Russ Oil-Gas

08-25-2008 - Kommersant - The Volga District Arbitration Court put on Friday to the lengthy conflict between Gazprom and the American billionaire Getty family for control over OAO Southern Oil Co. when it upheld the decision of Arbitration Court of Astrakhan Region annulling the 1999 Southern Oil share issue in favor of Christopher Getty’s JPM Partners, in which Gazprom lost its controlling package in the company. Gazprom has been seeking that result in court since May 2007. The court found that the shares were sold at a reduced price and the majority shareholder was not properly informed of the sale. Southern Oil Co. was founded in 1995 to develop the Verblyuzhye field, which has proven reserves of 17.5 million tons of oil. Astrakhangazprom (later renamed Gazprom Dobycha Astrakhan) had 79 percent of its authorized capital, and the Volga-Caspian Banking Corp., OOO Radon and Astrakhan Oil and Gas Production Expedition each had 7 percent. JPM Partners LDC was made a partner through a stock issue that lowered Astrakhangazprom’s share to 42 percent. JPM Partners claims that it invested $12.8 million in the company between February 2000 and June 2007. The filed provided unexpectedly low grade oil, however, that JPM Partners was unable to sell. In 2005, Astrakhangazprom petitioned the Federal Financial Markets Service for an audit of the stock issue, which uncovered irregularities. This is not the first asset that the Getty family has had to return to Gazprom. A similar situation arose in 2003 and 2004 with ZAO Stimul, which was founded in 1993 by Orenburggazprom (51%) and the U.S. company Avalon International (49%). The Getty family’s Victory Oil Co. received 61.8 percent of the company through a stock issue in 2000. When the U.S. company put a controlling package in the company up for auction in 2003 and the Chinese CNPC won it for $200 million, Gazprom, which had bid $80 million successfully disputed the stock issue.

20 August, 2008 - Upstream OnLine - Russia's Prime Minister Vladimir Putin supports the idea of equal access to pipelines for independent gas producers along with Gazprom, anti-trust chief Igor Artemyev said today. In an interview with business daily Vedomosti, Artemyev said all the relevant agencies have approved a bill on equal access to Gazprom's pipelines for other gas producers that have long been fighting to get access to lucrative export markets. The service is going to submit the bill to the government for final approval this week and sees the chances of changes in the current system to be very high, he said. "Firstly, premier Vladimir Putin has publicly said to [Gazprom's chairman Alexei] Miller that he supported the idea. Secondly, the position of vice-premier Igor Sechin is extremely positive," Artemyev was quoted by Vedomosti as saying. Independent gas producers, which produce around 16% of all Russian gas, have long been complaining that they often have to sell the fuel to Gazprom at local prices, about five times lower than the export price which is now around $400 per 1000 cubic metres. The anti-monopoly service had earlier said that Gazprom should retain its export monopoly status but would have to buy gas for exports from independent producers on a pro-rata basis to their production. "The rules on non-discriminatory access must be accepted, all independent producers, including oil companies should have equal rights with Gazprom and its subsidiaries, all voluntary actions by Gazprom should be excluded," Artemyev said. Analysts told Reuters that the proposal, if approved, should increase gas sales revenues of independent gas producers such as Novatek and oil companies producing gas such as Lukoil, by up to 60%. Artemyev also said his agency has suggested the government should set a fair formula price at which Gazprom would buy the fuel from independent producers. "It will produce some average contract price which surely will not be $50 per Mcm," he said.

// Finland’s former Prime Minister to help construct the Nord Stream across the Baltic Sea
He’ll become advisor to the Nord Stream head
Aug. 18, 2008 - Kommersant - Finland’s former Prime Minister Paavo Lipponen will become advisor to the Nord Stream AG head. To Gazprom, which is in control of the company, such consultants is the only opportunity to quickly get all permits to construct the pipeline from Russia to Germany across the Baltic Sea by 2011. Friday, the operator of the Nord Stream AG pipeline construction reported that an agreement with Finland’s former Prime Minister Paavo Lipponen was reached. “Mr Paavo Lipponen will become advisor for addressing environmental issues and receiving permits to build the pipeline in Finland. With his help, we’ll try to clear up legal matters concerning the peculiarities of the Finnish law,” the company’s spokesperson explained to Kommersant. The shareholders of the Nord Stream AG include Gazprom (51%), Germany’s BASF (20%) and EON (20%), as well as Holland’s Gasunie (9%). With its capacity of 55 billion cubic meters annually, the Nord Stream pipeline is to connect Russia and Germany. The first branch of the pipeline is to be launched in 2011, the second one – in 2013. The company’s press-release was issued after the former Prime Minister said in his interview with Finland’s Helsingin Sanomat that he agreed to work as Nord Stream advisor for a year, and that he had been invited by the company’s CEO Mattias Varing and Chair of the Shareholders Committee, Germany’s former Chancellor Gerhard Schröder. Mr Lipponen emphasized that he’ll be an independent consultant. “I’ll work with two parties – I can point to the opinion of the Finnish government regarding the Nord Stream management and convey information from corresponding Finnish bodies,” Mr Lipponen stated. Now he works as advisor to Finland’s energy company Pohjolan Voima. As to the profit he can get from the project, Mr Lipponen said that it’s “moderate” and complies with the volume of payments international consultants get. The necessity to invite the Finnish former Prime Minister is caused by the fact that so far no pipelines have been constructed in Finland’s exclusive economic zone, and there’s no tested mechanism of settling relevant issues with the government of Finland. The Nord Stream AG is planning to accomplish extra environmental research taking account of the recent applications of the ministries of Sweden, Denmark and Finland. The outcome of the research will be included in the final draft of the company's report on meeting the standards of environmental impact assessment (EIA) in the transborder context. The report is to be issued in October. It’s the third time Gazprom invites Europe’s former top politicians. Gerhard Schröder was the first one – he was invited by Vladimir Putin personally. This summer Gazprom CEO Alexey Miller invited Italy’s former Prime Minister Romano Prodi. It need be said, however, that Mr Prodi could not agree at that moment since he was incumbent Prime Minister. And Mr Lipponen retired five years ago. According to Valery Nesterov from Troika Dialog, the invitation of the political heavyweight is aimed to foster the realization of the project. The Nord Stream first claimed to launch the first branch of 27.5 billion cubic meters of gas annually in the third quarter of 2010, then the date was changed twice: to 2011 and 2012. Nevertheless, in June the company reported ready to launch it in 2011 again. So, there’s only two years left to receive all necessary permits. “The company has issued a white book (of environmental norms – Kommersant), it’s working its way through the legal labyrinth. All it has to do now is comply with the planned deadline of launching the pipeline,” Mr Nesterov opines. According to East European Gas Analysis director Mikhail Korchemkin, Gazprom shouldn’t have announced the time frames of the start of supplies before getting the permits with the Baltic states trying to show the officials that “nothing depends on them”. In the view of the expert, the company may get “bogged down” in the governmental studies of Sweden and Denmark, and he doesn’t believe that Mr Lipponen’s personal contacts can truly eliminate the difficulty. However, Mr Korchemkin doesn’t rule out that Gazprom may continue inviting former European officials to its projects.

19 August 2008 - Russia Today - Gazprom may soon lose its status as the sole exporter of Russian gas. The country’s antimonopoly watchdog is preparing amendments giving independent producers access to gas pipelines. Independent gas producers have lobbied for access to Gazprom’s export routes for years. But they now have powerful allies, including the Federal Antimonopoly agency, a Deputy Prime Minister Igor Sechin - and the Economy Ministry. Denis Borisov, Analyst at Solid says Gazprom may be forced to share its export profits. "Since Gazprom is a monopoly when it comes to selling Russian gas abroad, it may be asked to share the profit it makes - namely, the difference between export and domestic gas prices - with independent producers." Independent producers acocunt for about 15% of Russia’s total gas output, but that’s expect to double by 2020. Experts say the Independents may gain access to the giants pipeline in line with their share of production. But there is no consensus on the issue within the government and Vitaly Ermakov, from Cambridge Energy Research says this reflects two competing outcomes policymakers want in the gas sector. “The Russian government is largely divided on the issue. On the one hand, Russian policy makers want a tightly controlled state monopoly in the gas sector, which is a strategic sector. On the other hand they would like to use the advantages of the market, they would like to bring in additional volumes that the independents can produce.” The amendments would benefit some of Russia’s biggest energy companies, which have built up their gas units in recent years according to Denis Borisov. "The main beneficiaries from the proposed changes would be Lukoil, TNK-BP, Rosneft and, of course, Novatek, Russia’s largest independent gas producer. They could gain a total of as much as $10 BLN a year in additional revenues." But the gas giant may not stand idly by, and watch its estimated $40 billion of export revenues cannibalized. If the legislation is passed, Gazprom may boost transportation fees for the independents to compensate its losses.

08-18-2008 - Scandinavian Oil&Gas Magazine - Gazprom has launched the construction of the most difficult section along the Bovanenkovo – Ukhta gas trunkline system – a submerged crossing via the Baidarata Bay. 1,219 mm steel pipes being used for the submerged crossing construction have 27 mm wall thickness and are designed for 120 atm pressure. The pipes were made and encased in concrete by domestic companies. All the marine operations are also being effected by a Russian company. Laying gas pipes with such technical parameters in the Baidarata Bay remarkable by its specific environment will be the first project of this kind not only in Russia but also in the world practice.

14 August, 2008 - Upstream OnLine - Russia's anti-monopoly agency is proposing to change legislation on gas exports that would force gas monopoly Gazprom to share export pipelines with independent producers, a ccording to reports. Vedomosti business daily quoted sources as saying the amendments had been supported by influential Deputy Prime Minister Igor Sechin, the economy ministry and the customs services while the energy ministry is against them. Under the proposal, Gazprom would retain its export monopoly status but would have to buy gas for exports from independent producers on a pro-rata basis to their production. Independent gas producers such as Novatek and oil players producing gas such as Lukoil have long been fighting to get access to lucrative export markets where gas often sells at prices five times higher than at home, a Reuters report said. Russia has promised to free domestic gas prices by 2011, which would boost the attractiveness of domestic sales. "We do not believe at this point that the bill has a realistic chance of being passed, as Gazprom is likely to fight tooth and nail against the proposal," Troika Dialog said in a note to investors. It also said that if the bill were passed Gazprom would force independent producers to fund maintenance and expansion of its pipelines to recoup losses on exports. Renaissance Capital said it estimated that in 2007 total non-Gazprom gas production stood at 104 billion cubic metres or 15.9% of Russia's total with Gazprom buying only 20 Bcm from third parties in Russia. "If amendments are approved, independent producers would enjoy higher sales prices and would have an incentive to increase gas production in mid-term as opposed to waiting for the liberalisation of domestic gas prices scheduled for 2011, which may even be delayed," it said.

MOSCOW, August 14 (RIA Novosti) - Gazprom increased gas exports to Europe and former Soviet republics 11%, year-on-year, in the second quarter of 2008 to 61 billion cubic meters, the Russian energy giant said Thursday. Gazprom supplied 41.5 billion cubic meters of natural gas worth 286.26 billion rubles ($11.8 billion) to Europe and 19.5 billion cubic meters worth 64.62 billion rubles ($2.7 billion) to the former Soviet republics, the energy giant said. Gazprom said it increased deliveries to almost every country in Western Europe - its major export market - although volumes fell in Greece and Turkey. This year, Gazprom intends to export over 163 billion cubic meters of natural gas to countries outside the Commonwealth of Independent States, a loose association of former Soviet republics except the Baltic states of Latvia, Lithuania and Estonia, and expects to earn around $64 billion, the energy giant earlier said.

RBC, 07.08.2008, Moscow 16:17:59.Gazprom Neft's oil exports to countries outside the CIS grew 2.2 percent to 7.6m tonnes in the first half of 2008 compared to the same period a year earlier, the Russian energy holding's oil arm said in a statement today. Oil refining rose 6.3 percent to 13.7m tonnes, gasoline production reached 3.624m tonnes, diesel fuel output stood at 4.423m tonnes, fuel oil production amounted to 2.87m tonnes, and jet fuel output was nearly 8.125m tonnes.

Aug. 01, 2008 - Kommersant - Gazprom’s proven reserves of natural gas grew 0.6 percent to 18.27 trillion cu. m. by international PRMS standards in 2007. That is 88 percent of its total reserves. Its probable reserves were lowered 1 percent to 2.55 trillion cu. m. and its total reserves thus rose 0.4 percent to 20.82 trillion cu. m. Independent experts say that that is enough to provide for Russia’s and Europe’s needs in full, in spite of the gas monopoly’s falling production at old, large deposits. That news, released for the first time yesterday in an informational memorandum for the new issue of Gazprom Eurobonds, drove the company’s capitalization up $4 billion, and experts say it is still undervalued. The coefficient of the renewal of Gazprom’s reserves is 188 percent. The reserves of Severneftegazprom grew most last year (by 152 billion cu. m. at the Yuzhno-Russkoe oil and gas field). Gazprom dobycha Astrakhan grew by 22 billion cu. m. and OAO Gazprom grew by 704 billion cu. m. The reserves of Tomskgazprom fell from 255.3 billion cu. m. to 36.8 billion cu. m. Thanks to the passage of the laws “On Mineral Deposits” and “On the Continental Shelf” this year, the government decided to give Gazprom without competition ten licenses from the state unallocated fund with reserves of 3.8 billion tons of oil equivalent. Investors view the monopoly’s stock with guarded optimism. Its stock rose 1.5 percent on the RTS yesterday, with the market as a whole rising 0.9 percent. On the MIVCEX, it fell 0.4 percent, along with the whole market.

31 July, 2008 - Upstream OnLine - Russian gas giant Gazprom booked a 78% rise in net profit, calculated under Russian Accounting Standards (RAS), in the second quarter of 2008. The world's largest gas producer said in a statement net profit rose to 131.24 billion roubles ($5.60 billion) in the second quarter from 73.72 billion roubles in the year-ago period. The company also said earnings rose to 285.7 billion roubles in the first half of 2008, a 106% increase from 138.67 billion roubles in the first six months of 2007. Analysts tend to focus on Gazprom's financial reports under International Financial Reporting Standards (IFRS), but view the RAS report as important guidance. The company also pays annual dividends based on RAS results. Gazprom has said its IFRS net profit rose more than 9% to 695 billion roubles in 2007. It has yet to publish IFRS quarterly results.

RBC, 31.07.2008, Moscow 18:31:53.Gazprom's net profit under RAS more than doubled from RUB 138.7bn (approx. USD 5.91bn) in the first half of 2007 to RUB 285.7bn (approx. USD 12.18bn) in H1 2008, the Russian energy holding said in a statement today. However, net profit shrank 15 percent to RUB 131.2bn (approx. USD 5.59bn) in the second quarter compared to January-March. The gas monopoly attributes the decrease in net profit in Q2 to a fall in sales revenue resulting from seasonal factors.

MOSCOW, August 1 (RIA Novosti) - Gazprom Neft, the oil arm of Russian energy giant Gazprom, reported Friday a 73.8% increase in its net profit calculated to Russian Accounting Standards year-on-year in the first half of 2008. The company's net profit totaled 61.9 billion rubles ($2.6 billion) in January-June 2008, up from 35.6 billion rubles ($1.5 billion) in the same period last year. Gazprom Neft, known as Sibneft before it was taken over by Gazprom in September 2005, stabilized crude output at 32.7 million metric tons (240 million barrels) in 2007 - the same production level as in 2006. The company plans to boost annual crude output to 90-100 million tons (660-730 million barrels) by 2020. Gazprom owns a 75% stake in the company, and another 20% belongs to a consortium of Italy's ENI and Enel.