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Thursday, December 20, 2007

Gazprom Led Germans to Yuzhno-Russkoe

view of yuzhno-russkoe field of gas condensateDec. 19, 2007 - Kommersant - Russia’s Gazprom and German BASF have completed the deal on the asset swap under the Yuzhno-Russkoe project without waiting for E.On to join the undertaking. As a result, Gazprom got 50 percent in German Wingas gas trader and 49 percent in Wintershall that produces hydrocarbon in Libya. BASF is forecasted to annually generate $2 billion from its share in Yuzhno-Russkoe starting from 2009. From the Moscow headquarters of Gazprom, Russia’s First Deputy Prime Minister and Gazprom BOD Chairman Dmitry Medvedev and German Vice Chancellor, Foreign Minister Frank-Walter Steinmeier inaugurated December 18, 2007 Yuzhno-Russkoe field of gas condensate in Yamal-Nenets Autonomous District of Russia. Yuzhno-Russkoe reserves are estimated at 1 trillion cu meters of gas. In the next effort, Gazprom CEO Alexei Miller and BASF CEO Juergen Hambrecht inked the certificate on the asset swap in the Yuzhno-Russkoe project. Far back in the spring of 2006, the parties entered into the agreement, which provided for Gazprom’s extension in Wingas GmbH to 50 percent less a stock. In the end, the monopoly also got 49 percent in Wintershall AG. BASF received 25 percent less a common stock in Severneftegazprom (license holder for Yuzhno-Russkoe development) and a preferred stock, which has no voting right but equals to 10 percent in the project. Therefore, BASF may add roughly 35 percent of Yuzhno-Russkoe reserves to the balance. German E.On was expected to emerge as the third partner, but the parties failed to agree on the deal.

Tuesday, December 18, 2007

Gazprom, Wingas to boost underground gas storage to 8 bln cu m

MOSCOW, December 18 (RIA Novosti) - Gazprom [RTS: GAZP] and Germany's Wingas AG intend to boost their joint underground gas storage capacity to 8 billion cubic meters, the Russian energy giant's chief executive said on Tuesday. Alexei Miller said Gazprom was implementing two underground storage facility projects and could launch two more similar projects in Britain and Germany in the near future. Meanwhile, Alexander Medvedev, deputy chairman of the Gazprom management committee, said the joint underground gas storage capacity could be increased by 2010. Wingas is a joint venture of Wintershall, Germany's largest crude oil and natural gas producer, and Gazprom. Wingas has been engaged in gas distribution since 1993 and supplies natural gas to public utilities, regional gas suppliers, industrial and power plants in Germany and other European counties via network pipelines extending over 2,000 kilometers (1,242 miles).

Gazprom invests $1.2 bln in Yuzhno-Russkoye giant gas field

MOSCOW, December 18 (RIA Novosti) - Russian energy giant Gazprom [RTS: GAZP] has invested 0.85 billion euros ($1.2 billion) in the development of northwest Siberia's Yuzhno-Russkoye oil and gas deposit, a company official said on Tuesday. Alexander Medvedev, deputy chairman of the Gazprom management committee, said total investment in the deposit, which went into operation on Tuesday, would total 2 billion euros (about $2.9 billion). The deposit launch ceremony was attended by First Deputy Chairman of the Russian Government and Chairman of the Gazprom Board of Directors Dmitry Medvedev, Chairman of the Gazprom Management Committee Alexei Miller and German Foreign Minister Frank-Walter Steinmeier. The deposit, for which Gazprom subsidiary Severneftegazprom holds a license, has 805 billion cubic meters of proven gas reserves, and 5.7 million tons (42 million barrels) of proven oil reserves. The Yuzhno-Russkoye deposit is expected to produce 1.4 billion cubic meters of gas in the fourth quarter of 2007 and reach its design capacity of 25 billion cubic meters per year in 2009. Gazprom on Monday closed a deal with BASF AG on the German chemical company's participation in the project, and also drew up a list of assets to be swapped with Germany's E.ON to enable it to join the west Siberian gas field project as well. Under an asset swap agreement between Gazprom and Germany's BASF AG, signed earlier this year, the German energy concern bought a 25% minus one ordinary share and one privileged share without a voting right in Severneftegazprom.

Gazprom, BASF close gas asset swap deal

BRIEFLY MOSCOW, December 17 (RIA Novosti) - Gazprom and Germany's BASF AG have closed a deal on an asset swap in the natural gas production and trade sphere, the Russian energy giant said Monday. Gazprom and Germany's chemical company BASF signed an asset swap agreement in October, and in line with the agreement Gazprom increased its share in Wingas GmbH to 50% minus one share. Wingas GmbH was formed in 1993 as a strategic alliance between Gazprom and Wintershall, a wholly-owned subsidiary of BASF AG.

Gazprom to receive electric power plants in Europe in asset swap

MOSCOW, December 17 (RIA Novosti) - Gazprom [RTS: GAZP] could receive electric power plants in Europe in an asset swap with Germany's E.ON, the press office of the Russian energy giant said on Monday. Gazprom and E.ON have drawn up a list of potential assets for the exchange in which E.ON will participate in a project to develop the Yuzhno-Russkoye gas condensate field in northwest Siberia while Gazprom will receive stakes in E.ON's assets in western and central Europe. The assets included in the list are currently being valuated, Gazprom said. The Yuzhno-Russkoye deposit, for which Gazprom subsidiary Severneftegazprom holds a license, has 805 billion cubic meters of proven gas reserves, and 5.7 million tons (42 million barrels) of proven oil reserves.

Gazprom begins production at vast Siberian field

Kovykta Production StationDecember 18, 2007 - The Associated Press - MOSCOW: Russia's state natural gas monopoly, OAO Gazprom, officially began production Tuesday at a vast field in western Siberia that will be an important source of gas for the Nord Stream pipeline project supplying Western Europe. Germany's chemical giant BASF AG has a 10 percent share in the Yuzhno Russkoye field, which has estimated recoverable reserves of about 600 billion cubic meters — roughly 1.5 times the amount of gas consumed in a year by all 27 European Union countries. Gazprom supplies about 40 billion cubic meters of gas to Germany annually. President Vladimir Putin praised the project as a positive step in ensuring the "economic stability" of Europe and Germany. "What matters is not the quantity of supplies, but the quality of relations between the partners," Putin said at a Kremlin meeting with German Foreign Minister Frank-Walter Steinmeier. "Cooperation between Gazprom and BASF is truly important, as it exemplifies an important step in our relations."The field, whose production was begun with Gazprom officials pressing a ceremonial button, will be one of the main sources of gas for the planned Nord Stream pipeline running from the Russian port of Vyborg under the Baltic Sea to Germany. Nord Stream will ship 55 billion cubic meters of gas a year, bypassing current routes through Belarus, Ukraine and Poland. Officials at the ceremony in Gazprom's headquarters in Moscow included Gazprom board chairman Dmitry Medvedev, who is likely to be elected Russia's president in March, having received Putin's endorsement. "It's an important period in the life of our country. The presidential elections are coming up but, despite political events the most important thing is the development of our country, the economy and the social sphere," Medvedev said at a meeting with Steinmeier, according to the ITAR-Tass news agency. "The event that took place in Gazprom on Tuesday is exactly an event of this scale." Putin's choice is seen in part as an effort to reassure the West, particularly business circles, about Russia's course after he leaves office. "Medvedev, whom I have know for many years, certainly is one of those Russian politicians who stand clearly for a Westward orientation and for economic modernization of the country," Steinmeier said on Germany's ZDF television.

E.On, Gazprom make 'major progress' in deal on Siberian gas field

December 17, 2007 - ASSOCIATED PRESS - FRANKFURT, Germany – German-based utility E.On AG said Monday it has made “major progress” in talks with Russia's OAO Gazprom aimed at giving E.On a stake in a Siberian gas field in exchange for stakes in its European assets. Talks between Duesseldorf-based E.On and Gazprom have been under way for two years. “Major progress has been made in the negotiations on an asset swap between Gazprom and E.On in the framework of which E.On will acquire a stake in the west Siberian gas field Yuzhno Russkoye and Gazprom will acquire stakes in E.On assets in western and central Europe,” E.On said in a statement. It said, however, that the value of the potential deal has yet to be worked out. “The valuation of these assets still has to be made and, in the event of a value imbalance, additional assets should be agreed on,” the statement said. E.On has not disclosed the size of the stake it would receive in the gas field. In return, Gazprom would get stakes in power plants and underground gas storage facilities that E.On owns and operates in western and central Europe. The German company did not specify which facilities Gazprom would take stakes in. E.On has said that it hopes to rely on the Russian gas project to account for about 60 percent of its natural-gas production goals. It is aiming for 10 billion cubic meters of gas production annually, with Yuzhno Russkoye accounting for about 6 billion cubic meters of that. Shares of E.On fell more than half a percent to 145.26 euros ($209.07), part of a wider decline on the DAX, itself down 1.5 percent to 7,825.29.

Gazprom, Shell further delay Sakhalin LNG exports

December 17, 2007 - REUTERS by Dmitry Zhdannikov and Damon Evans – MOSCOW/SINGAPORE – Sakhalin Energy, one of the world's top liquefied natural gas projects, warned on Monday it will delay first exports to customers in Asia and the United States by at least a few months. Industry sources said the delay, which arose from slow construction work, could be extended to half a year to spring 2009 creating bullish pressures on the LNG market in Asia where customers face peak demand in the winter period. “We aim to complete the main construction and commence LNG plant start-up at the end of 2008. LNG exports are expected to start shortly thereafter,” a Sakhalin Energy spokesman said. The group, which has signed up customers for almost all of its production volumes, had previously pledged to start exports in the third quarter of 2008. Sakhalin Energy, which is led by Russian gas export monopoly Gazprom and involves Royal Dutch Shell, Mitsui and Mitsubishi, said it was talking to customers but declined to comment on whether it would have to pay fines for delays and if it was seeking bridging supplies. The development confirms expectations by many analysts that a prolonged battle between Shell and the Kremlin for control over the project last year would lead to delays. The shares of Shell and Gazprom were unaffected by the news on Monday and performed in line with market peers and broader indexes. Sakhalin Energy has sold over 90 percent of the planned 9.6 million tons per year LNG production under long-term contracts, with 60 percent going to Japan and the rest supplied to South Korea as well as to North America's West Coast. The biggest customers include Tokyo Gas, Tokyo Electric and Korea Gas. The $22-billion project had long been led by Shell but the company agreed to sell control in the project to Gazprom last year after Russia's environmental watchdog agency threatened to strip it of production licences for breaking ecological rules. Analysts broadly interpreted the threat as a Kremlin reaction to Shell's decision to massively increase spending on the project, without seeking permission from the authorities, and Shell's move to delay the first LNG shipments from 2007.
In September, Sakhalin Energy said it would delay year-round exports of its highly-sought light crude to 2008 from the end of 2007 citing delays in pipeline commissioning as the main reason. But had not changed the LNG timetable. Industry sources said on Monday the pipelines was still the biggest problem as they run 800 km (497 miles) in parallel down the length of the island to the LNG plant, crossing thousands of small and big rivers. “Mechanically the plant is nearly there as Daewoo are 70 percent complete on train two, but commissioning cannot happen yet,” said a contractor at the project. “Cryogenic insulation will not be finished until September 2008, but that does not include the valves,” said another source. Cryogenic insulation is wrapped around the pipes to ensure the super-cooled gas remains at the correct temperature. Insulation is usually the last application to be completed at an LNG plant before commissioning takes place. “If there is any slippage in the construction schedule then we will easily see start-up delayed till spring 2009, as once winter sets in productivity at site is extremely low,” said the contractor.

Thursday, December 13, 2007

Home Global Gas Battle Opens New Front

// in Algeria ... Dec. 13, 2007 - Kommersant by Andrei Maslov - A new front, the Algerian one, has opened in the global struggle for energy supply diversification. That became absolutely clear after The Wall Street Journal reported with reference to Sonatrach president Mohamed Meziane that the cooperation pact signed by Sonatrach and Gazprom in August 2006 has expired. A little earlier, Algeria emitted, accidentally or not, leakages that it is dissatisfied with the quality of military equipment supplied from Russia. Most surprisingly, the criticism was coming not from the immediate customers in the Algerian armed forces, who seemed to be satisfied, but from President Bouteflika’s civilian associates. These events are obviously interlinked. Especially if taking into account the high stakes in the strategic partnership between Algeria and Russia. Due to their natural resources, these two countries would have been able to control up to 40 percent of natural gas supplies to the EU, had they made joint efforts. So, European consumers decided to stake on Algeria and Libya in an attempt at neutralizing Gazprom’s growing pressure. The struggle for energy supply diversification, initiated by the EU so eagerly, makes Gazprom’s presence in those countries unacceptable for the gas consumers. The U.S. feels similar anxiety: it hopes to keep bringing its own, and not Russian, gas from Algeria. So, the anti-Russia consensus among Algeria’s chief Western patrons, the EU and the U.S., has become inevitable. Things got even worse for Russia when the outer pressure on Algeria was complicated by the clan struggle between different influence groups inside the country. Here again, energy resources are to blame. The end of war and growing oil and gas export revenues led to rapid redistribution of political weight from the ‘army elite’ to the ‘energy lobby’. Bouteflika, staying neutral for several years, eventually sided with the energy officials, which brought him a positive approval by Western partners, the U.S. first of all. This repartition of influence could not help affecting the cooperation with Russia, especially in the military equipment sphere. The army and power agencies were gradually edged out from the economy, then from the domestic policy-making, and from the foreign policy at last. Meanwhile, Russia’s politics in Algeria has been built on confidential relations with the most influential power officials, who are now moved to the background. That is why Russia should not expect good news from the Algerian front now. Still, Gazprom-Sonatrach relations are not completely ruined. Although Russia and Algeria are far from mutual understanding yet, and the ‘gas cartel’ was termed as utopia, Sonatrach and Gazprom have become working well for each other. Despite everything, both monopolies are slowly but steadily moving towards a common aim: towards increasing the role and the share of exporter countries in the international gas market.

Sakhalin Nears Korea

Dec. 13, 2007 - Kommersant - Korean Kogas and Russia’s Gazprom are in talks about strategic partnership in Sakhalin-3 project. The section eyed by Kogas is yet a portion of federal reserve, but the analysts don’t doubt Gazprom will get it in the end. Korea Gas Corporation (Kogas) will probably become Gazprom’s partner in developing Kirinsky block of Sakhalin-3. Today’s concern of the companies is to evaluate Korea’s demand for the pipeline gas and fix dates for the first supplies. Representatives of Gazprom press service confirmed that the experts were negotiating about Sakhalin-3 in Moscow headquarters of the monopoly. “The Korean party has expressed the desire to take part in development of Kirinsky block of Sakhalin-3,” people in Gazprom said without specifying whether the monopoly agreed to the proposal. Gazprom Deputy CEO Alexander Ananenkov supervises progress in negotiations with Kogas. The Sakhalin-3 project provides for development of four blocks on the Sakhalin shelf – Vostochno Odoptinsky, Ayashsky, Veninsky and Yuzhno-Kirinsky. Rosneft and Chinese Sinopec hold the surveillance license for Veninsky block. The aggregate reserves of Sakhalin-3 are estimated at above 600 million tons of equivalent fuel. The reserves of Kirinsky block exceed 75 billion cu meters of gas. Although Russia’s Rosneft and LUKOIL as well as Indian ONGC are also eyeing Kirinsky block, the analysts don’t doubt it will go to Gazprom once it is crossed out of the list of federal reserve. So, the chance of Kogas to join the project appears rather solid.

Gazprom Up In Anticipation

December 11, 2007 - The St.Petersburg Times - MOSCOW — Gazprom, Russia’s natural gas export monopoly, rose as much as 2.9 percent after Russian President Vladimir Putin endorsed its chairman, Dmitry Medvedev, as his successor. Gazprom, the world’s largest gas producer, gained 2.3 percent to 355.82 rubles at 2:36 p.m., valuing the company at 8.44 trillion rubles ($345.03 billion). United Russia Chairman Boris Gryzlov proposed Medvedev, 42, as the party’s candidate at a meeting in Moscow today and Putin supported the idea, state television reported. Medvedev also serves as Russia’s first deputy prime minister. Medvedev’s role in the energy industry makes domestic tariff increases and tax reductions more likely for energy firms, Julian Rimmer, head of sales and trading at UralSib Financial Corp.’s London office, said by phone from London. “People think that tariff hikes for the energy companies are now more likely,’’ Rimmer said by phone from London. “People in the oil sector understand that for Russia to solve its production problem, it needs to stimulate production in Siberia.’’ The election is scheduled for March 2. Putin has pledged to stand down after serving two consecutive terms, the maximum allowed by the constitution.

Wednesday, December 12, 2007

Gazprom looking to increase natural gas supplies to Britain

MOSCOW, December 12 (RIA Novosti) - Gazprom is seeking to increase natural gas supplies to Britain, the Russian company said on Wednesday after a meeting between CEO Alexei Miller and British Minister of State for Energy Malcolm Wicks. The Russian natural gas monopoly has been selling natural gas to Britain under short-term contracts since 1999, with its gas exports to the country increasing rapidly. Last year, the company supplied 8.7 billion cubic meters of natural gas to Britain. "Prospects for expanding Russian natural gas supplies to the British market and Gazprom's joint activity with British energy companies in the oil and gas sphere were considered at the meeting," the statement reads. The parties also discussed the implementation of cooperation agreements between Gazprom and Britain's energy giant BP, including natural gas and liquefied natural gas deliveries. Britain has been a natural gas net importer since 2004. A number of Western experts have forecast that the country's demand for natural gas imports will reach 40 billion cubic meters by 2010. The Nord Stream gas pipeline currently being built under the Baltic Sea to pump Russian natural gas to Europe should become a new channel of natural gas supplies to Britain. In April 2006, Gazprom Marketing & Trading Ltd, a Gazprom subsidiary, delivered the first 140,000 cubic meters of liquefied natural gas (around 85 million cubic meters of natural gas) to the Isle of Grain terminal in Britain. In June 2007, Gazprom, ÂÐ and the Russian-British joint oil venture TNK-ÂÐ signed an agreement to establish a strategic alliance for long-term investment in joint energy projects and asset swaps both in Russia and in third countries. Latest reports say that the Gazprom board will consider the company's participation in gas and energy projects in Armenia at a meeting next Tuesday, when the company's performance in 2007 is due to be reviewed

Gazprom Launches Yuzhno-Russkoye Field, the Key Deposti for Nordstream Pipeline

07.12.2007 - [Neftegaz.RU] - Gazprom launches a major northern field that will deliver gas to Europe through the future Nordstream pipeline, Chairman of Gazprom Board of Directors and Russian First Deputy Prime Minister Dmitri Medvedev told reporters on Thursday. The development of Yuzhno-Russkoye field wil be started on December 18,” he said. Proven reserves of the field in the Nothern West Siberia comprise 600 billion cubic meters of gas. The deposit has to reach the annual projected capacity of 25 billion cubic meters by 2011. It is a core deposit for the $10.5-billion North European Gas Pipeline (Nordstream. Medvedev said Gazprom is developing into a fully-fledged global energy company and all its activities are aimed to achieve the target.

Gazprom to start production at Yuzhno-Russkoye field on Dec.18

MOSCOW, December 6 (RIA Novosti) - Russian energy giant Gazprom will start production at northwest Siberia's Yuzhno-Russkoye oil and gas deposit on December 18, the company's board chairman said on Thursday. Production at the deposit in the Yamal-Nenets Autonomous Area will begin at 10:00 a.m., Dmitry Medvedev told journalists. "This is a serious event, involving tens of thousands of people, which is linked to our asset-swap agreements with our German partners," Medvedev said. Under an asset swap agreement between Gazprom and Germany's BASF AG, signed earlier this year, the German energy concern bought a 25% minus one ordinary share and one privileged share without a voting right. In turn, Gazprom increased its stake in the authorized capital of their joint trader Wingas GmbH to 50% minus one share. Gazprom will also receive a 49% stake in the authorized capital of Wintershall AG, which owns exploration and production licenses at Libyan oil and gas fields. The deposit, for which Gazprom subsidiary Severneftegazprom holds a license, has 805 billion cubic meters of proven gas reserves, and 5.7 million tons (42 million barrels) of proven oil reserves. Medvedev also said Russia saw no obstacles to launching on schedule the Nord Stream pipeline, being built under the Baltic Sea to pump natural gas to Germany. The ambitious pipeline project is being developed by Russia's state-controlled Gazprom and Germany's E.ON and BASF at an estimated cost of $12 billion. Medvedev said the situation around the pipeline, due to be commissioned in the latter half of 2010, was "quite favorable, despite concerns being voiced by a number of countries." Baltic countries earlier called for a detailed study of its environmental consequences. The pipeline is expected to run across Russian territorial waters, the economic zone of Finland, Sweden and Denmark, as well as Germany. Gazprom controls a 51% stake in Nord Stream AG, the project operator. Medvedev added that Gazprom was seeking to enter the New York and Shanghai exchanges. "Gazprom has capitalization growth reserves, and work is in store for the company to position itself on the New York and Shanghai exchanges," he said. Gazprom's capitalization on the RTS stock exchange has reached $336 billion, Medvedev said, adding that his company was currently ranked the world's fifth largest. Gazprom shares grew 4.89% on the MICEX stock exchange on Wednesday, and went up 4.45% on the RTS. Experts said the growth followed the completion of gas price talks with Ukraine earlier this week, and an increase in gas tariffs for 2008 by the Federal Tariff Service. Medvedev said with confidence that Gazprom's capitalization growth would have a positive impact on the entire Russian stock market.

Friday, December 07, 2007

Gazprom to fly solo at Arctic fields

Kovykta Production Station29 November 2007 - Upstream OnLine - Russia's Gazprom said today it is not looking for foreign investment in two major Arctic projects on the Yamal Peninsula, but said it might welcome foreign oil companies at other fields there. Gazprom, the world's largest natural gas producer has said it plans to spend more than $1 billion at the Bovanenkov and Kharasavei fields in the Arctic peninsula as it speeds up exploration to replace declining Siberian production. Vlada Rusakova, head of the company's department of strategic development, said Gazprom will work independently at those fields. "If there are some interesting proposals - some interesting technologies offered to develop some other fields - we will consider those offers," she said, Reuters reported. As Yamal is in Northwest Siberia, the company will need tens of billions of dollars to bring gas from remote deposits into its trunk gas pipeline system. It plans to produce the first 15 billion cubic metres of gas at Bovanenkov in 2011, gradually bringing output to 250 billion cubic metres a year. Industry analysts say Yamal's development will dwarf Shtokman, another giant deposit, which is located in the stormy Barents Sea and will need at least $20 billion in investment. Anglo-Dutch supermajor Shell has expressed interest in getting involved in a major project on the Yamal peninsula.

Gazprom, Gaz de France sign cooperation agreement

MOSCOW, December 6 (RIA Novosti) - Gazprom [RTS: GAZP] and Gaz de France have signed an agreement on scientific and technical cooperation, the Russian state-controlled natural gas giant said on Thursday. "The agreement stipulates scientific and technical cooperation between the companies to: increase the efficiency of pipeline gas transportation and underground storage, as well as liquefied natural gas production, storage, delivery and re-gasification; develop technology for hydrocarbon deep processing and energy saving; reduce greenhouse gas emissions; and introduce new types of equipment and technology," Gazprom said in a statement. The parties will establish task forces in January 2008 to determine priority areas of joint research for the agreement's successful implementation, Gazprom said. Gaz de France, one of Europe's largest gas companies, supplies gas to more than 14 million consumers, including 11 million in France. Since 1975, when both companies signed a gas supply agreement, Gazprom has delivered over 280 billion cubic meters of gas to France, including 10 billion cubic meters in 2006.

Gazprom Needs Total's Help

12.03.2007 - [Neftegaz.RU] - Gazprom is likely to welcome France's Total to help it tap a large gas field in Astrakhan, the company said. On Friday, Gazprom said it was considering teaming up with Total on the Astrakhan field -- one of its 10 biggest, with potential reserves of 2.5 trillion cubic meters. Astrakhan's reserves have yet to be fully audited by DeGolyer, which rates them at 199.3 billion cubic meters of proven gas reserves and 48.3 bcm of probable reserves. By the way, Total was the first foreign company which was invited to develop notorious Shtokman gas field.

Gazprom Plans To Construct Largest Storage Unit in Europe

November 30, 2007 - Bloomberg - St.Petersburg Times - FRANKFURT — Gazprom, the world’s biggest natural gas exporter, plans to build Europe’s largest storage facility for the fuel to supply a new pipeline under the Baltic Sea. The facility in Hinrichshagen, northeastern Germany, will hold as much as 5 billion cubic meters of natural gas, Burkhard Woelki, spokesman for Gazprom’s German unit, said by telephone Wednesday from Berlin. Construction will start in 2009 and cost 420 million euros ($620 million), he said. Gazprom’s Nord Stream pipeline is scheduled to start carrying natural gas 1,200 kilometers under the Baltic to Germany in 2010 as the Russian exporter seeks to avoid transit countries like Belarus and Ukraine. Gazprom, which feeds one-quarter of Europe’s gas demand, wants to plug directly into markets in northwestern Europe and raise export capacity by one-third. The Wingas storage facility in Rehden, northern Germany, can hold 4.2 billion cubic meters of gas.

Gazprom to Pay For Turkmen Gas 50 % More

turkmenistan29.11.2007 - [Neftegaz.RU]- Russia's gas export monopoly Gazprom has agreed to pay 30 to 50 percent more for Turkmen gas next year. Gazprom said in a statement its chief executive Alexei Miller had signed a deal with Turkmen officials to pay $130 per 1,000 cubic metres in the first half of 2008 and $150 in the second half, up from $100 this year. Gazprom added that could result in higher prices for Ukraine, and, consequently, in tough talks between Russia and Ukraine. In 2009 and beyond the price will be determined by a formula, which will in turn depend on global energy prices. The deal will be valid until 2028.

Shell: Rusisa's Yamal Gas Reserves More Than Gazprom's

Jeroen van der Veer22.11.2007 - [Neftegaz.RU] - Shell chief executive officer Jeroen Van Der Veer and CEOs from Dutch companies including gas trader GasTerra said the Russia's Yamal peninsula and Kara Sea gas deposits may hold over 30 trillion cubic metres of gas, more than the proved reserves of Gazprom. Russia has said it was "interested' in the proposal to develop Yamal peninsula. The Dutch energy companies, including Essent and Nederlandse Gasunie, would work in the region with state-run Gazprom, which needs the fuel from Yamal to replace dwindling production at existing fields.

Gazprom, BP Delay Kovykta Deal Amid a Series of Talks

November 30, 2007 - Reuters by Dmitry Zhdannikov - Gazprom, BP and its Russian venture TNK-BP will not have time to close the Kovykta deal in December amid talks over a broader range of issues, Gazprom said Thursday. "BP's chief executive [Tony Hayward] flew to Moscow today and we held talks about a very broad number of cooperation issues. As to the Kovykta deal, we won't be able to close it on time," Gazprom's spokesman Sergei Kupriyanov said. The meeting between Hayward and Gazprom's CEO Alexei Miller is the second in November and the fourth over the past six months. Industry sources have said contacts between the two bosses have intensified as a lock-up period on TNK-BP's shareholders is due to expire at the end of this year and Gazprom may want to buy 50 percent in the firm from the Russian shareholders. Such a deal would be another milestone in the Kremlin's drive to regain control over the strategic energy sector and would give it a share of over 60 percent of Russia's oil production. BP owns the other 50 percent in TNK-BP and industry sources have said it would not heavily oppose changing partners since Gazprom enjoys full support of the Kremlin, while the current five billionaire shareholders have conflicting interests and invest in other businesses. "We continue to believe that the potential entry of Gazprom into TNK-BP would help the latter to strengthen its political links and maybe even get access to best assets in Russia," Renaissance Capital said in a note this month. The Kovykta deal was signed in June and under it BP, Gazprom and TNK-BP agreed to set up a strategic alliance.

Petro-Canada Urges LNG Plant Approval

November 21, 2007 - The Moscow Times by Anatoly Medetsky - Canadian oil and gas firm Petro-Canada on Tuesday urged potential partner Gazprom to approve a plan to build a $3.5 billion liquefied natural gas plant on the Baltic Sea to capitalize on the decline of the product's supply in North America. Petro-Canada, one of several foreign companies that Gazprom has shortlisted as a possible partner in the project, is seeking from 25 percent to 49 percent of a joint venture to build and operate the plant. North America provides for more than 90 percent of its natural gas needs, but the fields -- mostly found in Canada -- "are getting tougher" and production began to decline this year, Petro-Canada's vice president Graham Lyon told a gas industry conference. The Baltic plant would produce 5 million tons of LNG annually and start deliveries in 2013 if Gazprom makes the decision this year, Lyon said. North America is expected to consume 80 million tons of LNG by 2015, he said. Gazprom is set to consider the plan next month, the gas producer's deputy chief executive Alexander Medvedev said on the sidelines of the conference. "I believe the project has all the necessary parameters for a positive decision to be made." Medvedev said. Gazprom is also planning to build an LNG plant near Murmansk to start shipping the gas from the giant Shtokman field in the Arctic to Atlantic markets in 2014. Gazprom has not yet identified the plant's capacity. "Skeptics say that Shtokman can do the same job in the same timeframe, but in fact there is no competition," Lyon said. "There is plenty of room for both projects." Petro-Canada hopes to sign a 20-year contract to buy some of the gas from Gazprom to ship it to a re-gasification terminal with capacity for 3.6 million tons, which the company is planning to build in Quebec, Lyon said.

Dutch and Russian interests lay undersea pipe

7th November, 2007 - Big News Network - An agreement between Dutch gas company Gasunie and Russian monopoly Gazprom will see a controversial pipeline being built beneath the Baltic Sea between Russia and Germany. The agreement gives Gasunie a nine percent stake in the Nord Stream consortium, which is planning a 1,200-kilometre undersea pipeline from Vyborg in Russia to Greifswald in Germany. Gazprom controls 51 percent of the pipeline, which it plans to use to supply gas to western Europe when it is completed in 2010. The project has run into objections from Sweden and Estonia on environmental concerns. Poland, which is heavily dependent on Russian gas, objects to the fact that it is being bypassed by the new pipeline.

Thursday, December 06, 2007

Focus on Gazprom, Not Sovereign Wealth Funds

Novem. 8, 2007 - The Moscow Times - Anders Aslund - Until recently, the world of finance appeared to move toward transparent, publicly traded private corporations, but recently an opposite trend is apparent. Nontransparent forms of investment, such as hedge funds, private equity funds and sovereign wealth funds, are surging. Meanwhile, the global trend toward privatization has been somewhat impeded. Central banks have accumulated large international currency reserves, and they have prompted the creation of new sovereign wealth funds. A couple of countries, such as Venezuela and Russia, are even experiencing outright re-nationalization. What do these new developments amount to? Recently, Financial Times columnist Martin Wolf wrote about "a brave new world of state capitalism." Attention is increasingly turning to the rapidly expanding sovereign wealth funds. In a new policy brief of the Peterson Institute, senior fellow Ted Truman has sorted out many of the issues involved. Currently, sovereign wealth funds are assessed at $2 trillion to $2.5 trillion, and some forecast that they will grow to $12 trillion by 2015, which is the current level of the U.S. gross domestic product. During the oil boom in the 1970s, early sovereign wealth funds arose in oil-producing emirates such as Kuwait and Abu Dhabi, which has the largest fund of $600 billion to $700 billion. Norway established a fund for its excess oil income in 1990. As an exception, Singapore has accumulated two large funds not based on oil incomes. China and Russia have recently instituted large sovereign wealth funds. Moscow's soaring stabilization fund of $148 billion is the fifth-largest sovereign fund. The origin of these funds is rising international reserves based on large current account surpluses. In OPEC countries, these surpluses are due to extraordinary oil revenues; in China, they are due to undervalued exchange rates; and in Russia, they are due to both circumstances. China's international reserves of $1.43 trillion are the biggest in the world and amount to about half of its GDP. Russia's international reserves of $441 billion exceed one-third of its GDP. To a considerable extent, these large international reserves are a reaction to the Asian and Russian financial crises of 1997 and 1998. The countries that were hit by this crisis realized that they could not rely upon the International Monetary Fund as a fire brigade and that they needed to create their own sufficient reserves. It is commendable that the East Asian and former Soviet states have adopted such conservative fiscal policies. The ballooning reserves, however, are a result of undervalued exchange rates. By purchasing foreign currencies and issuing rubles, the Central Bank is boosting the money supply and generating inflation. Indeed, the country's dominant economic concern today is rising inflation. The government would be well-advised to let the ruble exchange rates appreciate to reduce inflation. As a consequence, the excessive reserve accumulation would dwindle. Nor does it make much sense for Russia to hold sterile reserves amounting to one-third of its GDP. Investing its reserves cautiously in treasury bills, the state generates little return on this huge capital. That is the reason why Western countries do not maintain larger reserves than necessary. The real nightmare is that the reserves will be stolen, which the Finance Ministry obviously worries about. The natural conclusion in countries with large international reserves is to transfer some reserves to a national wealth fund -- either a stabilization fund designed to safeguard against oil price fluctuations, as in Russia, or a fund for pensions or future generations, as in Norway, Singapore and Kuwait. These funds are built up by state savings through budget surpluses. Russia's stabilization fund is easy to defend as a cushion for great fluctuations of the prices of oil and gas, which comprise 63 percent of the country's exports. A pension fund, like the one in Norway, also makes sense, as long as the state takes the main responsibility for pensions. Funds for future generations, as Russia will introduce in February, are a paternalistic idea, however, because they assume that citizens are so irresponsible that they cannot be entrusted with their own savings. It would make more sense to cut taxes and let citizens save and invest themselves. The nature of the political regime matters as well. The only democratic country with a large sovereign wealth fund is Norway. Since the Norwegian fund was established in 1990, every incumbent government has lost elections because the opposition has proposed all kinds of expenditures from the abundant fund. It is difficult to democratically defend a public fund that exceeds the evident needs of international reserves. The natural conclusion is that it should not be formed at all. Rather than discuss the problems of sovereign wealth funds, we should focus on their poor justification. If international reserves exceed a certain level, exchange rates should appreciate, which should impede the accumulation of reserves. A certain stabilization fund for export price fluctuations can be defended, but only within reasonable limits. Funds for future generations may make sense in places such as Kuwait and Abu Dhabi, which have finite natural resources, but they make no sense in large, multifaceted countries like Russia or China. The current Western concern is that sovereign wealth funds from oil-producing countries and China will buy up large swathes of Western economies. A similar worry arose with Arab investments in the late 1970s and with Japanese real estate investments in the late 1980s. But inexperienced foreign investors tended to lose money and they had amazingly little impact. Do you remember when Mitsubishi bought half of Rockefeller Center in Manhattan in 1989 at the top end of a real estate boom? They lost big. In Russia, the fund for future generations is likely to be the most transparent and cautiously managed public money. The tentative policy is to let the fund be professionally managed by several external companies in small and diversified investments. Global stock markets are likely to be happy with the Russian contribution. It is less obvious that Russia's taxpayers should welcome it. The outside world is most concerned about Gazprom investments -- and justifiably so. With a market capitalization of $280 billion, Gazprom is a far greater financial force than what Russia's fund for future generations will be for a long time. Moreover, Gazprom's policy is explicitly monopolistic, prohibiting competitors and independent companies from access to its pipelines. Although Gazprom is publicly traded and files international accounts, it is not very transparent, as is evident from its insistence on using RosUkrEnergo as an intermediary for gas trade with Ukraine. By bringing former German Chancellor Gerhard SchrЪder on board, Gazprom has illustrated its interference in European politics. Western policy should focus on the transparency and deregulation of state-dominated monopolies such as Gazprom and its counterparts in the West, rather than concentrating on the comparatively benign wealth funds. Sovereign wealth funds, however, are more likely to be a cross than a benefit to the nation.

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