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Friday, January 30, 2009

Gazprom passes RosUkrEnergo debt to Naftogaz

RBC, 29.01.2009, Moscow 16:57:46 – Gazprom and Gazprom Export have transferred RosUkrEnergo's $1.7bn debt to Naftogaz of Ukraine, Gazprom's information department reported today. In accordance with the assignment contract of January 20, Naftogaz will now have the right to claim RosUkrEnergo's debt owed to Gazprom, RBC Ukraine reported. Gazprom stressed, however, that only the monetary debt had been passed, and the contract did not involve any natural gas deals. Neither Gazprom nor Gazprom Export have any right for RosUkrEnergo's gas located in Ukrainian underground storages, and have not struck any deals with this gas, the Russian gas monopoly stated. It did not specify on what terms RosUkrEnergo's debt had been transferred.

Gazprom, Shell may delay exports of Russia’s first LNG cargo

January 28, 2009 - SINGAPORE (Bloomberg) - Japanese utilities may face a delay in receiving the first liquefied-natural gas cargoes from an OAO Gazprom-led project in Russia, an official said. Sakhalin Energy Co. may start shipments of the clean-burning fuel by March from Sakhalin-2 project north of Japan, after final commissioning of the facilities next month, a Tokyo Electric Power Corp. official said on Tuesday by phone, requesting anonymity because of company rules. The first cargoes had been due to be shipped in January, Gazprom said in June last year. Gazprom, which currently exports to European customers via pipelines, aims to become a global energy supplier by selling LNG, gas chilled to a liquid for shipment by tanker. The delay in supplies may not affect customers because a global recession has reduced demand for gas from power plants and industries, increasing inventories. Loading will begin on Feb. 19 at the $22-billion development off Russia’s Pacific coast in a process that will take several weeks, Gazprom’s Deputy Chief Executive Officer Alexander Medvedev told Bloomberg News on Dec. 19. In June, Gazprom said LNG exports from Sakhalin Island near Japan will start “no later than January.” Sakhalin Energy said on Jan. 15 that it started gas production from its Lunskoye area, 15 kilometers (9.3 miles) northeast of Sakhalin Island, which will be piped to onshore facilities and chilled to convert to LNG for exports. Tokyo Electric has agreed to buy as much as 1.2 million tons a year of LNG from Sakhalin-2 for 22 years, according to Sakhalin Energy’s Web site. A majority of the 9.6 million tons a year of capacity is earmarked for Japanese utilities including Tokyo Gas Co., Chubu Electric Power Co. and Osaka Gas Co., with the rest supplied to Korea Gas Corp. and customers in North America. Gazprom owns 50 percent plus one share of Sakhalin Energy Co. Royal Dutch Shell Plc has 27.5 percent, Mitsui & Co. holds 12.5 percent and Mitsubishi Corp. has 10 percent.

Thursday, January 29, 2009

Gazprom to boost South Stream gas pipe capacity by 16 bln cu m

MOSCOW, January 28, 2009 (RIA Novosti) - The capacity of a gas pipeline designed to pump gas to the Balkans and other European states is expected to be boosted by 16 billion cubic meters annually, Gazprom Deputy Chairman Alexander Medvedev said on Wednesday. The first deliveries along the South Stream pipeline are scheduled to start in 2013. The project, expected to annually pump 31 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries, involves Bulgaria, Serbia, Hungary, Italy and Greece. "We are not only planning to launch the Nord Stream with a capacity of 55 billion cubic meters and the South Stream with 31 billion cubic meters capacity, but also to increase South Stream's transit capacity by another 16 billion cubic meters," Medvedev said in an interview with the international TV news channel Russia Today. The Nord Stream pipeline, which will pump gas from Siberia to Europe under the Baltic Sea, is being built jointly by Gazprom and Germany's E.ON and BASF and Dutch gas transportation firm, Gasunie, at an estimated cost of $12 billion. The Gazprom official said this move was economically justified. "Demand is available and it is more economical to have a gas pipeline with a capacity of 47 billion cubic meters instead of 31 billion cubic meters," Medvedev said. Gazprom is implementing the projects to build a gas pipeline under the Baltic Sea to pump gas directly to Germany and a gas pipeline under the Black Sea to pump gas to the Balkans and other European states to diversify its gas export routes, especially in the light of the recent gas row between Moscow and Kiev that saw gas transits to Europe suspended for two weeks.

Former German spy could be nominated to Gazprom board

Mattias WarnigMOSCOW, January 28, 2009 (RIA Novosti) - A former East German intelligence officer and managing director of the Nord Stream gas pipeline project could join the board of Russian energy giant Gazprom, a Russian paper reported on Wednesday. Matthias Warnig will be nominated to Gazprom's new board of directors, which will be elected on June 26, business daily Vedomosti said, referring to three sources: a Russian government official; an acquaintance of the Nord Stream head; and a manager of Gazprombank, a banking institution related to Gazprom. Gazprom sought and received Warnig's consent to be nominated, a source close to the Nord Stream managing director confirmed to the paper. The final list of candidates will be drawn up only late in the week, with nominations open until January 30, and approved by the current Gazprom directors on February 4, the paper said. Gazprom's and Warnig's representatives declined to comment on the information. Warnig, 53, is expected to be nominated by Gazprom and the paper said he could take the seat of the sole independent director, former finance minister Boris Fyodorov, who died in November in London. A former officer of the main intelligence service of East Germany, Warnig has been working in Russia since 1991. He held several posts at Dresdner Bank until 2005 and since 2006 has been the managing director of Nord Stream, the company that operates the project to build a gas pipeline under the Baltic Sea to pump gas from Russia directly to Germany.

Bulgaria Bills Gazprom

//Seeks Compensation for 19-Day Outage; Firm Blames Ukraine
01-25-2009 - Wall Street Journal by Jacob Gronholt-Pedersen - MOSCOW - Bulgaria said it will claim compensation from Russian gas monopoly OAO Gazprom for the losses it incurred during a 19-day Russia-Ukraine gas dispute that cut off supplies to Europe. Russian gas flow to Europe resumed this week after Moscow and Kiev signed a 10-year supply contract that the two parties insist will guarantee future shipments aren't interrupted. Bulgaria's Economy and Energy Minister Petar Dimitrov on Friday handed Gazprom's Deputy Chief Executive Alexander Medvedev an official request for compensation during talks in Sofia. Gazprom says it has no intention of paying and that Ukraine is to blame. The Ukraine government press office couldn't be reached for comment. Bulgaria's move suggests Gazprom will bare the brunt of compensation claims for damages that some of the worst-hit countries in Eastern Europe are estimating at hundreds of millions of dollars. Mr. Medvedev was scheduled to meet to discuss the same issue later Friday with Slovakia's Prime Minister Robert Fico, who said Slovakia's economy lost €100 million daily due to the stoppage in gas flows. Mr. Medvedev said Gazprom faced "force majeure conditions (that) made it impossible to fulfill our contract obligations. We did not have the physical possibility to supply gas to Europe." Some experts disagree with Mr. Medvedev, saying European importers have agreements with Gazprom, not with Ukraine. "All contracts say Gazprom has to deliver gas to a specific point west of Ukraine's border with the European Union," said Mikhail Korchemkin, an independent gas analyst based in Pennsylvania. It remains unclear whether Gazprom would legally be able to redirect claims to Ukraine, as the company's European export contracts have never been made public. Western European nations have so far been quiet on the issue of compensation, with many suffering far less than have the newer EU members. Some, including Italy and Germany, enjoy friendly ties with Russia and may not want to rock the boat too much, especially with projects like the Nord Stream gas pipeline -- set to bring Russian gas to Europe without passing through Ukraine -- important to longer-term diversification plans. European Commission President Jose Manuel Barroso indicated earlier this week that individual companies are free to sue Russia for the New Year disruptions.

Monday, January 26, 2009

Gazprom sends signal about Arctic offshore projects

Gazprom in Barents Sea2009-01-26 - BarentsObserver - Russian energy major Gazprom maintains that the Prirazlomnoe field in the Pechora Sea will be ready for production in 2011 and the Shtokman field in 2013. That is to be achieved partly with help from the Russia state. The company management in a meeting last week highlighted that it intends to meet set deadlines in the Shtokman project. The first gas from the field will be sent towards European consumers in 2013, a press release from the company reads. The Prirazlomnoe field – the first offshore oil field in the Arctic – is to be ready for production in 2011. The company management also stressed that the lobbying of federal ministries for offshore project support will be continued and that a programme on the training of specialist manpower will be elaborated. The press release gives a strong signal from the Russian gas giant about a continued high pressure on the Arctic. At the same time however, the company possibly also signals that adjustments will be made in the company’s plans. Gazprom states that adjustments will be made in the company’s long-term program on shelf development in the period until 2030. The character of the envisaged adjustments remains not clear, however. The company also confirms that it will prepare documentation on the development of shelf projects to the upcoming board meeting. Gazprom today has 13 licenses to offshore projects. In the period 2005-2008 the company boosted its offshore reserves with an additional 1,5 billion tons oil equivalents. In the period 2009-2020, the reserves are to be increased further with 5,6 billion tons of oil equivalents, the company informs.

Antitrust watchdog fines Gazprom

RBC, 26.01.2009, Moscow 16:51:46 – Russia's Federal Anti-Monopoly Service has fined Gazprom RUB 157.7m (approx. USD 4.79m) for creating economic and technological obstacles that prevented Trans Nafta from accessing the market of natural gas supply and transit to Tatarstan, the service's press office reported today. The Russian gas monopoly was also accused of discriminating against Trans Nafta in favor of other companies providing gas supply and transit to the republic, including those affiliated with Gazprom.

Gazprom refuses to pay compensation for gas crisis

EurActiv Logo26 January 2009 - EurActive - Gazprom will pay no compensation for recent gas supply disruptions to Bulgaria and Slovakia, the countries worst affected by the gas crisis, which affected Russian gas supplies to 18 European countries this winter, writes Dnevnik, EurActiv's partner in Bulgaria. Sofia had officially requested Gazprom to pay compensation to Bulgarian consumers. Bulgaria also asked the Russian energy giant to agree to receive lower prices for its gas to compensate for the delivery failures. Bulgarian Prime Minister Sergei Stanishev said last week that his country had failed to receive 123 million cubic metres of gas during the two-week crisis. Press reports estimated the compensation request to be worth some 100 million euro. Gazprom Deputy CEO Alexander Medvedev visited Sofia on Friday to reject the compensation demands, invoking 'force majeure' and blaming Ukraine for the disruptions. Gazprom estimates that its own losses from the supply stops will top USD 2 billion. "Ukraine is to blame for the cut-off in gas deliveries," Medvedev told Bulgarian Energy Minister Petar Dimitrov and the management of Bulgaria's Energy Holding. Gazprom's Medvedev also rejected a Bulgarian proposal to establish direct contact between the Russian gas giant and the Bulgarian government. Gazprom said it intends to pursue dialogue via Overgas, the main intermediary for Russian gas imports to Bulgaria and a company of which Gazprom owns a majority stake. After visiting Bulgaria, Medvedev flew to Slovakia, where he met the country's Prime Minister Robert Fico. Slovakia is also insisting that it must receive compensation for the losses it has suffered. But Fico wants the EU to reach a common position on any potential compensation for the gas crisis, according to press reports. Western European nations have so far remained quiet over the compensation issue. Many suffered far less during the crisis than the EU's newer members did, the Wall Street Journal writes. The daily further recalls that Italy and Germany enjoy friendly relations with Russia and "may not want to rock the boat too much". European Commission President José Manuel Barroso indicated earlier this week that individual companies are free to sue Russia over the disruptions. But asked during a recent interview with EurActiv about potential compensation for consumers following the gas row, Consumer Affairs Commissioner Meglena Kuneva said it would be "very difficult to solve the issue from a practical point of view".

Gazprom officials meet with Budapest ahead of Nabucco gathering

Gazprom officials meet with Budapest ahead of Nabucco gatheringJanuary 26, 2009 - Russia Today - Nations behind the Nabucco pipeline project are gathering in Hungary this week to discuss the 10 Billion euro scheme to reduce Europe's dependence on Russian gas. Just before their meeting, Gazprom's deputy chairman Aleksandr Medvedev visited Budapest to secure support for Russia’s new routes. Gazprom is on tour - around Europe. On the agenda - the aftermath of the gas conflict and new pipelines bypassing troubled Ukraine. Nord Stream running under the Baltic sea is already under construction, the work on South Stream - under the Black sea - kicks-off this year. Hungary says it supports the construction of South Stream and might sign a joint venture in the next two months. Janos Veres, the country's Finance Minister, says they want to diversify -- and not just transit. "Hungary remains committed to the diversification of the routes of gas supplies as well as of sources." On Tuesday Hungary hosts European and Central Asian officials to breathe new life into the Nabucco project. The pipeline bringing Central Asian gas through Turkey to Western Europe, bypassing Russia, is planned to carry up to 30 billion cubic meters of gas annually. But Experts say there might be not enough gas to fill the pipeline and to make the multibillion euro project profitable. Russia says it doesn't consider Nabucco a rival, according to Gazprom Deputy CEO, Aleksandr Medvedev. ”There is a phrase that ‘nature abhors a vacuum,’ but there have been some cases in history when pipelines have remained empty.” Gazprom Board Chariman, and former Russian Prime Minister, Viktor Zubkov was similarly circumspect about the Nabucco Project. “It may become a good monument to ambition and irresponsible decisions.” But experts say there might be not enough gas. Never before has something as mundane as pipelines attracted so much attention from so many politicians. Despite Russia's doubts about plans to bypass its pipelines, this week's meeting of Nabucco participants in Hungary will show whether the project which some dubbed "a dream pipeline" will come a step closer to reality.

Gazprom: South Stream gas pipeline project to go ahead despite world crisis

24 January, 2009 - Interfax-Ukraine - Budapest - The global financial crisis will not lead to either the scrapping or the delay of the South Stream pipeline project, a plan to transport Russian natural gas along the Black Sea to the Balkans and further to Italy, said Alexander Medvedev deputy chief executive of Gazprom. This year "is dedicated to preparing a feasibility study for all routes of the pipeline, [and] as soon as the feasibility study is finished it will lead to an investment decision," Medvedev told reports in Budapest on Saturday. "We have no major reason to put back the deadline for the implementation of the project," he said. South Stream is one of several pipeline projects designed to bypass Ukraine. Nord Stream, another Russian back project, envisions building a pipeline along the Baltic Sea from Russia to Germany and further to the United Kingdom. Russia's devastating financial crisis of 1998 did not stop another Gazprom project, Blue Stream, from coming into being, Medvedev said. "Blue Stream was put into practice at the peak of the crisis of 1998. Nothing can make a good project be canceled or put off," he said. Medvedev was speaking after he attended a meeting in Budapest of a Russian-Hungarian economic cooperation commission.

Kuwaiti Noor Invest. Co. sets up joint company with Russian Gazprom

KWUAIT, Jan 24 (KUNA) -- Kuwaiti Noor Financial Investment Company Noor Financial Investment Company said on Saturday that it has completed procedures for the establishment of a joint venture with Russia "Gazprom Giovezeka" of the Russian gas company Gazprom. The establishment of the new company comes as part of implementing an earlier agreement between the two sides which would set up two companies one in Russia and one in Kuwait under one joint company, Noor InvestNoor Invest Vice President and Member of Board of Directors Nasser Al-Murri told KUNA. Al-Murri said the joint venture in Russia will work under Gazprom company, one of the most specialized companies in oil and gas in the world and will control a share of 51 percent of its shares, while NoorNoor will control 49 percent of the shares. The joint venture, which will establish a similar company in Kuwait, will have 51 percent of its shares, while Gazprom holds 29 percent of the shares and the remaining 20 percent share will be for a Cyprus Silantro Holding Ltd company. The work of the two companies will focus on providing services in the area of exploration and pre-production, maintenance and repair and renovation activities of the oil and gas sector, Al-Murri said. The joint venture will also work to provide unique experiences, technology and economic know-how in Kuwait and other Gulf Arab states to support the exploration of oil and gas as well as increasing production capacity in these areas, Al-Murri added. The Kuwaiti official expressed pleasure for the joint venture in having an investment opportunity to work in Russia, as well as attracting Russian companies to work within the region.

Friday, January 23, 2009

Uzbekistan pledges gas to Gazprom

uzbekistanTASHKENT, Uzbekistan, Jan. 23 (UPI) -- Uzbekistan is prepared to sell 1.1 trillion cubic feet of natural gas to Russia in 2009, President Islam Karimov said during a meeting with Russian officials. Karimov told Russian President Dmitry Medvedev Friday his country would offer Russian gas monopoly Gazprom an initial volume of 565 billion cubic feet per year, "but we are ready to provide more," RIA Novosti reported Friday. Medvedev arrived in Uzbekistan Thursday to discuss bilateral relations in the energy sector. Gazprom, along with LUKoil, Russia's private oil and gas company, is active in energy-rich Uzbekistan. "Considering LUKoil has been granted permission to increase gas production in this country, we can supply another (530 billion cubic feet) of gas," the Uzbek president said. Gazprom chief Alexei Miller called Uzbekistan a "very important" partner for energy transits, adding the country is a potential host for future gas pipelines from Russia. Karimov said his country would sell gas exclusively to Russia, "while it is entirely up to Russia what to do with it next."

Gazprom lobbyist suspended from EU

GPlus EuropeJanuary 23 2009 - Financial Times by Joshua Chaffin - Gazprom’s Brussels lobbying firm has been suspended from the European Union’s lobbying register for failing to disclose the identity of three clients. GPlus Europe, one of Brussels’ most influential lobbying firms, is the first to be suspended from the voluntary registry, which was established in June to promote greater transparency about the role of lobbyists in EU decision making. The commission’s decision, communicated in a letter last week, does not imply any wrongdoing by GPlus or restrict its ability to operate. Peter Guilford, one of GPlus’ founders, said the firm had informed the commission in December, when it first joined the registry, that it had pre-existing confidentiality agreements with three clients, who did not want their names disclosed. Two of those clients are no longer represented by GPlus. “We’ve been super-transparent,” Mr Guilford said, noting that the clients in question included two trade associations and one corporation. GPlus has since published on its own website the information it submitted to the commission about its relations with Gazprom and dozens of other clients. The episode underlines the challenges of devising an effective lobbying registry. The EU plan calls for participants to disclose all their clients, and their respective payments within 50,000 euros. Since its launch in June, more than 800 firms have signed on. Yet lobbyists and even commission officials acknowledge that many others would be prevented from registering due to their clients’ concerns about privacy. “I think it’s an anomaly that needs ironing out when they review [the registry] in the summer,” Mr Guilford said. GPlus, a division of media giant Omnicom, was hired by Moscow after it received most of the blame for a 2006 gas dispute with Ukraine that disrupted supplies to western Europe.

Wintershall Draws Lessons from Gas Transit Spat

Dr. Rainer SeeleJanuary 22, 2009 - AFX News Ltd. - German oil and gas group Wintershall will press on with the Nord Stream gas pipeline plan under the Baltic Sea as it applies lessons learned in the Russia-Ukraine gas transit crisis, board member Rainer Seele said on Thursday. "We have to do our utmost to get clearance for the project. For our part I can say we will make our billions (of euros) contribution to it despite the finance crisis," Seele told reporters at an energy conference. "The safest transit country is the Baltic Sea." The 7.4 billion euro ($9.55 billion) plan -- shared by Wintershall parent BASF, E.ON Ruhrgas, Gazprom and Dutch Gasunie -- aims to create an alternative route to Ukraine for pipes to transport Siberian gas to Europe. It has been delayed for years as Nordic countries demand environmental impact probes but pressure to complete it is mounting as the Ukraine transit route has shown itself to be disruptible whenever Ukraine and Russia row over volumes and fees. Wintershall, which relies mostly on pipeline gas brought in from Russia, the North Sea, and other locations to supply its customers, would also take a fresh look at possibilities for liquefied natural gas (LNG) which is transported on special ships, Seele said. LNG makes consumers independent of transport via pipelines. Seele said he was still skeptical about LNG as an option for Europe, as there is not yet an infrastructure for it, but it was becoming increasingly important in the pricing of spot gas. "We will reassess LNG," he said. LNG is supercooled and regasified at points of consumption and quickly available. Seele -- who doubles as chairman of the Wingas trade unit, a 50/50 joint venture between Wintershall and Gazprom -- said the unit was on track to report a 2008 sales increase of 18.1 percent to 30 billion cubic meters, an all-time record and originally a sales target for 2010. He cited pricing strategies and success in wooing customers. Commenting on pending approval for a gas storage site in Britain's Saltfleetby, he said he was disppointed with the delays which already put back the start of construction by two years. A decision is due within a few days whether a new public hearing round also needed, he said. "It might take another year before we can start," he said. Unlike continental Europe, Britain does not yet have sizeable storage capacity to bolster supplies to the market in harsh winters or during transport crises. But a law stemming from the 1960s is holding up permissioning of the Wingas plan for the 400 million cubic meter storage site in Lincolnshire.

Gazprom 'to weigh up Sofia's claims'

01-23-2009 - Upstream OnLine - Russian gas giant Gazprom will look into Bulgaria's demands for compensation over the cut in Russian gas supplies in line with existing contracts, Gazprom's deputy chief Alexander Medvedev said today. Bulgaria's Economy & Energy Minister Petar Dimitrov submitted a letter to Medvedev, who arrived in Sofia today, demanding either direct financial compensation to affected industrial consumers or deliveries of gas at a discount price. Dimitrov told a joint news conference with Medvedev that a third option for compensation envisioned access to Russia's pipeline network for the possible transport of gas from third countries, possibly Caspian, at discount transit fees. Medvedev said he expected Gazprom would reply to the Bulgarian demand in two weeks. "The signed contracts between the supplier and the consumer clearly determine the conditions (for compensation)," he said, speaking through an interpreter. "We think force majeure conditions took place and we did not have the physical possibility to provide gas to Europe, including to Bulgaria," Reuters quoted Medvedev as saying. "Despite that we think the sanctions which we may bear might not fall under the force majeure conditions and that is why we are reviewing the possibilities with our partners of solving these issues strictly in line with the signed contracts." Medvedev said he did not see the need for Bulgaria, which is almost fully dependent on Russian energy, to transit gas from other countries as Russia had enough supplies. Gazprom declared force majeure on its exports to Europe via Ukraine on 13 January. The cut-off stemmed from a dispute between Gazprom and pipeline transit state Ukraine which affected roughly 20 countries. Russia and Ukraine have blamed each other for the cut-off. "Even if there are no formal legal grounds, it is in the interest of Gazprom and the good co-operation...compensations to be paid to gas consumers in Bulgaria," Dimitrov said. Bulgaria was left without any deliveries for 15 days and estimates direct company losses at about 200 million lev ($133 million). Dozens of companies had to shut down production and hundreds of thousands of consumers were also left without heating in the depths of winter, provoking widespread public anger and street protests in the European Union's poorest nation. "I would like to express my sympathy to the people and companies which have suffered from the gas crisis," Medvedev said. Dimitrov reiterated his country's demand to review supply contracts and remove intermediaries. Gazprom now delivers gas to Bulgaria via three distributors, which are controlled or partially owned by the Russian gas giant.

Thursday, January 22, 2009

Gazprom's Reserves on Arctic Shelf Grow

23 January 2009 - The Moscow Times - Gazprom said Thursday that its hydrocarbon reserves on its Arctic Shelf will increase by 5.6 billion tons of fuel equivalent between this year and 2020. Gazprom said Russia currently has around 100 billion tons of fuel equivalent on the enormous shelf, which covers many time zones and is partly frozen. Around 80 percent of these are gas. "In 2005-2008, Gazprom's reserves on the shelf grew by 1.5 billion tons of fuel equivalent as a result of geological exploration work," Gazprom said. "The expected growth of Gazprom's hydrocarbon reserves on the Russian shelf in 2009-2020 will be around 5.6 billion tons of fuel equivalent," it said. Rosneft and several other firms will also operate on the shelf. Last year, the total hydrocarbon reserves held by Gazprom rose by a record 10 percent after the government granted it 10 major gas deposits and its oil reserves were boosted.

'Gas row boosts Nord Stream plans'

01-22-2009 - Upstream OnLine - Germany's Wintershall will press on with plans for the Nord Stream gas pipeline, with board member Rainer Seele adding that the gas group will "apply lessons learnt from the Russia-Ukraine gas transit crisis". "We have to do our utmost to get clearance for the project. For our part I can say we will make our billions (of euros) contribution to it despite the finance crisis," Reuters quoted Seele as telling reporters at an energy conference. "The safest transit country is the Baltic Sea." The €7.4 billion ($9.55 billion) project - a joint venture between Wintershall's parent BASF, fellow German outfit E.ON Ruhrgas, Russian gas giant Gazprom and Dutch player Gasunie - will bypass Ukraine, bringing Siberian gas to Europe via a subsea link running under the Baltic Sea from Russia to Germany. It has been delayed after Finland, Sweden and the Baltic states have demanded environmental impact reports into the link, but pressure to complete it is mounting after this month's disruptions in supply via Ukraine. Wintershall, which relies mostly on pipeline gas brought in from Russia, the North Sea, and other locations to supply its customers, would also take a fresh look at possibilities for liquefied natural gas which is transported on special ships, Seele said. LNG makes consumers independent of transport via pipelines. Seele said he was still sceptical about LNG as an option for Europe, as there is not yet an infrastructure for it, but it was becoming increasingly important in the pricing of spot gas. "We will reassess LNG," he said. Seele - who doubles as chairman of the Wingas trade unit, a 50/50 joint venture between Wintershall and Gazprom - said the unit was on track to report a 2008 sales increase of 18.1% to 30 billion cubic metres, an all-time record and originally a sales target for 2010. He cited pricing strategies and success in wooing customers. Commenting on pending approval for a UK gas storage site at Saltfleetby, he said he was disppointed with the delays which already put back the start of construction by two years. A decision is due within a few days whether a new public hearing round is also needed, he said. "It might take another year before we can start," he said. Unlike continental Europe, the UK does not yet have sizeable storage capacity to bolster supplies to the market in harsh winters or during transport crises. But a law stemming from the 1960s is holding up approval of the Wingas plan for the 400 million cubic metre storage site in Lincolnshire.

Bulgaria plans to seek compensation from Gazprom

SOFIA, Jan 22 (Reuters by Tsvetelia Ilieva) - Bulgaria plans to seek compensation from units of Russia's Gazprom (GAZP.MM: Quote, Profile, Research) for losses caused by this month's cut in gas supplies, Economy and Energy Minister Petar Dimitrov said on Thursday. He told parliament the compensation for "direct and indirect" damages would probably be requested by the Bulgarian government, state news agency BTA reported. Under existing contracts, the Balkan country can seek financial and economic compensation from the three distributors, controlled by Gazprom, that deliver gas to Bulgaria, the minister said. Compensation claims have already been sent to one of the intermediaries while claims to the other two were being prepared and would be submitted in the next several days, he said. He did not give any financial or other details. A Gazprom spokesman declined comment. The three companies that import Russian gas to Bulgaria -- one of the countries worst hit in the Moscow-Kiev gas price row that cut supplies to Europe -- are Overgas, Wintershau and Gazpromexport. A spokeswoman for the Bulgarian-registered Overgas, 50-percent owned by Gazprom, said the company had not received any compensation claims so far and refused further comment. Bulgaria, almost fully dependent on Russian gas, was left without any deliveries for 15 days as a result of the cut-off, stemming from a dispute between Gazprom and pipeline transit state Ukraine, which had affected some 20 countries. The disruption left hundred of thousands in Bulgaria without heating in the coldest winter week in early January and forced dozens of factories to shut down production, causing direct company losses of about 200 million levs ($133 million). Russian gas started flowing via Ukraine to the rest of Europe on Tuesday after Moscow and Kiev resolved their dispute.

Nord Stream to pump EU gas by 2011, Russia says

German firm EUROPIPE has been making pipes for Nord Stream since 2007 21.01.2009 EUObserver by Philippa Runner - BRUSSELS - A major new gas pipe connecting Russia to Germany will be up and running by 2011 Russia predicts, with Paris expected to join Berlin in giving the scheme political backing inside the EU. "The need to diversify routes of supplying gas from my country to EU member states has been underlined by this crisis," Russia's EU ambassador, Vladimir Chizhov, told EUobserver on Tuesday (20 January), as Russia's transit deadlock with Ukraine came to an end. "The Nord Stream project will now be expedited and I believe that in early 2011 it will able to provide gas," he added. "The land sections of this pipeline are already built and pipes are being produced on a daily basis for the underwater section. There are special ships needed to lay those pipes and they will start doing that as Spring comes." Nord Stream is to bring gas from the Shtokman, Yuzhno-Russkoye and Prirazlomnoye fields in Russia to Greifswald in Germany, from where it will branch out west. German firms E.ON and BASF are major shareholders in the venture. But Germany alone has failed to overcome political objections from eastern EU states, such as Poland and Lithuania, which fear Nord Stream will enable Russia to cut off their gas in the event of a bilateral dispute. "It's a key Russian objective to bring France on board, to have a broad political coalition in Europe, not just Germany," European Council on Foreign Relations (ECFR) expert Pierre Noel said. "I don't know if they escalated this [Ukraine transit] crisis intentionally, but they want to solidify links with key partners in France, Germany and Italy and I think this crisis will achieve this." French diplomats declined to comment on the favourability of Nord Stream, beyond saying the Ukraine crunch "might speed up" construction. But the prospect of French firms with strong ties to the Elysee Palace joining the project makes political backing more likely. "We [are] interested in participation in Nord Stream under the condition we would be a partner and there would be contracts for extra gas supply in addition to whatever percentage we would have in the pipeline," a spokeswoman for Gaz de France told this website. French oil firm Total is already a major shareholder in the Gazprom-led consortium to develop the Shtokman field.
Russian circle closing -- Russia believes the Ukraine crisis will also increase backing for its South Stream project to bring gas via the Black Sea to Bulgaria, Greece, Austria, Hungary, Slovenia and Italy. The South Stream countries, together with Germany, have become known as the "Friends of Russia Club" in Brussels diplomatic circles, for their track record of backing Russian interests inside the EU, by - for example - blocking previous EU conflict resolution schemes for Georgia. "South Stream, when completed, together with Nord Stream, will provide a circle, a donut of energy security," Russia's Mr Chizhov said. "If the circle is broken at one point for whatever reason, be it political, technical, natural disaster or even terrorist attack - God forbid - the rest of the circle will work." Meanwhile, the EU's plan to pump Caspian Sea basin gas directly to Europe via Turkey - the Nabucco project - is fraught with political problems despite support from the Czech EU presidency.
Caspian black hole -- Nabucco is not commercially viable unless Turkmenistan joins EU-friendly dictatorship Azerbaijan to put gas into the pipe. But EU-Turkmenistan relations are in a black hole, with Russian influence pervasive in Ashgabat. The European Parliament remains unwilling to approve a basic EU trade agreement due to the country's egregious human rights record. The European Commission does not know if shootings in the country's capital last September, which killed around 40 people, were mafia-related or a failed coup. In this context, EU companies are happier to brave the Russian investment climate than to sign multibillion contracts to get Turkmen gas out of the ground. "Turkmenistan is nowhere near building a commercial gas relationship with the EU," the ECFR's Mr Noel said.

Wednesday, January 21, 2009

Gazprom reserves right to damages from Ukraine

RBC, 20.01.2009, Moscow 18:34:37 – Gazprom reserves the right to demand compensation for losses from Ukraine, Alexander Medvedev, deputy CEO of the Russian gas monopoly Gazprom, stated today. He said that while it was standard practice for a contract to work without failures, in the event of disputes the parties had the opportunity to resort to independent judges, and it would be strange for Gazprom to waive that right.

Gazprom says will not drop arbitration suits against Ukraine

MOSCOW, January 20, 2009 (Itar-Tass) - Russia's major producer and exporter of natural gas, Gazprom, will not drop lawsuits against Ukraine in the international arbitration court, Gazprom's Deputy CEO Alexander Medvedev told reporters Tuesday. "We reserve the right to demand compensation for the losses we've sustained," he said. "We can work fruitfully /with the Ukrainian side/ but this doesn't rule out litigations in the arbitration court," Medvedev said.

Recession could kill Eastern plans for liquefied gas

January 19, 2009 - - Canwest News Service by Marianne White - QUEBEC - The proposed liquefied natural gas terminals in Eastern Canada risk never seeing the light with the current economic crisis and plummeting energy prices, economists and analysts warn. The growing demand for fossil fuel drove Canada to jump into the race for liquefied natural gas (LNG) terminals to supply the U.S. Northeast market. It was also part of a plan to secure domestic supplies as gas stocks in Western Canada decline and demand grows. At the height of the enthusiasm for such projects around 2005, Canada had more than six proposals in Atlantic Canada and Quebec.
 The world's biggest natural gas producer, Russia's Gazprom, joined forces with Quebec's Gaz Metro, Alberta's Enbridge and Gaz de France to invest in the Rabaska gas terminal to be built on the south shore of Quebec City.
The world's biggest natural gas producer, Russia's Gazprom, joined forces with Quebec's Gaz Metro, Alberta's Enbridge and Gaz de France to invest in the Rabaska gas terminal to be built on the south shore of Quebec City.
Half of those have been mothballed recently for lack of supply and observers expect the remaining projects will be put on hold indefinitely, aside from the Canaport LNG terminal already in construction in Saint John, N.B. "All the other projects will be put on the back burner," anticipates energy economist Jean-Thomas Bernard from Laval University in Quebec City. He said energy prices and market conditions don't make it viable. "With the recent surge in gas prices in Europe and the extremely high prices in Asia, the gas will go there, not to North America where prices are rather low," he said. Unlike crude oil, the price of natural gas isn't equal all over the world. For LNG terminals in Eastern Canada to be profitable, prices would need to be higher on the receiving end than in Europe, Bernard noted. And he doesn't see that happening in the short or middle term. Quebec and Ontario are entirely dependent on natural gas from Alberta and if the demand starts to exceed the offer before LNG terminals are built, Bernard said prices are likely to go up. "We could see episodic surges," he said. The Canaport terminal is expected to begin operations in the second quarter of 2009. It will be the first regasification plant in Canada, sending out natural gas to both Canadian and U.S. markets. There are three other proposed LNG facilities on the Canadian East Coast, two in Nova Scotia and one in Quebec. There are also three projects in the works in British Columbia. One of the most controversial projects is Quebec's Rabaska. Opponents have underscored for years the risks of allowing big tankers carrying liquefied gas to enter the St. Lawrence River, just 10 kilometres downstream from the historical Quebec City that has been recognized as an international heritage site. While the UNESCO is studying their request to halt the project, opponents have found new hope in the collapsing economy. "The economic arguments don't stick anymore," stressed Jacques Levasseur, president of the opposition group Stop au Methanier. "Russia has made it clear the era of cheap gas is over," he added. The $840-million project is spearheaded by a consortium that includes the world's biggest natural gas producer, Russia's Gazprom. It joined forces with Quebec's Gaz Metro, Alberta's Enbridge and Gaz de France to invest in the Rabaska gas terminal to be built on the south shore of Quebec City. The promoters signed a letter of agreement with Gazprom last May to negotiate the supply of natural gas from the Shtokman gas fields in Russia. A deal was expected to be reached before the end of 2008, but the talks are hampered by the economic crisis. Rabaska's president Andre L'Ecuyer acknowledged Gazprom has been hit hard by the crisis and that its financial resources aren't quite the same as a year ago. "Some parameters of the agreement are more difficult to tie together. We are still negotiating but it isn't easy," L'Ecuyer said. Gazprom has to invest $18 billion on infrastructures to extract the gas from the Barents Sea, freeze it into liquid from and ship it to Quebec on tankers. Analysts think it's a huge investment Gazprom might not be able to make if energy prices remain low. The Russian giant lost $20 billion in 2008 because of plummeting oil and gas prices. Russia specialist and historian Tristan Landry noted that Gazprom is cash-strapped and was forced to halt all its infrastructure and development projects. Considering the hefty price tag attached to the Rabaska project, he thinks the Russian company will be tempted to drop that complex project first. "I think Rabaska will be dropped because it requires extremely costly infrastructures to turn the gas into a liquid form and if Gazprom has any money left, the company will favour the Bovanenkovo project," he said, referring to a Russian field in the Arctic Yamal peninsula that will be linked to a pipeline network. ut an expert on the world energy scene believes Russia and Gazprom probably have reasons other than just the economics to bring gas to Eastern Canada. "The Russians have every incentive to keep their end of the bargain," said John Foster, former lead economist at Petro-Canada and World Bank. The retired consultant noted that the Rabaska project would open the U.S. market to Gazprom. "The Russians want to have some diversification from Ukraine because they are enormously reliable on Ukraine to get their gas to Europe," he stressed, adding the current crisis between Russia and Ukraine exemplifies that. "There are geopolitical games at play and the battle for control of the energy resources is a great big one," he added.

Gazprom looks to make up lost ground after dispute

Gazprom looks to make up lost ground after dispute21 January 2009 - Russia Today - The two week-long gas dispute cost Gazprom more than $2.6 Billion in lost export revenues that the company plans to recuperate by the summer. Slovakia was the first to receive Russian gas two weeks after Ukraine shut off the transit pipeline. On Tuesday Gazprom shipped 350 million cubic meters of gas bound for Europe and 75 million cubic meters for Ukraine’s internal market. Kiev will pay an average annual price of 230 dollars per thousand cubic meters this year - 30 percent more than in 2008. And Gazprom CEO Aleksey Miller insisted Ukraine must pay on time. “The contract foresees a special mechanism in case there are failures in payment, or if no payments are made. If that happens, we will switch to a 100% prepayment from Ukraine. They will have to pay for gas a month ahead.” Market watchers took that as a sign that tensions remain in Russia Ukraine gas relations. Aleksandr Nazarov, Analyst at Metropol Capital also points to continued criticism by Ukraine’s president Viktor Yushenko of the contract signed by his political rival Yulia Timoshenko. “These two indicators make me believe that the conflict is not solved. The conflict is solved only in the part of continuing the gas transit to Europe. Regarding the Ukrainian consumption of gas, I expect more conflicts, more issues, maybe in the summer, maybe next year. But I am sure we will hear again about it in the next 12 months.” During the past two weeks of gas disruption Gazprom lost $2.6 Billion in export revenues. But the company hopes to recoup the money by summer according to Gazprom’s Deputy CEO, Aleksandr Medvedev. “But we do hope that the rest of the year we will be in a position to supply additional gas to our customers, and also to refill our underground storages, and the storages of our partners, which have been intensively used during this current crisis period. So we do hope that at least part of these damages could be partly compensated by additional deliveries to European customers.” The gas dispute forced Gazprom to cut production by 200 million cubic meters per day. As transit resumes, market watchers say Gazprom must restore full production as fast as possible.

Gazprom the Great

16 January 2009 - The Moscow Times-Reuters by Pavel Baev - The Russian-Ukrainian gas quarrel has become a farce. European monitors cannot establish whether the pipelines are blocked for two main reasons: Either Russia has manipulated the complex system of pumping stations, or Ukraine is simply incompetent in operating them. The points of disagreements between Gazprom and Naftogaz appear strikingly trivial in comparison to the damage that all parties continue to suffer. Prime Minister Vladimir Putin, who positions himself as the mastermind and micromanager of the "business dispute," is apparently enjoying every opportunity to demonstrate the ineptitude of his Ukrainian colleagues. It is too early for assessing the consequences, but one lesson looms large for the European gas consumers: More problems of this sort are surely in the making.
Although the European Union bureaucracy is traditionally slow in responding to these sorts of problems, it cannot afford to drag its feet on the gas issue. It is clearly trying to reduce the dependency upon Russia through diversification. Gazprom, however, does not seem to be worried about this potential danger, although it runs the risk of losing a considerable share of its pivotal market. This cavalier attitude from the state-controlled monopoly can partly be explained by the great distortions to political decision-making caused by the exploding economic crisis. At this point, however, Ukraine has more pressing, immediate concerns than its reputation as a transit country since it is faced with the very real prospect of an economic collapse.
Even in the best of times, forging a common energy strategy was a very complicated task for the EU. Now, in the midst of a global economic crisis when the EU member states are adopting individual stimulus packages, it becomes all but impossible. Putin has made sure that Germany, the most important country on his mental map and chief partner in the Nord Stream project, is not affected by the gas blockade because most of Russia's gas is transported to Germany through Belarus and Poland. With Germany leaning toward supporting Gazprom and France remaining largely neutral on the issue, Moscow doesn't expect the EU to develop a common position against Gazprom.
There are, however, deeper reasons for Moscow's readiness to take the toughest possible line in the conflict with Ukraine, and they concern midterm prospects for the EU energy market. The goals of a 20 percent reduction in total energy consumption and a 20 percent increase in the use of renewable sources by 2020 approved by the EU in December were dismissed by Gazprom as wishful thinking -- and it has some reasons to believe that it can throw its weight around Europe for many years to come. Gazprom understands that any EU attempt to shift from gas to coal would be sabotaged by the environmental lobby. It also understands that the high-cost EU projects for developing alternative sources will most likely be tabled as long as oil prices remain low. Finally, Gazprom is confident that replacing Russian gas with EU-based nuclear power plants is not realistic.
Obstacles to developing alternative energy sources for the EU are complicated by the fact that there are limited choices for alternative sources of gas. Norway and Algeria have limited resources and have no plans for increasing their exports. Qatar has more resources, but it is oriented toward China and other Asian markets.
Iran, which could potentially saturate the gas market, remains on the U.S. blacklist for investments. This prevents any European major energy company from developing Iran's vast gas resources. (Gazprom has expressed interest in joint projects, but it lacks capacity and expertise to change the landscape in any serious fashion.)
As for the much-debated Caspian alternatives, Russia has booked a significant portion of Turkmenistan's gas production and China has invested in the country's new gas projects for its own uses. Without Western investment in developing Iranian gas resources and with most of Turkmenistan's gas going to Russia and China, the Nabucco project, intended to transport Caspian gas to Europe via Turkey, makes little sense.
Moscow could be overconfident when it believes that Gazprom's dominance on the European market is unshakable, but the halt of deliveries has revealed a fundamental asymmetry in the long-existing interdependency. Many EU member states are very vulnerable to interruptions in gas flow, while Russia has reserves to compensate for delays in money flow. This position of strength established in the gas skirmish with Ukraine makes it possible for Gazprom to plan for the next battle -- challenging the EU over gas prices. The current formula for calculating gas prices on the basis of oil prices was established back in the 1980s, and Gazprom could insist on revising it. This behemoth of a company cannot exist on such a thin diet, so Putin needs to convince Germany and every other European consumer that the era of cheap gas is indeed over.
The EU has lost three years contemplating unfeasible propositions, ranging from the Nabucco pipeline project to wind farms across Europe. Nonetheless, there are still two plans on which it could move reasonably fast: constructing new storage facilities that would contain gas reserves for three or four months and building connections between isolated distribution systems in order to create an all-European gas network. That would not automatically strengthen the liberalization of the gas market, about which such national champions as Gaz de France or E.ON remain less than enthusiastic, but it would deny Gazprom the ability to put painful pressure on particular targets.
Putin radiates confidence that Russia is set to win this round of gas confrontation, but despite his self-proclaimed pragmatism he has neglected the importance of trust, respect and partnership. No price can be put on these values as you can with a thousand cubic meters of gas. It is up to the EU quiet bureaucrats, overworked commissioners and rotating presidents to make sure that Putin cannot get away with setting his own rules.

Tuesday, January 20, 2009

Gazprom turns on gas taps

20 January 2009 - Upstream OnLine - Russian gas started reaching Europe via Ukraine today for the first time since a contract row between Moscow and Kiev cut supplies to about 20 European countries two weeks ago. Slovakia, which borders Ukraine, said gas had started arriving, though Kiev said it could be up to 36 hours before supplies reach other parts of Europe, where some countries have been forced to ration supplies to customers. "Gas is not only flowing in the direction of Europe but it is flowing to Europe," Alexander Medvedev, Russian gas giant Gazprom's deputy chief exectuive, told a conference call with reporters. Ukraine confirmed it was receiving gas from Russia and said it would deliver it to Europe as quickly as possible. In European Union member Slovakia - which was badly hit by the cut-off and briefly considered re-starting a Soviet-era nuclear reactor - Economy Minister Lubomir Jahnatek said supplies had started arriving. The gas dispute had reflected political tension between Moscow and Kiev, with Russia opposed to formerly Soviet Ukraine's aspirations to join the Nato military alliance. Gazprom said that under the new contract Ukraine would pay $360 per 1000 cubic metres of gas in the first quarter of this year, a sharp rise on the $179.5 per Mcm that Kiev was paying for Russian gas last year. The new price is likely to come down later this year as gas tracks falling oil prices, but it could still be a huge burden for a Ukrainian economy struggling with debt and sharp falls in the hryvnia currency. Tymoshenko said on Monday she expected the average price over this year to be between $230 per Mcm and 250 per Mcm. 20 January 2009 - Upstream OnLine - Gazprom chief executive Alexei Miller warned if Ukraine were to fall behind in its payments, the company would raise the price and demand Kiev pay for all its gas in advance - sanctions that could cripple the fragile Ukrainian economy. Fears persist that bitter infighting in Kiev could cause the deal to unravel. Aides to Ukrainian President Viktor Yushchenko - a bitter rival to Tymoshenko - accused her of signing an agreement that would hurt the economy. But Yushchenko's deputy chief of staff Oleksander Shlapak said the president lacked the legal authority to annul the deal. "The prime minister has taken on herself all responsibility for these decisions," Shlapak said. Austria's OMV said Russian gas could reach its hub in Baumgarten, in the east of the country, on Wednesday. A Turkish Energy Ministry source told Reuters the flow of Russian gas via Ukraine into its pipeline system would begin on Wednesday and should be back to normal on Thursday. Russia will also resume pumping gas to Ukraine itself, cut off on New Year's Day and surviving on dwindling stockpiles. Oil prices fell to just over $33 a barrel today, partly in response to the resumption of gas supplies through Ukraine. The gas disruptions had driven up demand for oil products, used as alternatives to gas in heating and power generation. Even once flows to Europe resume, the effects are likely to linger. Russia's standing as an energy supplier is under renewed scrutiny and Europe is exasperated that its gas flows were blocked by squabbling between Moscow and Kiev. Russia provides about a quarter of Europe's gas requirements and pumps 80% of this via Ukraine. In Bulgaria, almost entirely dependent on Russian energy, many households were left without adequate heating and hundreds of companies have had to scale back production. "The impacts on the Bulgarian economy are catastrophic," Economy & Energy Minister Petar Dimitrov told Reuters in an interview. " ... the impact very much resembles that of a terrorist attack." The EU should let Bulgaria reopen two Soviet-era nuclear reactors to offset damage caused by the gas cut-off, he said. Russia cut flows to Ukraine itself on 1 January after the two sides failed to agree a 2009 supply contract. Six days later, export flows to Europe through Ukraine also ceased after Russia accused Kiev of siphoning off gas intended for export. Ukraine's pro-Western leaders denied stealing gas, and countered that Moscow was trying to blackmail European customers by halting gas supplies.

Texas wildcatter tussles with Russian bear

gavel17 January - Houston Chronicle by Loren Steffy - FORT WORTH — As a scion of one of Texas’ most famous wildcatting families, Dick Moncrief has seen his share of Oil Patch squabbles. Nothing, though, prepared him for the battle he’s been waging for more than a decade over a stake in one of Russia’s most prolific natural gas fields. It’s an epic saga, part Dallas and part Dostoyevsky. Moncrief’s grandfather, W.A. “Monty” Moncrief, made a fortune in legendary Texas oil plays like the East Texas field, and the Moncrief name is ensconced in the pantheon of Texas legends alongside the Hunts, the Basses and the Waggoners. Now, the family’s wildcatting prowess is being tested in state district court here, the latest in a series of legal battles over whether the Russian natural gas concern Gazprom violated a 1997 agreement that Moncrief claims granted his company, Moncrief Oil International, a 40 percent stake the Yuzhno-Russkoye Field in western Siberia. The field produces
 2.5 billion cubic feet of gas a day and has reserves of as much as 40 trillion cubic feet. Moncrief estimates his stake may be worth as much as $16 billion. “It’s one of those dream fields,” Dick Moncrief said. “That’s why we’ve fought so hard for it.” Moncrief’s company began operating in Russia in the mid-1990s, helping oil companies obtain financing for drilling projects. Moncrief claims his 1997 deal with Gazprom gave his company an exclusive and direct ownership interest in the Y-R Field, as it’s commonly known in exchange for a plan for developing the field and distributing its gas. At the time, Russia was looking for foreign expertise to bolster its domestic energy industry. It seemed a bold opportunity for U.S. companies. “People had high hopes for Russia,” Moncrief said. “It seemed like we understood each other.” That understanding crumbled. Gazprom’s management surreptitiously transferred Moncrief’s stake in the venture, including its development plan, to another Russian-controlled company, according to Moncrief’s suit. After Vladimir Putin’s election as Russian president in 2000, Moncrief hoped his company’s interest would be returned. Putin, after all, vowed to eliminate corruption. Although Gazprom officials assured Moncrief they would reinstate the Y-R Field venture, that never happened, Moncrief claims in the lawsuit. Instead, in 2005, Gazprom announced it had reached agreements with two German companies to develop the field and build a huge pipeline to it. Michael Goldberg, an attorney with the Houston office of Baker Botts, which represents Gazprom, disputes Moncrief’s claim of an ownership interest, noting that documents from an earlier case show the oilman was merely one of several potential investors. Gazprom is the primary natural gas supplier to Europe, and, as its recent showdown with the Ukraine demonstrates, it’s not afraid to hold the continent hostage to get its way. “Gazprom plays very rough,” said Craig Pirrong, a professor and director of energy markets for the Global Energy Management Institute at the University of Houston who also writes frequently on Russian politics and business. “Contracts are something they interpret in their own interests, and as options rather than commitments.” Moncrief’s battle is yet another cautionary tale for U.S. companies doing business in Russia. In recent years, larger companies lost struggles with the Russian government over control of oil ventures in Russia. Moncrief’s search for justice has been, so far, fruitless. He had little chance of winning a lawsuit in Russia because Gazprom is largely controlled by the government, and a case in Germany has stagnated. The earlier case in federal court in Fort Worth was dismissed over a lack of jurisdiction. In April, he filed suit in state court in Fort Worth, and although Gazprom appealed to the federal level, the case was returned in mid-December. Moncrief filed in state court because Gazprom opened a Houston subsidiary in 2006 to develop liquefied natural gas terminals. The LNG program, Moncrief said, was part of the development plan his company submitted for the Y-R Field. “Moncrief’s frivolous story changes every time he files the case,” Goldberg said. With the case cleared to proceed in state court, Moncrief’s attorneys could begin gathering depositions as early as this month. In an unusual twist, Moncrief has pledged $500  million of any judgment he gets to the University of Texas, his alma mater. Goldberg points out that federal Judge Terry Means in Fort Worth cited “persuasive arguments” by Gazprom even though he returned the case to state court. “We are confident that the state court will take this message from the federal judge and dismiss the case,” Goldberg said. Even if Moncrief wins, though, he may not be able to collect because Gazprom is likely to ignore a state court ruling, said Bruce Misamore, the former chief financial officer for Yukos, a private Russian oil company. Yukos filed for bankruptcy in Texas in 2004 to keep the Russian government from seizing and auctioning off the company’s major division, but the Kremlin ignored the filing. In other words, even all the determination of a legendary Texas wildcatter may not be able to overcome the lawlessness of Russia’s Wild West.

Merkel Urges Progress On Baltic Pipeline

January 16, 2009 - AFX News Limited – German Chancellor Angela Merkel said on Friday she was in favor of quick progress on the construction of the Nord Stream Baltic Sea gas pipeline. "Nothing at all has changed," Merkel told a news conference when asked whether a gas dispute between Russia and Ukraine had led to a change in plans. "We want it to be built quickly. We have an approvals process to complete. Politically, there is a commitment by the German government to this project. But we certainly can't wait for Nord Stream for gas." Merkel added: "I think it's also in Russia's interest for gas to be delivered to western Europe again."

Russia Is Trying to Get Gas to Europe

Alexander Medvedev16 January 2009 - The Wall Street Journal by Alexander Medvedev - European consumers of Russian gas could be forgiven for being frustrated and bewildered by the impasse which has prevented supplies from Gazprom being delivered to them in recent days. An agreement brokered by the European Union and signed on Monday by Russia and Ukraine ought to have ensured the resumption of supplies on Tuesday. For all the obfuscation surrounding the issue, the reason this has not happened is simple. Gazprom, as required by the agreement, notified Ukraine of its intention to pipe gas to European customers on Tuesday, Wednesday and again yesterday. We opened the taps to start the flow. The Ukrainian transit company, Naftogaz Ukrainy, refused to let the gas through, citing a flurry of contradictory reasons. First, it was claimed that we were deliberately using the wrong pipelines. Yet a glance at the map shows that we chose the normal routes to the neediest countries, namely Bulgaria, Moldova and Slovakia. Ukraine then claimed it could not send the gas onwards because there was insufficient pressure in the system to make it work. What Naftogaz failed to explain was that the reason there is insufficient pressure is because Ukraine illegally siphoned off the gas that was sitting in the pipelines when they shut down the export system. This gas was never intended for Ukrainian domestic consumption; it belongs to European customers. Having created the problem by siphoning off the gas, Ukraine is now demanding that Russia supply more gas, basically free of charge, to get the flow started. Theft is theft, whether it is gas or goods from a shop. Ukraine must put the gas back into the system. If it cannot because the gas has been consumed, then it should pay for the additional volumes they are asking us to supply. Ukraine claimed that Gazprom had to supply the gas needed to fuel the transmission system itself, the so-called "technical gas," for free. This is like a taxi driver asking you to pay your fare, and then driving you to the gas station and asking you to pay to fill up his tank. Then Ukraine said it would pay for the "technical gas" which would allow Europe to get the supplies it was due, but only at a price of its choosing and only when and if an agreement was reached on domestic Ukrainian supply, thereby holding European communities and businesses hostage in what should be a commercial discussion between two companies. We are more than willing to help Ukraine overcome its technical difficulties. Indeed, we have offered massive up-front payments to help Ukraine pay for its gas and restore its infrastructure. But we cannot just pump free gas into Ukraine's domestic system. This would be to condone state-sponsored embezzlement, something which EU countries, with their commitment to the rule of law, must surely abhor. All the more so as we still have no contract for the supply of gas to Ukraine itself. We are grateful for the EU's recent mediation efforts. But sometimes even the most scrupulous of mediators have to take a stand where flagrant breaches of the law are taking place. The roots of the gas transit problem lie, of course, in the still unresolved dispute over Ukraine's failure to pay for deliveries of gas for its own purposes. During 2008, Gazprom tried to settle the issue of Ukraine's gas debt to avoid an extreme situation at the end of the year when our supply contract expired. We are ready to resume talks at any time. Who stands to gain from this dispute? Not Gazprom: We are losing substantial amounts of money every hour and therefore have a keen interest in resuming deliveries to our European customers as soon as possible. Not Europe: Our partners are suffering from the lack of gas that they expect and we want to deliver. Our record for respecting our contractual obligations toward them is unrivalled in the gas industry. Under an existing bilateral transit contract between Ukraine and Russia and also under international agreements, Ukraine must guarantee the transit of Russian gas. According to Article 7 of the European Energy Charter, which it has ratified, Ukraine is obliged to provide unhindered transportation of energy resources through its territory. Ukraine is thus in flagrant violation of its obligations. What the world has witnessed recently is arguably the most serious breach of transit obligations ever, creating a stranglehold over the supply of gas to the whole of Europe. As winter bites across the continent, the most important thing is for our customers to receive their gas. We are doing everything in our power to minimize the side effects of Ukraine's illegal actions. We have increased gas supplies to European consumers through alternative routes and we are buying more gas on the spot market. But sadly, this isn't enough. The only way to alleviate the situation, and to avoid a humanitarian catastrophe, is for Ukraine to immediately open up the route to Europe. Mr. Medvedev is deputy chairman of Gazprom and director general of Gazprom Export.

Cost of gas dispute mounts for Gazprom, as customers look for other supplies

Cost of gas dispute mounts for Gazprom, as customers look for other supplies14 January 2009 - Russia Today - The shape of the European gas market could forever be changed in the aftermath of the gas dispute between Russia and Ukraine. The dispute has cost Gazprom as much as $1.1 Billion already in export earnings, and undermined its market share. Gazprom's attempts to recover an outstanding debt have led to a row that's caused it to lose over a billion dollars in export earnings according to CEO, Aleksey Miller. “Starting from the 1 of January Gazprom has lost 1.1 billion dollars of export earnings under gas supply contracts to Europe since January 1.” The EU's response to the Russia-Ukraine gas dispute has been to increase imports of alternative supplies according to Energy expert, Ian Cronshaw “Europe may import more gas - some of it may come as LNG, a lot of it will need to come by pipeline as well, obviously from Russia as it's the largest source, but from other resources such as North Africa and Norway.” Norway - which accounts for 16% of the EU's energy needs, was among the main beneficiaries of the gas stand-off - it's seen gas exports climb to record levels of more than 340 million cubic metres. Thats prompted speculation about long-term changes to the shape of the market. But Gazprom Deputy CEO, Aleksandr Medvedev, maintains it won't lose its piece of the pie. “Our long-term contracts will continue to work and what's going on cannot affect our market share.” Experts say that currently, alternative sources of supply can only complement deliveries from Russia, but not substitute for them entirely. Ron Smith, Head of Rsearch at Alfa Bank says that many alternative producers are already extracting gas at maximum capacity. “There's not much flexibility on the part of European consumers. They consume some gas from Norway, from Algeria and Northern Africa, but that was already the case, it's not that they've switched and replaced Russian supply, they can't do that. There's a limit to how much gas physically you can pull out either those areas. Norway is already producing as much gas as it can.” Whether Gazprom regains its position on the global market remains uncertain, one thing is clear. The more flexible the global gas market, the less ordinary consumers will be exposed to rows between suppliers and transit countries.

Gazprom looking to barter gas supplies through to Balkans

Gazprom looking to barter gas supplies through to Balkans14 January 2009 - Russia Today - Gazprom has made a last-ditch attempt to bring gas to thousands of European homes without heating. With Ukraine refusing to transit Russian gas, Moscow has proposed a new deal, involving the European Union. Moscow and Kiev have admitted they can no longer solve this dispute on their own. Near-bankrupt Ukraine wants 1.5 Billion cubic meters of gas from Gazprom free. Gazprom argues it is not a charity, but without that gift Kiev's won't carry out its transit contract. At its command centre in Moscow Gazprom shows Ukraine is not letting gas through. To up the pressure on Kiev, Gazprom has put together a barter deal with European leaders, according to CEO Aleksey Miller. Gazprom will give Ukraine 20 million cubic meters of gas for its population, and Ukraine will transfer the same amount across the border to Slovakia. Having failed to shame Kiev into cooperating, the EU would back the deal according to, monitor, Albert Grigorian. “In the situation we are today, it's maybe the best solution for these countries which are in difficulties. The situation in Moldavia and Serbia and Slovakia is very bad.” In the coldest winter this century, Russian Premier Putin says Kiev's taken Europe "hostage" - tens of thousands of Europeans have lost their central heating. Russian President Medvedev's convened a gas crisis summit of European states for Saturday. Ukraine has been invited.

E.ON heads EU monitoring team

e.on9 January 20098 - Upstream OnLine - Germany's E.ON Ruhrgas said it would lead a European Union team to monitor gas exports via Ukraine when supplies to Europe resume after they were halted in a row between Moscow and Kiev. Russia's state-controlled gas monopoly Gazprom said a deal to monitor gas exports via Ukraine would be signed today, allowing resumption of supplies to Europe. A spokesman for the Essen-based gas distributor said the first experts were starting work in Kiev at 1200 GMT today to watch gas transits on both sides of the Russian-Ukraine border, with E.ON Ruhrgas acting as a co-ordinator. The role of the group would be to supervise the transit flows of Russian gas through Ukraine, the spokesman said. The 20-strong team including four Ruhrgas employees would also include representatives of other big European gas players, including Eni, GDF Suez and the EU Commission. The spokesman stressed the role was not viewed as political. "It is a purely technical mission," he said. The brief was given to E.ON Ruhrgas, Germany's market leading gas supplier, by the EU Commission. E.ON Ruhrgas has a history of partnership with Russian gas suppliers going back to the early 1970s and its former managing director, Burckhard Bergmann, is on Gazprom's board. A statement from E.ON Ruhrgas said all its customers were still being supplied in full. Along with its German sector peers, E.ON got more gas from other origin countries, redirected more Russian gas via Poland instead of Ukraine and drew on underground gas storage. "We can make additional gas available in Europe, in concrete terms to Hungary, Slovakia and Italy. Since earlier today, Serbia is also getting some support shipment from E.ON Ruhrgas," the statement said. It said no Russian gas was arriving in Germany this morning via the Waidhaus border point on the Czech border, which serves as the hub for Russian volumes arriving that way. "Gazprom compensates us for parts of these shortfalls with gas via alternative transport points," said E.ON, alluding to the Yamal pipeline via Belarus and Poland.

Russia to restore gas under EU monitors

6 January 20098 - Upstream OnLine - Russia will resume gas exports to Europe as soon as EU monitors arrive at gas compressor stations along the route, Prime Minister Vladimir Putin said. "As soon as people show up there and really sit down and start working, gas will immediately resume flowing," Putin told reporters. Unfortunately, Gazprom boss Alexei Miller said that Ukraine had refused to sign a protocol allowing multi-lateral monitoring of Russian gas transit to Europe, further delaying supply resumption. "We had a real chance today to resume supplies. Unfortunately, it did not happen," he told reporters in Brussels. Russia, whose image is being damaged by the gas row, was prepared to pay Ukraine a transit fee of $3-4 per 1000 cubic metres over 100 kilometres, up from $1.70 now, Putin said. Putin, citing the "collapse" of authorities in Kiev and high-level corruption in Ukraine as reasons for the dispute, called on Ukrainian leaders to come to Moscow to sign a new gas deal, said a Reuters note.

Russia cuts off gas to Ukraine, ups supplies to Europe

MOSCOW, January 1, 2009 (RIA Novosti) - Russia cut off natural gas supplies to Ukraine on Thursday after last-ditch talks on a 2009 contract failed late on Wednesday, but increased shipments to other European states, gas monopoly Gazprom said. A similar dispute between the two ex-Soviet neighbors resulted in a brief cutoff of supplies to Ukraine in 2006, when shortages were reported in some Eastern European countries. Russia accused Ukraine of siphoning off Europe-bound gas. "Deliveries to Ukraine were cut in full at 10:00 a.m. on January 1," Gazprom said. Speaking at a news briefing at Gazprom's central office, spokesman for the state-controlled energy giant Sergei Kupriyanov said supplies to European consumers via Ukraine had been increased by 20 million cubic meters to 326 million a day, while supplies to Ukraine had been cut by 110 million cu m. Kupriyanov said shipments via Belarus, another major transit country for Russian gas, had also been increased by 20 million cu m a day. A spokesman for Ukraine's national oil and gas company Naftogaz confirmed that gas supplies had been cut. "We have noticed a reduction in pressure," Valentyn Zemlyanskiy said adding Ukraine was continuing to pump gas in transit onto Europe in full. Gazprom said on Wednesday Ukraine's Naftogaz had threatened in a letter addressed to the monopoly that it could start confiscating Russian gas meant for European Union consumers after January 1, if no new contract was agreed for 2009. The EU urged on Thursday both sides to engage in further talks. "All existing commitments to supply and transit must be honored," the EU president, the Czech Republic and the European Commission said in a joint statement. Frequent gas disputes between Moscow and Kiev have raised concerns in Europe about the reliability of Russia as a supplier. Ukraine transits about 80% of Russian gas, a major source of revenue for Moscow, bound for the EU. Europe buys a quarter of its gas needs from Gazprom. EU consumers have not reported a shortfall in gas deliveries so far. "Gas is being supplied in line with the contract, pressure in the pipeline on the Polish-Ukrainian border is within norm at the moment," Poland's state-run gas company PGNiG said. Kupriyanov said Gazprom had urged Ukraine to continue the talks, but said the Ukrainian delegation had not yet arrived. Moscow and Kiev have failed to settle their dispute over Ukraine's gas debt, which Gazprom puts at $2 billion, and over the price for next year. Gazprom offered Ukraine a price of $250 per 1,000 cu m for gas in 2009, about half the current average price in Europe. Ukraine, which paid $179.5 last year, said it was prepared to pay $201, however. The country's economy has been devastated by the ongoing global financial crisis. Russian Prime Minister Vladimir Putin said on television on Wednesday that the price of $250 was tantamount to "humanitarian aid" to the "fraternal" Ukrainian people as Russia would buy Central Asian gas it re-exports to Ukraine and other consumers at about $340 per 1,000 in 2009. Putin blamed political squabbles between Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko - both expected to run in presidential elections due late this or early next year- for failure to reach a timely gas deal with Russia. Tymoshenko was expected to fly to Moscow late Wednesday, but a source in Kiev said at the last moment that the trip had been canceled. "Tymoshenko was ready to fly to protect Ukrainian interests and to solve the gas issue in talks with Russian participants," a source in Kiev said. "The prime minister's trip to Moscow would have undermined the Ukrainian president's position." On Thursday, Tymoshenko's energy adviser said speaking live on Ekho Moskvy radio station in Moscow that the gas contract would be signed by Orthodox Christmas celebrated on January 7. "By Christmas we will have all the contracts signed," Oleksiy Hudyma said. "What is important that the process is continuing, the delegations are preparing for a meeting to carry on dialogue."

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