Russia 090508 Basic Political Developments

US-Canadian Shale Could Neutralize Russian Energy Threat To Europeans

http://www.sciencedaily.com/releases/2009/05/090507145745.htm
ScienceDaily (May 7, 2009) — Rising shale gas production in the United States and Canada as well as potential natural gas supplies from Iraq could be pivotal in curbing Russia’s ability to organize an “energy weapon” against European consumers, according to a new study released May 7 by Rice University’s Baker Institute for Public Policy.

The study, “Russia and the Caspian States and the Global Energy Balance,” examines Russia’s evolving energy relations with its Caspian neighbors, the Organization of Petroleum Exporting Countries and the West and considers potential scenarios for Russian and Caspian oil and natural gas strategies.

“Maintaining favorable tax conditions to support investment in onshore shale gas resources in the United States can play an important role of containing Russia’s leverage over an increasingly global natural gas market,” said Kenneth Medlock, a Baker Institute researcher and lead author of the study. “In addition to North American resources, our scenario analysis shows that there are several supply sources that can serve as viable alternatives to heavy future global reliance on Russian natural gas.” 

The level of investment made by small U.S. independent oil and gas companies could be negatively impacted by proposed new tax changes such as the abolition of IDC (intangible drilling costs) credits and adjustments in the depreciation allowance because in many cases, smaller drilling companies do not have the scale to absorb additional costs.

Medlock said that Russian efforts to organize a “gas troika” among three of the largest natural gas producers – Iran, Russia and Qatar – would result in all members of the troika losing significant market share over time with only minor, short-lived gains from higher prices. The development of alternative supplies from a variety of other sources, including North America, North Africa, Australia and Iraq, would serve as counterweights to attempts by the troika to exercise any market power.

“Ironically, Russia could be one of the biggest losers in this scenario,” Medlock said. Nonetheless, the Baker Institute recommends that the United States and Europe work together to promote the development of additional natural gas storage capacity (perhaps a strategic stockpile), particularly in Europe, to enhance energy security in the emerging global natural gas market. “Storage is vital to overcoming short-term market disruptions, but it is likely that market reform will be a precursor to substantially enhancing Europe’s storage capability,” Medlock said. The study also notes that concerns about the vulnerability of Eastern European countries such as Ukraine and Poland could be best addressed by helping to finance projects to diversify the natural gas supplies of those countries.  

The Baker Institute researchers recommend that the Obama administration consider new approaches to counter Russian interference in the energy sector of the Central Asian energy states and transit states in the Caucasus. The Baker Institute said U.S. diplomats should focus more on resolving territorial and ethnic conflicts in the region and on promoting overall energy market transparency and liberalization than on reviving stalled pipeline diplomacy.

“For all the United States’ good intentions, U.S. pipeline diplomacy has not managed to significantly reduce the dependence of Central Asian states on Russia to transport their energy supplies,” the study’s authors wrote. Although there was little damage to the U.S.-backed Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Erzurum pipelines that extended through Georgia during the Russo-Georgia war of 2008, the operation of Georgian ports was seriously disrupted, making apparent the risks that either accidental or deliberate damage could take place at Russian hands.

Adapted from materials provided by Rice University.

Gazprom

4-Year Novatek Deal

http://www.themoscowtimes.com/article/1009/42/376965.htm
08 May 2009 Bloomberg
Novatek has asked shareholders to approve a transportation contract with Gazprom worth 115 billion rubles ($3.5 billion).

The four-year agreement would allow Novatek to ship a total of 82.1 billion cubic meters of gas, starting this year, the company said on its web site.

Gazprom may cut output at least 10 percent this year as demand falls, the company said last week.

Population rejected Gazprom drilling plans

http://www.barentsobserver.com/population-rejected-gazprom-drilling-plans.4588348-116321.html
2009-05-07

Gazprom subsidiary Gazflot this week conducted public hearings on planned exploration drilling in the Taz Bay, a branch of the Ob River. The local population however wanted no drilling and rejected Gazprom's plans

The drilling in the area is planned held in a ten-day period this summer, Murmanchanin.ru reports.

However, the people who attended the hearing did not want any drilling in the area. In an unofficial vote, the locals turned down the plans.

Company representatives maintained that pollution from the drilling, to take place about 20 km from the river shore, will be insignificant. Gazflot also offers 345 million RUB of compensation over a five-year period to regional authorities

The hydrocarbon resources located under the Taz Bay are part of the the major West Siberian oil and gas resources.

Yamburg, Russia’s second largest gas field, is located near the bay.

Firtash's Firm Fights To Recover Emfesz

http://www.themoscowtimes.com/article/600/42/376967.htm
08 May 2009

By Anatoly Medetsky / The Moscow Times

A company controlled by Ukrainian businessman Dmitry Firtash said Thursday that it was fighting to recover control of Emfesz, a major Hungarian gas distributor, from a mysterious firm called RosGas that has been linked to Gazprom.

Mabofi Holdings Limited, registered in Cyprus, said it discovered Wednesday that its 100 percent interest in Emfesz had been "fraudulently" transferred to the Swiss-registered RosGas.

"There is no information available as to the beneficial ownership of RosGas," Mabofi director David Brown said in an e-mailed statement.

Emfesz managing director Istvan Goczi said last week that Gazprom controlled RosGas, Reuters reported.

A Gazprom spokesman declined comment Thursday. Gazprom has previously said it had "nothing to do with" RosGas.

Mabofi, part of the Group DF that holds Firtash's business assets, accused Goczi of pulling off the transaction by using his power of attorney, given to him in October 2004, to buy Emfesz.

"Neither Mabofi, Group DF nor any of the senior management of the group had any knowledge of this transaction and have given no approval whatsoever," Mabofi stated.

The Hungarian authorities registered the deal, the company said.

Mabofi is taking steps in Hungary, Cyprus and Switzerland to defend its rights to the shares and "is confident that the ownership of Emfesz will be restored to its rightful owner as soon as possible," it said.

Group DF is also in the process of removing Goczi from its board of directors.

Mabofi said one of RosGas' directors was Tamas Gazda, a Hungarian lawyer formerly employed by Emfesz.

RosGas first surfaced last week when Emfesz, which controls 20 percent of Hungary's gas market by importing some 3 billion cubic meters of the fuel per year, identified the company as its new supplier. The previous supplier, RosUkrEnergo, had difficulties getting gas out of Ukrainian storage facilities, Emfesz said.

Firtash owns 45 percent of Swiss-registered RosUkrEnergo, where he is a partner with Gazprom, which holds another 50 percent of the trader. Gazprom, however, excluded RosUkrEnergo from the trade with Ukraine starting in January.

Ukraine seized more than 11 bcm of RosUkrEnergo's fuel following a January dispute with Russia over gas transit to Europe. Afterward, Poland also stopped receiving deliveries from RosUkrEnergo, which insists that it still owns the gas in Ukraine.

The Emfesz affair could be another sign of a strain in relations between Gazprom and Firtash. Goczi helped Gazprom to take Emfesz away from Firtash, a Gazprom source said, Vedomosti reported Thursday. Gazprom is eyeing Bulgaria's Overgas, which it owns 50-50 with Bulgarian businessman Sasho Dontchev, as a new owner for the Hungarian trader, the source said.

Gazprom, Eni disagree over South Stream role

http://www.guardian.co.uk/business/feedarticle/8495354

Reuters, Thursday May 7 2009

By Alberto Sisto

ROME, May 7 (Reuters) - A dispute has erupted between Italian oil major Eni SpA and Russian state-controlled Gazprom over the role Eni will play in the South Stream gas pipeline, an Italian government source said on Thursday.

The Gazprom-led project aims to bring Russian, Caspian and Central Asian gas to Europe and is a rival to the European Union-backed Nabucco pipeline, which aims to reduce European reliance on Russia for its energy supplies.

Eni and Gazprom are 50 percent partners in the company which is conducting feasibility studies for the pipeline, but the Italian oil and gas producer's final role in the pipeline has not been defined.

The government source said Eni wants to be able to market gas from the pipeline in the countries the pipeline will pass through but that Gazprom was only offering the right to bring gas into Italy and a role in managing the pipeline.

"The Italian group wants to enter into the second phase of the project, that of selling the gas in the countries the pipeline will pass through... the Russians are putting up opposition, the talks are, however, still fluid," the source said.

Eni did not want to comment. A Gazprom spokesman declined immediate comment.

The Italian Prime Minister Silvio Berlusconi and his Russian counterpart Vladimir Putin are slated to meet at Sochi in Russia on May 15.

A previous meeting in April, when a statement on South Stream was expected, had been cancelled because of the Italian earthquake in Abruzzo.

The disagreement is the latest setback for the project, which had appeared to be speeding ahead of Nabucco, following Nabucco's difficulties in securing gas supplies.

On Wednesday, a source familiar with the situation said plans for Russia and the transit countries to sign an agreement on South Stream next week in Sochi were in doubt after the parties failed to agree on terms.

However, Serbian state gas company Srbijagas will sign a deal with Russia's Gazprom on May 15 on Serbia's participation in the South Stream gas pipeline, a spokesperson with Serbia's Energy Ministry said on Thursday.

No one from the Slovenian Ministry of Economy, which is in charge of the South Stream pipeline in Slovakia, will attend a signing ceremony in Sochi next week, an official said.

Eni and Gazprom have signed a series of Memoranda of Understanding on the development of the South Stream project since 2007.

South Stream will pass under the Black Sea and through Bulgaria, Serbia and Slovenia to Austria.

(Additional reporting by Tom Bergin in London; writing by Stephen Jewkes and Tom Bergin; editing by Simon Jessop)

Politika: 400 km of South Stream to run through Serbia

http://bsanna-news.ukrinform.ua/newsitem.php?id=9101&lang=en
BELGRADE, May 7. (Tanjug).
The length of the South Stream gas pipeline stretch that will run through Serbia will be about 400 kilometres and its capacity will be over 10 million cubic metres, meaning that the pipeline will not just barely touch Serbia in the part close to Romania, the Belgrade daily Politika reported on Thursday, conveying the stand of its sources that are taking part in the negotiations on the issue.

Pointing out that what we had here was a highway gas pipeline project, the source said that what was also encouraging was the statement by Bulgarian Prime Minister Sergei Stanishev who had confirmed, following his last-week visit to Moscow, that the two governments had reached agreement on the long-awaited South Stream project and that Gazprom and Bulgargaz, a Bulgarian state-owned company and not Overgaz (Gazprom's sister company), would sign the agreement in the course of two weeks.

The Belgrade newspaper also reports that the contract on the setting up of a joint company for the construction of the South Stream gas pipeline, which Gazprom and Srbijagas are due to sign by May 15, is a document which will confirm that the new Serbian-Russian company will be seated in Switzerland and that it would draft a feasibility study on the profitability of the job.