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Friday, March 28, 2008

‘Big step’ for Eni-Gazprom partnership

Italian energy giant Eni said it had made a "significant step" in its talks with Russian partner Gazprom about an exchange of assets.
26 March 2008 - Upstream OnLine - Italian energy giant Eni said it had made a "significant step" in its talks with Russian partner Gazprom about an exchange of assets. The exchange is part of a framework co-operation agreement signed by the two companies in 2006. The reported breakthrough was taken at a meeting between Eni chief executive Paolo Scaroni and his Gazprom counterpart, Alexey Miller, in Moscow yesterday, Eni said, Reuters reported. "Miller and Scaroni ... made a significant step forward in the negotiation for the asset exchange established within the strategic agreement between the two companies," the Eni statement said. It did not elaborate. The EU is wary of Gazprom's attempts to buy up Europe's energy infrastructure, but the gas giant has sought to get new assets by building partnerships with individual companies and member states. Eni, meanwhile, relies on its ties with Gazprom to keep growing outside of Italy. Among other issues, Scaroni and Miller also discussed co-operating in oil, Eni said in the statement. "The parties discussed opportunities of co-operation between Gazprom Neft and Eni," it said. Eni owns 20% of Gazprom Neft , the oil arm of Gazprom, Russia’s gas export monopoly. Faced with falling production, Gazprom Neft plans to nearly double output by 2020. Scaroni and Miller also talked about South Stream, a 10 billion ($15.5 million) plan to bring Siberian gas to Europe, it said without giving any details.

Gazprom to jump on booming LNG market

Gazprom to jump on booming LNG marketMarch 28, 2008 - Russia Today - Gazprom is looking to cash in on booming global LNG demand with its liquefied natural gas production strategy covering up to 2030. LNG is set to be the future of gas transportation system. Russia`s natural gas giant has announced it has ambitions to become one of the leading LNG suppliers. The company has two big future gas projects - Shtockman and Sakhalin-2. The company’s spokesman Sergey Kupriyanov stressed that after Sakhalin-2 starts production, Gazprom will control over five per cent of global LNG supplies. “LNG market is developing very quickly. It will allow Gazprom to enter other markets that are not available through pipeline transportation systems. We expect to receive the first supplies from Shtockman field by 2014,” Kupriyanov said. Gazprom says there will be competition on the Russian market in terms of LNG production, but it will all depend on the right cooperation between the gas companies. Since 2000 the market for LNG has grown four fold, and currently represents around twenty per cent of the gas trade globally. Analysts back the idea to develop LNG production in Russia, saying this will open up more markets for producers. They think this will also make the concept of a gas cartel, an idea recently touted by the Russian government, more realistic. Ron Smith, Chief Economist of Alfa Bank, says cartel of gas exporters makes no sense unless you’re able to switch your markets. “If you’re tied to your existing market by pipeline, then Gazprom pulling back gas in Europe, for example, will not raise prices in the United State or anywhere else in the world, it will only affect Europe itself. So you need the LNG to tie markets together and make a global market,” he believes.

Tuesday, March 25, 2008

Talks on Access to Gazprom's Pipelines Nearing Completion

24.03.2008 - RZD News - The Federal Anti-Monopoly Service intends to agree with Gazprom on the rules of non-discriminatory access to its gas pipeline network in the near future, head of the antitrust agency Igor Artemyev told journalists today. The agency has made considerable progress in the talks, as only two or three issues are yet to be agreed, instead of 40 at the beginning of the discussions, Artemyev said. The agency's deputy head Anatoly Golomolzin is overseeing the talks with Gazprom. The move is expected to help attain the goal of tripling the share of independent gas producers by 2030, which was set by Russia's First Deputy PM Dmitry Medvedev in November 2007, RBC reports.

Wood Group Wins Strategic Pipeline Contract in Arctic Russia

Wood GroupMarch 25, 2008 – – A consortium comprising Gazprom, Total and Statoil Hydro have awarded J P Kenny Ltd, (JPK), a subsidiary of John Wood Group PLC ("Wood Group"), a multi-million call-off contract for work on its strategic trunkline project to bring gas from the Shtokman field in the Barents Sea to Northern Russia. For the project, currently planned to be executed over several phases, JPK is providing Front End Engineering Design (FEED) and management of all activities associated with engineering the pipeline. Contracted to provide support throughout all phases of the project, JPK entered phase 1 of the development of the Shtokman natural gas field development in January. Gerwyn Williams, Managing Director, J P Kenny said, "We are very pleased to have won this contract, which adds to our portfolio of cold region engineering projects. The project comprises a 600km 44-in. subsea pipeline from the Shtokman field running south to Murmansk. We will be executing the work in our London and Norwegian offices, supported by a Russian contractor, and we'll also be strengthening our presence in Russia by establishing a JPK office in St Petersburg, managed by Russian engineers." He added, "As the industry moves into deeper water and more remote environments, we can apply our subsea engineering capabilities to help our clients commercialise the breakthrough technologies needed to economically develop these new discoveries." For the technically challenging Shtokman project, which lies in arctic waters beyond the reach of divers, JPK will be delivering its tried and tested solutions to deepwater pipeline installation and will also be responsible for managing an extensive range of interfaces in terms of procurement, planning and compliance with Russian regulations.

JP Kenny has Shtokman gig in the bag

25 March 2008 - Upstream OnLine - Wood Group subsidiary JP Kenny has landed a multi-million pound call-off contract with the Shtokman partners - Gazprom, Total and StatoilHydro - for work on the strategic trunkline project to bring gas from the Barents Sea field to northern Russia. JP Kenny will carry out front end engineering and design and management work for all activities associated with the pipeline's engineering. The company added the project will be carried out over several phases. The UK-based player added that it started phase one of the work in January. JP Kenny managing director Gerwyn Williams said: "We are very pleased to have won this contract, which adds to our portfolio of cold region engineering projects. "The project comprises a 600 kilometre 44 inch subsea pipeline from the Shtokman field running south to Murmansk. We will be executing the work in our London and Norwegian offices, supported by a Russian contractor, and we'll also be strengthening our presence in Russia by establishing a JP Kenny office in St Petersburg, managed by Russian engineers." He added that JP Kenny will be delivering its tried and tested solutions to deepwater pipeline installation and will also be responsible for managing an extensive range of interfaces in terms of procurement, planning and compliance with Russian regulations.

Thursday, March 20, 2008

Anti-monopoly watchdog to bite into Gazprom monopoly?

Anti-monopoly watchdog to look into Gazprom?March 19, 2008 - Russia Today - Gazprom's iron grip on Russia's gas-transit system could at last be broken. The Russian anti-monopoly watchdog is preparing to change the law, meaning Gazprom would have to share its export pipelines with independent gas producers. Experts say the move is timely, considering that Russia’s domestic gas prices will be liberalised by 2011. “By 2015 the demand for gas from independent producers will increase from 100 billion cubic metres to about 150-170 billion cubic meters. Equal access to the export pipeline would give them the incentive to produce additional volumes, which will be in demand both within Russia and abroad,” believes analyst Denis Borisov from Moscow-based Solid Investment. Vitaly Ermakov of Cambridge Energy Research Associates believes the move would create a legal framework for independents too. However, competing with Gazprom will hardly top their agendas since they have more urgent matters to attend to. “Independent gas producers and Russian oil companies are struggling to monetise their gas. They are struggling to produce their gas because they don’t have access to transportation networks, or the access is limited. The independents would produce as much gas as they could if they had access to markets,” said Ermakov. Russia's top independent gas producers include Novatek, LUKOIL, SurgutNefteGaz and British Petroleum’s Russian joint venture TNK-BP. The world's largest gas producer, Gazprom supplies Europe with a quarter of its gas, making an estimated $US 40 billion a year on exports. Contrary to other expert opinions, Borisov says Gazprom would not fight the initiative. “Naturally, Gazprom is interested in maintaining the status quo, but the recent examples, namely reaching agreements for gas purchases from the Central Asian countries, show that Gazprom takes a rational approach. They will not waste their resources on putting up a fight.” Russia's top independent gas producers include Novatek, LUKOIL, SurgutNefteGaz and British Petroleum’s Russian joint venture TNK-BP.

Trio set to feast on Shtokman FEED

18 March 2008 - Upstream OnLine - Russian gas giant Gazprom has opted to hand the prized front-end engineering and design job for the $15 billion first phase of the Shtokman development to French outfits Technip and Doris together with UK player JP Kenny. The company overseeing the development, Shtokman Development, majority owned by Gazprom, said in a statement the companies would carry out the FEED for the project's first stage. The statement said Technip would prepare engineering studies on the project's onshore gas technological complex, including the proposed liquefied natural gas plant. Doris work on the FEED for the subsea production system and the offshore technological platform, while JP Kenny will do the job for the 600 kilometre subsea pipeline. Two Russian engineering companies, Rubin and Giprospetsgaz, will also be involved. Shtokman Development said the FEED contracts would be completed in 15 months in the second quarter of 2009, allowing the company to make a final investment decision as planned by the end of next year. The cost of the project's first stage - one of four planned stages - was initially estimated at $15 billion. Shtokman Development company is a special purpose vehicle set up by Gazprom, France's Total and Norway's StatoilHydro to build the infrastructure at the Barents Sea field, which holds an estimated at 3.8 trillion cubic metres of gas. Gazpromholds 51% of the Switzerland-registered venture, while Total and StatoilHydro hold 25% and 24% respectively.

Bolivia and Gazprom sign gas exploration deal

BUENOS AIRES, March 18 (RIA Novosti) - Bolivia hopes to meet its supply commitments to neighboring countries now that a natural gas prospecting deal has been signed with Russia's Gazprom, Argentina's Telam news agency said on Tuesday. Under the agreement signed in La Paz on Monday, exploration will be carried out at the Sunchal natural gas field in the south of the country. Bolivia has the second largest gas reserves in South America after Venezuela, with proven reserves of 680 billion cubic meters. "The agreement signed by Russia's Gazprom and the Bolivian state energy company YPFB will allow an increase in deliveries to neighboring countries, primarily Argentina and Brazil," Telam quoted Bolivian President Evo Morales as saying. Brazil currently requires between 27 and 30 million cubic meters of gas daily, while Argentina, which under contracts signed with Bolivia should receive 7.7 million cu m, receives some 3 million cu m of Bolivian gas a day. Experts had earlier expressed doubts that Bolivia would be able to comply with its contract commitments to its neighbors and simultaneously meet the growing domestic demand without new oil and gas deposits being commissioned. The Gazprom contract, signed by YPFB President Santos Ramirez and the Gazprom representative for Latin America, Stanislav Tsygankov, is a follow up to memorandum of understanding that the companies signed in February 2007 for prospecting and infrastructure projects as well as the training of staff. While working to boost its presence in Europe, Gazprom is also increasingly looking to South American markets. The focus is on cooperation talks with Brazil, Argentina and Venezuela, who jointly plan to build a transcontinental pipeline which will also cross Bolivia.

Gazprom pushed to pay more

13 March 2008 - Upstream OnLine - Kazakhstan wants Russian giant Gazprom to pay more for the transit of Turkmen and Uzbek gas in 2009 when the latter states start charging more for their gas, the head of the Kazakh state energy firm said today. Gazprom said last week it had agreed to buy gas from Uzbekistan, Kazakhstan and Turkmenistan at prices close to that it charges European customers, minus transport and other costs. "If the gas we buy becomes more expensive then, logically, the tariff will also grow," Uzakbai Karabalin, head of state oil and gas firm KazMunaiGas told Reuters. This year Kazakhstan raised the transit fee to $1.4 per 1,000 cubic metres per 100 kilometres from $1.1, following price increases by both Turkmenistan and Uzbekistan that sell their gas to Gazprom. Turkmenistan exports about 50 billion cubic metres of gas a year. Uzbekistan sells about 9 Bcm while Kazakhstan shipped abroad 7 Bcm last year. Kazakhstan uses a small amount of the natural gas going through its territory to power its pipeline pumps.

Average gas price for Europe could rise to $400 in 2008 - Gazprom

MOSCOW, March 14 (RIA Novosti) - Gazprom's CEO said on Friday that the average price for natural gas for Europe in 2008 could reach $400 per 1,000 cubic meters, 13% more than previously expected. "The price in Europe now exceeds $370. We believe the average price in 2008 could be $378 and could even reach $400 per 1,000 cubic meters," Alexei Miller said at a meeting with Russian President Vladimir Putin. Miller said the price hike was necessitated by the weakening U.S. dollar. However, he said the price increase would not affect the growing demand for natural gas on the European market. "Gazprom supplied 151 billion cubic meters of gas to the EU in 2007, and we plan [to ship] 157 billion cubic meters in 2008," he said. He added that gas supplies to Western Europe were based on long-term contracts, most of which would only expire after 2030. Miller also described Germany as Gazprom's number one customer. The gas monopoly is currently working on the Nord Stream pipeline project together with Germany's E.ON to pump 55 billion cu m of Russian natural gas under the Baltic Sea to Germany. He also said another Gazprom project, the South Stream pipeline, involving Bulgaria and Serbia under agreements reached earlier this year, would pump 30 billion cubic meters of Central Asian gas to Europe. The project is receiving active support from Italy, Gazprom's second-largest gas market, Miller said. Gazprom also announced plans on Friday to hold talks soon with importers of Central Asian natural gas following an announcement by regional producers that they would charge European-level prices from 2009. Uzbekistan, Turkmenistan and Kazakhstan said on Tuesday that they would begin exporting their natural gas at European-level prices from 2009. "The switchover to market pricing principles requires serious dialogue, so we are planning to start talks without delay," Miller said. Kazmunaigaz, the Kazakh gas monopoly, warned on Thursday about the possibility that it could raise tariffs to a European price level for the transit of Central Asian gas via Kazakhstan. The Gazprom CEO said the company was currently switching to market gas contracts with the former Soviet republics, and was already using market pricing for gas supplies to the Baltic nations. Gazprom and Ukraine's state gas company Naftogaz reached an agreement on Thursday ending their long-running gas dispute. Under the deal, Ukraine will pay a much higher rate of $315 per 1,000 cu m for Russian gas supplied in the first two months of this year. Gazprom also committed itself to supplying Ukraine with at least 49.8 billion cu m of Central Asian gas at $179.5 per 1,000 cu m from March until December 2008. Speaking about the domestic market, Miller said Gazprom was currently prioritizing Russian consumers. He cited high economic growth and the influx of foreign capital into the real sector of the economy as driving forces behind Russia's energy demands. The rise of national industries, such as producers of cement, building materials, and fertilizers and gas refineries, is also pushing up gas demands, Miller said. Gazprom plans to introduce market gas prices for Russian industrial consumers in 2011.

Friday, March 14, 2008

Gas Games in Central Asia

 © RIA Novosti03/13/2008 Moscow News by Marina Pustilnik - This week's announcement that the three Central Asian gas producers - Turkmenistan, Uzbekistan and Kazakhstan - will begin charging European-level prices for their gas starting next year was hardly unexpected, but it produced a bomb-like effect nonetheless. The heads of the three national oil and gas companies came to Moscow where they held a meeting with Gazprom CEO Alexei Miller. This too was a departure from old traditions where the next year's price of gas was a commercial secret discussed in closely-guarded bilateral meetings. Follo­wing this meeting, however, Gazprom's press service issued a press release that said: "Based on the interests of national economies and taking into account international obligations to guarantee reliable and uninterrupted deliveries of energy resources, starting in 2009 Central Asian countries will sell their natural gas for European prices." Although even the price formula for the Central Asian gas deliveries has not been determined yet, experts agree that in 2009 Gazprom will have to pay anywhere from $230 to $300 for 1,000 cubic meters of gas, depending on many variables. This year the Russian gas monopoly is paying between $140 and $180 for 1,000 cubic meters, depending on the country of origin and previous agreements. The game for Central Asian gas has several major players. This week's announcement has marked some clear winners and losers in this round of the game, but the outcome is still largely undecided. The clear winners of this story who will reap the rewards no matter what are the three Central Asian states who have already been labeled by the Russian media as the "Asian gas OPEC." By getting Gazprom to agree to raise the purchase price of their gas, Turkmenistan, Uzbekistan and Ka­zakhstan have secured a good price from a long-term partner, while simultaneously making a polite nod in the direction of Washington and Brussels, whose envoys have long tried to lure their leaders with European prices and projects to build gas pipelines bypassing Russia. Ukraine seems the likeliest loser at the moment, because it is now unable to hold separate negotiations for the Central Asian gas. It can either buy gas from Turkmenistan via Gazprom or turn its sights elsewhere, but the price it will have to pay next year will be high, and it is yet unclear how its gas-dependent industrial sector will react to the shock therapy. Ukraine does, however, have some leverage over Gazprom and that is the gas transit tariffs which are not kept significantly lower than average European ones. Raised tariffs might set the Russian gas monopoly $1-1.5 billion back. At the same time Gazprom has the same leverage against the Central Asian states - as it can also raise the tariffs for transportation of their gas across the Russian territory. Other losers in this geopolitical game are the United States and the European Union. Gazprom's compliance with the Central Asian states' demands for a higher price makes it difficult, if not impossible, for all other negotiations. Whatever price agreed between the four gas companies, the European firms would have to pay more as well as shoulder the construction of the South Stream pipeline or the high ground transportation costs. The South Stream pipeline itself no longer seems like a viable project. And this, of course, is the main paradox of this situation - to have Gazprom and the Central Asian states forge a new price alliance after all the diplomacy that went into breaking that partnership is akin to shooting oneself in the foot. And what of Gazprom? I am actually surprised to see the state monopoly behave in such a market-like manner. Of course, it's difficult to name Gazprom one of this game's winners until we see the actual numbers for the prices and tariffs, but the fact that it actually managed to turn this situation to its advantage commands some respect.

Gazprom et al agree to Sell Natural Gas at European Prices

March 11, 2008 - - The Gazprom Headquarters hosted a working meeting of Alexey Miller, Chairman of the Management Committee of Gazprom, Uzakbai Karabalin, President of KazMunaiGaz, Nurmmukhamad Akhmedov, Chairman of the Management Committee of Uzbekneftegaz and Yagshigeldy Kakaev, Chairman of Turkmengaz. The meeting addressed the outlook for cooperation in the gas sector. During the meeting the heads of the gas companies from Kazakhstan, Uzbekistan and Turkmenistan stated that "based upon the interests of the national economies and considering the international commitments with regard to the energy supply reliability and continuity, starting from 2009 natural gas will be sold at European prices."

Wednesday, March 05, 2008

Business as usual for Medvedev

03 March 2008 - Upstream onLine - Russia's next president Dmitry Medvedev - Russian gas giant Gazprom's chairman - pledged to uphold Vladimir Putin's policies today after a big election win that critics are claiming was stage-managed to let the outgoing Kremlin leader keep his grip on power. Displaying the double act that will be at the helm in Russia, Medvedev's first public appearance after results were released was to stand side by side with his mentor Putin on stage at a victory concert in Red Square. Medvedev, 42, who will be the youngest Russian leader since Tsar Nicholas II when he is sworn in on 7 May, has asked Putin to be his prime minister. Putin, 55, was prevented by term limits from running for re-election. But it is still not clear which of the two will really be in charge of the country, and analysts question if their power-sharing arrangement can last long in a nation accustomed to having a single, strong leader. "I think (my presidency) will be a direct continuation," said Medvedev, referring to Putin's eight years in office - a period marked by a concentration of power in the Kremlin and a willingness to stand up to the West on foreign policy. In a further sign Russia was not softening its assertive foreign policy, state-controlled gas giant Gazprom has cut gas supplies to pro-Western neighbour Ukraine by 25% at 0700 GMT this morning in a debt dispute. The company said supplies to Europe would not be affected by the move. "Gazprom is a reliable gas supplier, but we cannot and won't supply gas without payment," Gazprom spokesman Sergei Kupriyanov told Reuters. He said deliveries had been reduced by 40 million cubic metres per day. Ukraine's state energy player Naftohaz Ukrainy confirmed that supplies had been reduced. Earlier today Medvedev made clear he would not let his powerful prime minister encroach on his authority. "The president's main office is in the Kremlin. The prime minister's permanent location is the White House (government headquarters)," he told Reuters at his campaign headquarters. With 99.45% of the votes counted, Medvedev had 70.23%. His nearest rival, Communist leader Gennady Zyuganov, had 17.76%. Voter turnout was 69.65%, the Election Commission said. Kremlin opponents called yesterday's election a one-sided farce after Medvedev won by the huge margin without even taking part in a single campaign debate. "This is a secret service KGB operation to transfer power from one person to another," former Prime Minister Mikhail Kasyanov, who was disqualified from the ballot, told Reuters. Kremlin officials said the fact the election was one-sided did not mean it was unfair. Election chiefs said they knew of no violations that would put the result in doubt. Western observers monitoring the vote were expected to give an unflattering verdict later today. They have already called the contest unfair because of the blanket television coverage enjoyed by Medvedev. Civil society groups said millions of public sector workers were coerced into voting for Medvedev, some on pain of losing their jobs.

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