts say that there are no reasons for the government to decrease its number of members on the Board. Moreover, there is no major difference for Gazprom between two and three members in decision-making process. Analysts say that the gas holding's announcement may have a positive effect on energy companies' securities.

Gazprom, Brazil's Petrobras sign agreement on oil and gas

MOSCOW, February 26 (RIA Novosti) - Gazprom [RTS: GAZP] and Brazilian oil company Petrobras have signed an agreement on hydrocarbon cooperation, the Russian energy giant said in a news release Monday. The document, signed February 23, paves the way for collaboration in prospecting, development, sales and transportation projects in Latin America and, in particular, the development of sea deposits, liquefied natural gas production and high technology cooperation. Gazprom's representatives in Brazil reiterated the company's interest in assisting in the design and construction of the transcontinental gas pipeline that Brazil, Argentina and Venezuela are planning to build. Government-controlled Petrobras commands the country's oil and gas transport system and owns 11 refineries. Brazil holds 1.5 billion metric tons (11 billion barrels) of crude and 326 billion cubic meters of natural gas in proven reserves, a significant volume of this is deposited under sea. Petrobas, the Brazilian oil and gas leader since 1953, accounts for 95% of crude output and controls 90% of natural gas reserves. The country cannot meet all domestic demand for natural gas and imported additional gas from Bolivia and Argentina in 2006.

Thursday, February 22, 2007

Russia�s-German WINGAS Opens Moscow Office

Feb. 22, 2007 - Kommersant - A venture of German BASF’s subsidiary Wintershall and Russia’s Gazprom, WINGAS has opened a Moscow office in premises of Gazprom Export, WINGAS announced. The company has its headquarters in Kassel, Germany. The Moscow office will strengthen cooperation with Russia’s partners, including related to Tomsk agreements on widening cooperation, said Rainer Seele, chairman of WINGAS board of directors. “Accommodating WINGAS in our head office will encourage rapid communication with our Western Europe’s clients, enabling us to make better and more prompt contribution to ensuring the safety of natural gas supplies to Europe,” said Gazprom Export CEO Alexander Medvedev. BASF-Wintershall AG holds 65 percent in WINGAS, Gazprom owns 35 percent. But under the deal of 2006, the share of Russia’s gas monopoly will step up to 50 percent less a stock in the venture. One of the biggest gas enterprises in Europe, WINGAS has become very aggressive on the markets of Germany in particular and Europe in general. In addition to sales expansion, WINGAS and Gazprom work in tandem to increase the capacity of gas storage facilities in Austria, Britain and Germany and diversify infrastructure for gas imports to Europe.

Thursday, February 15, 2007

A new Russian energy monopoly: for better or for worse?

02–15–2007 – MOSCOW. (RIA Novosti economic commentator Vasily Zubkov) - What should we make of the recently announced decision by Gazprom and Siberian Coal Energy Company (SUEK) to set up a new power generation champion? The authorities have both endorsed the transaction and hurried to forecast a bright outlook for it on the Russian energy market. The reaction of the business community, however, was more equivocal. On the one hand, this seems to be a logical final stage in the consolidation of the industry. On the other hand, a new super giant, especially one supported by the government, could put an end to all hopes for the emergence of a competitive environment in the sector, and monopolizing it instead. Gazprom and SUEK, which are both large investors in domestic power generation, have announced plans to merge their generating assets in a joint venture in which the gas giant will have 50% plus 1 share and the coal giant 50% minus 1 share. The transaction is expected to be completed before July. The value of the new company is estimated at $11 billion. This merger will allow Gazprom to save on gas supply to thermal power plants by using its "own" coal instead, making it possible to increase or at least sustain exports. It is no secret that the current Russian gas output can hardly meet growing domestic demand and honor export commitments. The new coal business and power generation will be especially profitable for Gazprom in the next few years, while domestic gas prices - still regulated by the government - stay far below those of exports. The Industry and Energy Ministry estimates Russia's gas shortage this year (given international commitments) at 4.2 billion cu m. By 2010 it could reach 27.7 billion cu m and by 2015 - 46.6 billion cu m. Meanwhile, Russia has the world's second largest coal reserves and produces almost 300 million metric tons annually, with a possibility to boost production to 400 million metric tons by 2010 (it produced 426 million metric tons annually in the late 1980s). Given all that, the "coal instead of gas" strategy is a logical move intended to reduce power-generation tensions during the "gas break." First Deputy Prime Minister Dmitry Medvedev confirmed as much, saying "The new company will allow us to balance the use of coal and gas in power generation." Yet many are concerned about the government's overly enthusiastic endorsement of the new giant and, at times, its direct management. After all, it is all about the emergence of a new large monopoly with advantages that render all talk of fair competition irrelevant. What is domestic power generators' attitude to the initiative? RAO UES is also striving for diversification. The holding confirms that at present, coal accounts for 25.9% of its energy and gas for 70.6%. By 2010, the ratio is set to change drastically: 65.6% from coal and 31.1% from gas. It turns out that electricity produced from coal is cheaper, although coal power plants are more expensive to build. The company's CEO, Anatoly Chubais, has repeatedly confirmed the strategy of moving toward the use of coal. In the last six years, RAO UES has put into operation only one coal unit, at the Khoronor power plant, with a capacity of 215 MW. However, in the next five years it intends to put into operation 2,000 MW worth of coal generation units and another 20,000 MW in 2011-2015. Obviously, the government, Gazprom and RAO UES agree on the best way out of the current difficulties: diversification. Why then did Chubais describe the planned merger as a "big mistake" on the part of the government? That is a harsh assessment, even if a preliminary one. Perhaps, he does not like how Gazprom is managed and developed. That is natural: a liberal and market reformer cannot like the authorities' growing protection of the gas giant, its management, lack of transparency, aggressiveness, lack of competition and many other things. At the same time, RAO UES's fears could be assuaged by the possibility that its multibillion-dollar investment burden to develop Russian power generation could become significantly lighter as the new company emerges. It does not just have rich "parents," but also serious ambitions, planning to become a global major. That's an expensive, but worthy, goal. The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

Monday, February 12, 2007

Gazprom, Interros to Carve Up Power

????????February 12, 2007 – By Simon Shuster Staff Writer and Mikhail Fomichev / Itar-Tass -
Anatoly Chubais attending the opening of a second turbine at the Northwest Thermal Power Plant in September. Anatoly Chubais' long-held dream of free-market electricity reform looks to be in disarray after two giant business groups, Gazprom and Interros, emerged as the favorites to carve up the country's power production and form regional monopolies. Gazprom announced Thursday that it would pool its electricity assets with the country's biggest coal supplier, the Siberian Coal and Energy Company, known as SUEK. The merger will create a holding company worth about $12 billion, by far the largest in the country's power sector, with Gazprom in majority control. Considering the holding's wealth, its closeness to the state and its near monopoly over the fossil fuels used to produce electricity, analysts said it could easily dominate power generation, creating just the kind of monolith the reforms had sought to break apart. Chubais, head of Unified Energy Systems and the architect of the reforms, was unable to conceal his frustration Friday when asked about Gazprom's move into coal. The joint venture is "a major mistake for the government, and sadly not its first mistake," Chubais said during an hourlong conference call. Asked to clarify, he added, "I think you heard me right." Earlier this month, Interros holding company announced that its president, Vladimir Potanin, would buy out longtime business partner Mikhail Prokhorov, the CEO of mining giant Norilsk Nickel. The sale of Prokhorov's Norilsk shares alone is expected to leave him with about $7.5 billion in cash. Prokhorov said he intended to go into the electricity business. Assuming he does, Prokhorov's cash could buy him nearly 20 percent of all the generation assets being spun off from UES, said Dmitry Terekhov, an analyst with Antanta Capital. Although the Gazprom-SUEK venture is far wealthier, its wealth is in the form of UES shares, which are worth pro rata stakes in generating assets, but are not as maneuverable as Prokhorov's cash. In light of this, the two holdings would have "comparable muscle" in the power sector, said Tigran Hovhannisyan, a utilities analyst at MDM Bank. Both are likely to use it in laying claim to strategically placed generating companies. Yet their management styles will be different, Hovhannisyan said. "Prokhorov is a businessman. He wants to consolidate [electricity] stock and build a business that will bring him profits," he said. "Gazprom is more interested in building an empire. ... It has a mania for buying these electricity assets." Prokhorov is likely to take control of power stations in the north of Russia, where Norilsk and gold firm Polyus, the two companies he helped to found, run some of the country's biggest mining operations. The Gazprom-led venture is expected to buy out generators in the south, where SUEK mines its coal, and in the regions where Gazprom extracts natural gas and oil, including Murmansk, Omsk and the Yamal Peninsula. Mosenergo, the country's largest generating company and the sole provider of power to the capital, is already controlled by Gazprom.

Gazprom Bids for Control
Mayor Yury Luzhkov and Chubais agreeing on an investment plan last year. Gazprom has made no secret of its plans for the electricity sector. It wants nothing short of dominance. In a recent speech, Gazprom CEO Alexei Miller claimed electricity as part of his company's "core business." And the strategy statement on its web site says, "There is an understanding that today Gazprom is the most interested of all in developing Russia's power sector." Unlike Surgutneftegaz, which analysts consider more of a niche oil producer, Gazprom has set itself the goal of becoming "a global energy firm with full vertical integration," the statement said. That means it wants to control production, transport and sales, at home and abroad, and it wants to do so with gas, oil and electricity. The joint venture with SUEK is a major advance. Currently, coal makes up about 15 percent of the fuel used at power stations, but President Vladimir Putin said last week that this figure must rise to 35 percent, roughly the European average, by 2015. Such an increase would be much to Gazprom's advantage. Natural gas now accounts for about 60 percent of the power sector's fuel balance, and shifting that toward coal would free up gas for Gazprom to sell abroad, where it is sold for roughly five times the domestic price. SUEK churns out 30 percent of the nation's coal and holds significant stakes in 27 energy companies and a 2 percent stake in UES, according to Aton Capital. MDM bank values the coal firm's electricity assets at $2 billion. Combined with Gazprom's $10.5 billion in UES shares, the joint venture would control at least 25 percent of Russia's generating capacity, and that is before any of the buyouts it has planned, Aton said in a note to investors Friday. And Gazprom has its eyes on more than generation. In December, the monopoly created a new company to handle the dispatch and sale of electricity. The company began distributing power in January to all of Gazprom's affiliates, which jointly consume about 32 billion kilowatt hours per year, nearly enough to power Las Vegas. SUEK also controls low-voltage power grids in the regions where it mines for coal, Hovhannisyan said. On Nov. 28, Gazprom signed a far-reaching deal with Rosneft in which both companies pledged, among other things, to join forces in "the generation and sale of electricity and thermal energy," they said in a joint statement. But even without the help of Rosneft, which does not hold much electricity stock, "Gazprom will have enough money for everything," said Andrei Gromadin, oil and gas analyst at MDM Bank. As gas and electricity tariffs are gradually freed up over the next five years, the prices for both will rise exponentially, as will Gazprom's profits, Gromadin said. Aton Capital highlighted the risks of a Gazprom hegemony Friday. Minority shareholders of generation companies, or gencos, may suffer, the bank said, as Gazprom is more likely to capitalize its oil and gas operations rather than the noncore power sector, which needs about $110 billion of capital for renovation, according to UES estimates reported last week. The bank also warned of an electricity monopoly -- and all the inefficiencies that come along with it -- spanning the vast Siberian operations of Gazprom and SUEK. The main goal of electricity reform was to break up the national monopoly and introduce competition. Toward this end, UES advisers have consistently lobbied for a diverse investor base, even if it meant taking less money than the big strategic investors were offering. Chubais and Dmitry Akhanov, head of strategy at UES, have vocally favored portfolio investors and foreign firms with industry know-how. Other elements within UES -- including UES chief financial officer Sergei Dubinin and Mosenergo general director Anatoly Kopsov -- have defended Gazprom's record. The biggest upside to a monolithic power sector would be unity, said Gianguido Piani, a St. Petersburg-based energy expert. The ability to coordinate output is vital for meeting Russia's growing demand, Piani said, and a variety of small investors would bring chaos. He added that foreign investors, who have been wary of trusting the heads of the newly formed gencos, would be enticed by Gazprom's clout. And when it comes to boosting supplies -- to building dozens of power stations and spending billions of dollars on repairs -- Gazprom may be the only one with such deep pockets.

Prokhorov Branches Out
But Prokhorov's pockets are not exactly shallow either. According to Forbes' rich list for 2006, Prokhorov was the country's eighth-richest man with a personal fortune of more than $6 billion. A survey published Monday by Finans magazine puts him in third place, tied with Potanin, at $14.2 billion. Interros, the holding company Prokhorov founded with Potanin in 1990, has $15 billion of assets in industries ranging from banking, machine building and mass media, to its core business, metals. Norilsk Nickel, in which Interros holds the controlling stakes, is the largest producer of base metals in the world, and doubled its net earnings last year to $7.5 billion on the back of rising prices for nickel, a key ingredient for making steel. The electricity holding Prokhorov plans to start after resigning from the top post at Norilsk will also be part of the Interros holding, and his loyalties to the umbrella company are expected to stay strong, Alfa Bank analyst Vladimir Zhukov said. Unlike Gazprom, which is often criticized for inefficiency and bad management, Zhukov said Prokhorov was one of the savviest and most effective entrepreneurs in the country and is much praised for successfully turning Interros' gold assets into a $9 billion company, Polyus Gold, last year. In its market note, Aton said a profit-driven group could be tempted to tinker with prices if it controlled a major part of the country's power supply. In 2000 and 2001, this kind of price fixing was one of the main causes of the California energy crisis, which UES officials have often referred to as a worst-case scenario that they would do everything to avoid. That crisis arose when California liberalized its energy market in order to introduce competition and two private companies -- Enron and Reliant Energy -- ended up controlling the bulk of the state's power stations, grids and fuel. By restricting supply, the companies made prices soar until a state of emergency was called and almost 2 million customers faced rolling blackouts. The California case is extremely unlikely to happen in Russia, analysts said, because the state will maintain control of the grid, and would step in to curb a sudden rise in prices. Yet Prokhorov, unlike Gazprom, has no special ties to the state, and it is unclear how willing he will be to take advice from the Kremlin.

'Foreigners Keep Out'
At a recent press briefing, Chubais said his investment goal was "to support any foreign strategic company." "The general principle is to attract not only financial investors but strategic investors who will own not 25 percent but 51 percent in at least two, three or four generation companies." He named Italy's Enel, Germany's E.On, and Finland's Fortum as the main potential partners. But of the three, only Fortum has so far made any serious inroads. Its main asset is a blocking stake in TGK-1, which it may come to control after the company's July IPO. Fortum vice president Kari Kautinen said in an e-mailed statement that the Finnish company was looking to buy a "substantial stake" in a number of gencos, but did not specify which ones. "There are enough opportunities for many players in this field," she wrote. Interros is also playing the field for TGK-1, with a stake of more than 7 percent in the company that should go to Prokhorov when he forms his holding. TGK-1, which serves the Northwest Federal District, including St. Petersburg and the Leningrad region, enjoys two advantages that will make it worth fighting for. First, because it borders Finland, it exports more than 1 billion kilowatt hours per year to the lucrative European market. It is also the only genco allowed to produce power through hydro-generation, by far the most efficient method, which accounts for about half of its 6,200-megawatt installed capacity. The government-held Hydro-OGK is, and will remain, the only other purveyor of hydroelectricity. When asked why TGK-1 enjoys these special privileges, Andrei Zubarev, its head of capital management, said: "It is because [St. Petersburg] is the home region of the president." Italy's Enel runs the Northwest Thermal Power Plant, but owns none of it. It also holds 49 percent of Rusenergosbyt, a distribution firm recently undercut by Gazprom's distribution venture. An Enel spokesman who requested anonymity said Enel was prepared to invest up to 4 billion euros ($5.2 billion) in the country's electricity sector. "We have capital, technology and engineers and I think this is the perfect mix for upgrading the electricity sector," he said. Piani, however, was quick to explain away the interest of both foreign players mainly as a way of ensuring steady gas supplies from Russia. The state, he added, would resist their involvement. "Electrical systems are considered a national strategic asset. It means: Foreigners keep out," he said. As for portfolio investors, analysts agreed the power sector could not offer the quick turnarounds they like to see. "Right now, the companies [in the electricity sector] demonstrate only limited profitability ... and the investors who are looking at them are looking three to five years ahead when the reform takes full effect," Andrei Burlinov, director of investment banking at Troika Dialog, told a recent news briefing. Strategic, not portfolio, investors are the ones with the patience for such a long-term outlook, said Zoltan Szalai, another director of investment banking at Troika, which handled the IPO of OGK-5 and the restructuring of four other gencos last year. Global ratings agency Fitch last month slammed Russia's power sector as a "very high-risk market," mainly due to political uncertainty.

Chubais' Legacy
By the end of next year, there will be no more UES, and Chubais will no longer be in charge of the country's electricity network. The landmark sign outside the UES headquarters in southwestern Moscow will have to be taken down, and its employees will have to look for work elsewhere. "Oh, don't worry about me," UES chief spokeswoman Margarita Nagoga said. "All this power-sector trivia will come in handy somewhere." For Chubais, however, the situation is not so clear. His decade-long crusade to save the electricity sector from ruin is, for better or worse, coming to an end. And of his future plans, he has said only that he will not go into politics. His reasons for this are clear enough. His record as privatizations tsar under President Boris Yeltsin earned him the scorn of millions of Russians after he oversaw the 1995 loans-for-shares scheme, a proposal of Potanin's. The program sold off valuable state property to well-connected oligarchs at knockdown prices, helping them become billionaires. The scheme is still blamed by many for Russia's sharp economic divide. "In a way, [UES reform] was his chance to make up for it," said Antanta's Terekhov. "If it doesn't work out, I don't know. You'd have to feel bad for the guy."

Friday, February 09, 2007

Schroeder Says Baltic Pipeline to Be Built on Time, Calls Russia Reliable Supplier

08.02.2007 - MosNews - Former German Chancellor Gerhard Schroeder told the European Commission on Wednesday that the joint Russian-German gas pipeline under the Baltic Sea will not be delayed by environmental and political concerns. Schroeder also said that Russia has been and remains a reliable supplier of gas to Europe. Schroeder, who now serves as adviser to the pipeline’s owner Nord Stream AG, met with EU officials and politicians to put forward his view that the project was critical for Europe’s energy security. The 1,200-kilometer (750-mile) pipeline will go through Russian, Finnish, Swedish, Danish and German territory near parts of the seabed where chemical weapons and mines were dumped during and after World War II. It will avoid overland routes through Ukraine and Belarus where price disputes have seen Europe’s gas supply shut off briefly on New Year’s Day the past two years, raising worries in Europe about Russia’s reliability as an energy supplier. Construction is due to start in 2010 and the company — controlled by Russia’s state gas monopoly Gazprom — said it will complete an environmental impact assessment this summer. “We plan to complete the pipeline on time and we do not believe this would be impossible,” Schroeder was quoted by the Associated Press as telling reporters after the meeting. “I believe this project is completely essential as far as gas supply security goes, not only for Germany but also Europe,” he said, claiming Europe had few other choices as Norway’s supplies dwindle and Iran, the owner of the world’s second largest natural gas resources, is still a political pariah. “As for stability and safety, it’s difficult to name another supplier that would be more reliable than Russia,” Shroeder said. “Even in the years of Cold War Russia has proved to be a reliable gas supplier to Europe.” He said alternatives were in “certain regions of the world, where you must ask, is that politically a better bet than Russia?’” Nord Stream said the pipeline, when finished, could deliver 55 billion cubic meters of gas a year — or a quarter of the EU’s gas needs in 2015 — directly from Russia to Germany where it could then be transported to Denmark, Britain, the Netherlands, Belgium, France and other countries. Gazprom supplied around 150 billion cubic meters of gas in 2005. But countries bordering the Baltic Sea have expressed worries that the pipeline poses a major risk to the environment and Russian activity in their waters could compromise their military security. In December, Swedish lawmakers raised fears about disturbing the seabed, especially because of the large amount of mustard gas from chemical weapons dumped after World War II. Michael Moore, a Swedish army official, said the Baltic Sea was “one of the most mine-riddled” waters in the world, estimating that some 100,000 mines still rest on the seabed. The company said it will carefully examine the pipeline route to avoid or remove ammunition along a 2-kilometer (1.25-mile) corridor. Dirk von Ameln, Nord Stream’s deputy technical director, dismissed worries of explosions, saying most of the chemical ammunition dumped in the sea is inert mustard gas in liquid form. “This ammunition is not equipped with igniters so we don’t have to fear any explosions,” he said. “Nevertheless, we will do a very sound investigation of every meter (yard) where we put the pipeline to find those chemical warfare but also find any other kind of ammunition.” Poland and the Baltic states — Estonia, Latvia and Lithuania — have also weighed in, fearing that the pipeline would see them lose access to gas. Von Ameln was cool about a suggestion from German Chancellor Angela Merkel that a link to the pipeline could calm them, saying they would need to strike a supply deal with Gazprom first. “As long as there is no sales and purchase agreement, nobody tends to build a very expensive spur line into those countries,” he said. The pipeline itself will cost over 5 billion euros ($6.5 billion), but Schroeder said that, including onshore sites, the total outlay would be around 12 billion euros ($15.6 billion). One-third of the basic pipeline cost will be borne by Nord Stream and it would seek financing from the private sector and the EU’s European Investment Bank for the rest. Gazprom owns 51 percent of Switzerland-based Nord Stream, while German energy companies E.ON Ruhrgas AG and Wintershall AG each hold 24.5 percent in the consortium.

Gazrpom CEO Meets U.S. Ambassador to Discuss Energy Cooperation

09.02.2007 - MosNews - Gazprom CEO Alexei Miller has met with the United States ambassador to Russia William Burns to discuss energy cooperation, the Russian natural gas giant said on Thursday, Feb. 8. Miller and Burns focused on opportunities for large American companies to participate in oil and gas projects in Russia, including buying the assets of bankrupt Yukos Oil Company, formerly the country’s number one oil producer, whose multi-billion dollar production units and facilities are set to be sold off through liquidation auctions to meet creditors’ claims. The officials also considered possible bids from U.S. companies for contracts on the vast Shtokman gas project off Russia’s Arctic coast. U.S. majors Chevron and ConocoPhillips, along with Norway’s Statoil and Norsk Hydro and France’s Total, had been short-listed as contenders to develop the field until a stunning announcement by Gazprom in October that it would develop the deposit on its own. The Shtokman deposit is the only source of natural gas for the ambitious Nord Stream gas pipeline that will link Russia to Germany along the Baltic seabed, and is set to come online in 2010.

Total in Shtokman role talks

02-09-2007 - Upstream onLine - French oil and gas group Total is in talks with Russia's Gazprom about a potential role in developing the vast Shtokman gas field in the Arctic, French Industry Minister Francois Loos said. Russian gas giant Gazprom said last month it would offer contract work on Shtokman to the five western companies that previously bid unsuccessfully for stakes in the field, including Total and Norwegian energy group Statoil. "Total was on the shortlist and it is again in discussions with Gazprom. The question is what exactly is being offered by the Russians," Loos said. Loos said the involvement of Total and Gaz de France in Statoil's Snohvit gas project in the Barents Sea gave the French companies expertise needed for Shtokman. Total has an 18.4% stake and Gaz de France 12% of the Snohvit licence. "This (project) is very important in light of Shtokman," said Loos, who this weekend is scheduled to visit the Snohvit facilities on the far northern tip of Europe, Reuters reported. The $9.6 billion Snohvit project - including the only liquefied natural gas plant in the Arctic - is due to come on line in late 2007. In addition to Total and Statoil, the other foreign bidders for Shtokman were Norway's Norsk Hydro - soon to merge its oil and gas business with Statoil - and US supermajors ConocoPhillips and Chevron.

Nord Stream eyes EIB cash

Gerhard Schroeder and Alexei Miller02-09-2007 - Upstream onLine - A Russian-German joint venture to build a controversial gas pipeline under the Baltic Sea is seeking financing from the European Investment Bank (EIB), Nord Stream managing director Matthias Warnig said today. He was speaking after former German chancellor Gerhard Schroeder, chairman of the company's shareholders' committee, met two European commissioners to seek support for the project, fiercely opposed by Poland and criticised by other Baltic Sea states. "Of course the EIB is a very important possible financing partner but we are still in initial discussions so I can't be concrete at the moment," Reuters quoted Warnig as saying at a joint news conference. The EIB is the soft-loan lending arm of the European Union, which finances projects in member states and partner countries. Warnig also said talks with Dutch national grid operator Gasunie to join the project, in which Russian gas monopoly Gazprom is a partner with German utilities E.ON and BASF unit Wintershall, were on schedule and there should be clarity in the second quarter of this year. Schroeder said EU member states, including Poland, had unanimously declared the project to be one of the Trans-European Networks backed by the 27-nation bloc to boost its economy. "This means that it is not just a project that only concerns Germany and Russia but it's a European project to do with European gas supplies," he said. Schroeder said the EU would need to import more than 70% of its gas needs in 2015 compared to 50% today and asked critics who feared excessive dependence on Russian gas to consider the alternatives, especially Iran. "The (United Nations) Security Council has just agreed sanctions against Iran and hardly any country in the world is prepared to make major investments in that country," he said. A European Commission spokesman said the commissioners for industry and energy, Guenter Verheugen and Andris Piebalgs, had confirmed in the meeting that the Baltic pipeline had been identified as a priority project of European interest. He was unable to comment on the financing. EIB vice-president Wolfgang Roth said last year EIB might cover 30% of the project's costs, estimated at about $6 billion, but the bank's Belgian president, Philippe Maystadt, later clarified that no decision on financing had been taken. Poland has led vociferous hostility to the pipeline, which would bypass the former Soviet Baltic states - Estonia, Latvia and Lithuania - as well as Poland and Belarus. Schroeder said Nord Stream was taking very seriously environmental and other concerns expressed by Baltic Sea countries beside the proposed route of the gas line and wanted to address all fears in order to overcome them. Environmental campaigners have voiced fears of damage to marine life as well as risks from unexploded mines and chemical weapons dumped on the seabed. Swedish politicians have also expressed concern about talk that the Russian navy could patrol the route of the pipeline, which passes close to the holiday island of Gotland. Asked about the possibility of building a spur from the pipeline to supply other Baltic countries, Nord Stream permitting director Dirk von Ameln said that was technically feasible but prospective customers would first have to conclude a sales and purchase agreement with Gazprom.

Gazprom to join India's ONGC in upstream activities

MOSCOW, February 9 (RIA Novosti) - Gazprom [GAZP] will join India's Oil and Natural Gas Corporation (ONGC) in oil and gas exploration and production in India and other countries, the Russian energy giant said Friday. At a session of the Gazprom-ONGC Joint Working Group in India Thursday, the sides considered joint work "to prospect for and develop oil and natural gas deposits in India, Russia and third countries," as well as liquefied natural gas cooperation, Gazprom said in a news release. An ONGC press release said Gazprom had invited the state-owned Indian company to participate in eight projects in Russia including oil and gas projects in Eastern Siberia and the Far East. ONGC suggested Gazprom contribute to integrated petrochemicals, LNG and power projects in India. The sides also examined possibilities of joint work in Qatar, Myanmar (Burma), Libya, Vietnam, Cuba and the former Soviet Union. Gazprom and ONGC officials decided to extend for another two years their 2005 Memorandum of Mutual Understanding, which envisages cooperation in creating capabilities for processing oil and gas, and in organizing deliveries of energy products to markets in southern Asia, primarily India, and other parts of the Asia-Pacific Rim. Gazprom expects that cooperation with ONGC will enable the Russian gas monopoly to further expand its international operations and consolidate its positions on the global energy market.

Wednesday, February 07, 2007

Gazprom Reports Efforts to Bring Oil Reserves Onstream

Ananenkov Alexander GeorgievichFebruary 05, 2007 - RigZone onLine - Earlier this week at Gazprom's headquarters in Moscow, Alexander Ananenkov, Deputy Chairman of the company's management committee, convened a meeting dedicated to bringing onstream Gazprom's oil reserves. The meeting was attended by heads and employees of Gazprom's core businesses and a number of subsidiaries, including Gazprom Neft. The participants emphasized that development of oil business is fundamentally important for Gazprom and will enable to strengthen its position of vertically integrated energy company on the internal and external markets. Additional conditions to increase market capitalization and Gazprom's financial figures improvement will be stimulated by active involvement of Gazprom's oil reserves. Oil field exploration (Gazprom owns licenses for oil field development) will be managed by Gazprom Neft. Therefore the participants discussed the progress of the agreements preparation between the license owners and Gazprom Neft for exploration of the Novoportovskoye, Tazovskoye, Prirazlomnoye and Dolginskoye fields. The license owners will sign contracts with Gazprom Neft for construction of oil production facilities aimed at providing commissioning of said fields. Signing of the contracts is one of the stages for implementing the company's strategy on the oil sector. Attracting the Gazprom Neft's specialists for Gazprom's oil assets development will facilitate the use significant professional experience in the oil fields exploration sector using modern technologies. A common opinion expressed at the meeting was that the company needs to form working groups to synchronize work on preparing the standard contracts with Gazprom Neft for field development and providing operational services.

Gazprom Nominates 2 Outsiders

February 6, 2007 - The Moscow Times - Gazprom on Monday nominated two Moscow business figures as independent members of its board of directors. The board nominated Alexander Shokhin, the head of the Russian Union of Industrialists and Entrepreneurs, or RSPP, and Yevgeny Yasin, the rector of the Higher School of Economics, Gazprom said in a statement Monday. Gazprom shareholders will choose a new board from 19 candidates on June 29, the company said. All 11 current members, including First Deputy Prime Minister Dmitry Medvedev, CEO Alexei Miller and Economic Development and Trade Minister German Gref, are on the new list. Shokhin, the head of the RSPP since 2005, is a former chairman of Renaissance Capital's supervisory board. Shokhin will head a delegation of RSPP members at a meeting with President Vladimir Putin at the Kremlin on Tuesday, ahead of the organization's 15th-anniversary celebration Wednesday. Yasin, who served as economy minister under President Boris Yeltsin, is one of the country's most respected liberal academics. The Gazprom board also decided to sell a 50.67 percent stake in its petrochemical unit, Sibur Holding. Gazprom has been in talks with potential buyers BASF, Dow Chemical and PetroChina for more than two years. The board also said that by 2011 it planned to increase daily output capacity from underground storage facilities by more than one-quarter.

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