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Russian Petroleum Investor
Insider Insight into the Russian/Eurasian Oil and Gas Markets
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Download PDF of October 2008 Issue of Russian Petroleum Investor
04 Nov 2008
Russia Concerned Over Decreasing Global Oil Prices
By Inna Gaiduk
Following summer records of almost $150 a barrel, oil prices have fallen to below $75. Global oil companies and OPEC countries have said only that unduly high prices were favorable to neither consumers nor producers of oil. However, Russian oilmen are more sensitive to the decline – their revenues will suffer much more than the profit of other extracting companies. The problem is the so-called “Kudrin’s scissors,” which essentially consists in delayed revisions of high oil export duties following sharp reductions in price. An acknowledgement of these concerns is the participation of Russian deputy prime minister Igor Sechin at the last OPEC meetings where members decided to cut production. Page 5 PetroNeft and Arawak Combining; Preparing for Sale?
By Elena Kirillova
Investors from Ireland and Canada have decided to begin joint oil production in Western Siberia. The stable position of Irish PetroNeft Resources in the Tomsk region has attracted Canadian Arawak Energy. However, “the agreement on joint work” unusually allows PetroNeft the right of priority in the operation of any joint projects with Arawak. PetroNeft also intensively searches for funding to allow project realization. A number of experts believe that the companies are already united, making it easier for them to find money for joint projects, given the difficulties resulting from the global financial crisis. Other analysts insist that such small joint projects do not live long. After increasing extraction to a level attracting the interest of larger companies, asset sales become possible. Page 11 LUKOIL and Conoco-Phillips Commission South-Khylchuyuskoye
By Svetlana Milyaeva
At the end of August, LUKOIL and its American partner ConocoPhillips officially commissioned the South- Khylchuyuskoye deposit located in the Timan-Pechora oil and gas province, northern Nenets autonomous region. The deposit start up, which will provide 7.5 million tons a year, is a very rare event for the Russian oil and gas sector. Investments for deposit construction, infrastructure and for the Varandei terminal have amounted to almost $5 billion. Russian oil companies say that they cannot finance such large projects without further concessions from the government. However, it seems oilmen are not likely to receive additional tax preferences. Page 16 JOGMEC Eyes Eastern Siberian Resources
By Elena Kirillova
As the commissioning of the first stage on the East Siberia-Pacific Ocean (ESPO) pipeline draws closer, countries of the Asian-Pacific region pursue a policy of strengthening their presence in Eastern Siberia. Japanese corporation JOGMEC
and Russian oligarch Oleg Deripaska’s En+ Group intend to participate in joint projects to develop oil and gas deposits in the Krasnoyarsk territory, the Irkutsk region and the Republic of Sakha (Yakutia), transporting the produced oil via the future ESPO. This is not the first project of JOGMEC in Russia. Last year, the company together with the Irkutsk Oil Co. created the joint venture IOC-North. In addition, JOGMEC has declared interest in joint work with Rosneft on development of deposits with extractable reserves of not less than 100 million barrels, located near ESPO. En+ Group became widely known in Russia after the company decided to buy a stake in RussNeft. However, the company has yet to receive permission for the purchase. Page 22 Russian Deposit Licensing Unresolved
By Svetlana Milyaeva
Through the entire summer and early September, only one subsoil user auction took place in Russia – for two blocks in the Far Eastern Jewish autonomous region. Rosnedra, the Federal Subsoil Use Agency, had planned auctions on 245 blocks in 2008. In September-December alone, the schedule had called for auctions on 193 blocks. This schedule is now unobtainable. What is going on? Is there a total termination of auction activity or have some circumstances interfered with the process? Experts identify the main reason for the decline in licensing activity as arising from complications in auction organizational procedures after acceptance of amendments to the federal law “About Subsoil.” Before conducting an auction, it is now necessary to receive the consent of each land user in the territory containing the potential license block. Page 28 Gazprom Neft Searches for Foreign Projects and Partners
By Inna Gaiduk
Gazprom Neft, the oil subsidiary of Gazprom, intends both to enter the international market and to become an international company. For this purpose, the company offered to global majors a swap of assets, while considering projects in Iran, Iraq, Venezuela and the countries of Africa – especially Nigeria and Libya where it would like to work as part of the Gazprom group. Gazprom Neft hopes to complete the purchase transaction of Serbian national oil company NIS, while preparing Caspian expansion in Kazakhstan and Turkmenistan. Starting in October, Gazprom Neft will begin oil deliveries to China via Kazakhstan. Page 34 Zarubezhneft Enters Kharyaginskoye PSA
By Elena Kirillova
The Russian government has supported state company Zarubezhneft in its move to enter into the Kharyaginskoye production sharing agreement (PSA) with French company Total (currently owning 50 percent), Norwegian StatoilHydro (40 percent) and the Nenets Oil Co. (10 percent). Zarubezhneft will conduct negotiations with the project’s foreign participants and coordinate the price. Recently Zarubezhneft, which earlier specialized only in foreign projects, has focused its interest on Russian territory. It not only has successfully participated in Nenets autonomous region auctions, but has also invited there its Vietnamese partner. In addition, the company plans to participate in auctions to receive block development rights on the coastal zone in the area of the Timan-Pechora shelf. Recent changes in the law “About Subsoil” prohibit auctions for shelf blocks and give the development rights only to state companies. So far, that means either Rosneft or Gazprom. Zarubezhneft plans to become the third company working on the Russian shelf. Page 40 News Briefs
Page 49 Corporate Briefs
Page 50 Statistics
Page 60 Conference Calendar
Page 55
Download PDF of September 2008 Issue of Russian Petroleum Investor
22 Sep 2008
Oil Companies Again Seek Tax Privileges
By Inna Gaiduk
After Russian authorities lowered taxes on the oil and gas sector, legislative initiatives emerged. The Russian Union of Industrialists and Entrepreneurs (RUIE) released suggestions from “the interested companies” on tax reform for the sector. Certainly, tax reductions will promote capitalization growth for the enterprises. At the same time, the main problem experienced by the government is that decreases in the tax burden have no certain program or systematic character. Page 5 YNAR Becoming Strategic Center for Russian Gas Extraction
By Sergey Konovalov, Deputy Governor of the Yamal-Nenets autonomous region
The Yamal-Nenets autonomous region (YNAR) plays a special role in providing Russian energy security. Concentrated there are vast energy resources, which for the next decade cannot be replaced in the Russian fuel and energy sector as there are no other significant oil and gas regions having the same explored mineral raw potential as YNAR. In addition to huge resource potential, YNAR today also has high industrial potential. Here are located the main deposits and units of Gazprom. Page 11 Repsol Wants to Join Rosneft on Sakhalin
By Inna Gaiduk
Gazprom has already given indication it wants to have a position in the Sakhalin-3 oil and gas project, where Rosneft and Chinese Sinopec participate on the Veninsky and Kirinsky block. Now, the Spanish-Argentine oil company Repsol YPF is negotiating with Rosneft to purchase 25 percent of the Veninsky block. The transaction would allow Repsol to compensate for losses in Latin America and Rosneft to lower risks in the project. However, there are other applicants for Veninsky. Rosneft had suggested Gazprom enter into Sakhalin-3. Mass media reports indicate that Indian NGC has applied for practically the same package. If Repsol will be able to purchase a Sakhalin-3 participatory share, it will be its second asset in Russia. In 2006, the company purchased 10 percent of the Swedish independent oil-extracting company West Siberian Resources. Page 17 Russian Moves in European Downstream Assets
By Elena Kirillova
LUKOIL and Italian ERG S.p. A. have declared creation of a joint venture through which LUKOIL will acquire 49 percent of the ISAB refinery complex on Sicily for a price of 1.3475 billion euros. The agreement ends ten years of LUKOIL attempts to obtain refinery capacity in Europe. Its subsidiary LUKOIL Eurasia Petrol A.S. has also concluded an agreement to purchase Akpet and its network of almost 700 gas stations in Turkey. Rosneft has offered European partners a joint project to develop an integrated approach from oil extraction to sale, likely to include transportation. Gazprom also plans to become one of the key players in the French energy market and may purchase large assets in France. Thus far, this remains in the planning stage. However, Gazprom Neft has not been able to close the transaction to purchase Serbian NIS, while Zarubezhneft is only now ending a major conflict with workers at its recently purchased Bosanski-Brod refinery in Bosnia and Herzegovina. Page 23 Shell Changes Approach in Russia
By Elena Kirillova
Royal Dutch/Shell has decided to reconsider the conditions of its participation in Russian business. The company has said that it has learned from its previous disputes with authorities. Those included the compelled sale of half its share in the $22 billion Sakhalin-2 project. The company is thinking about changing its form of cooperation with Russian-British company Sibir Energy, thereby preventing a similar fate as TNK-BP, where British and Russian shareholders have not agreed on company management. Shell has decided to reduce its half ownership in joint venture Salym Petroleum Development. Currently negotiations are underway on determining how to provide one of the participants in a future joint venture a controlling share holding, while the other would receive a blocking vote. Page 29 Shtokman Develops
By Elena Kirillova and Inna Gaiduk
Gazprom has begun construction in Vyborg on the first of two semisubmersible platforms for drilling wells at Shtokman.The Murmansk regional governor Yury Yevdokimov has declared that in the nearfuture work will begin on a plant to process and liquefy natural gas from the deposit. Meanwhile, Gazprom partners Total andStatoilHydro await economic estimations, scheduled for completion in September 2009, before deciding whether to remain in the project. And the Russian government has begun an unprecedented campaign of import replacement, intending a transition to Russian technologies and equipment. Page 34 Russian Companies in Venezuelan Agreements
By Svetlana Milyaeva
On July 22, Gazprom, LUKOIL and TNK-BP signed agreements with Venezuelan PDVSA on joint research at three promising deposits in Venezuela’s Orinoco Valley. These agreements were hardly unexpected – the companies have conducted business with Venezuela since 2005-2007. It was unusual, however, that the three companies signed simultaneously, and in the presence of the Venezuelan President Hugo Chavez and his Russian counterpart Dmitry Medvedev at that. Page 40 News Briefs
Page 44 Corporate Briefs
Page 45 Conference Calendar
Page 49 Statistics
Page 55
Russian Petroleum Investor Issue Archives
08 Jan 2008
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