Russia 101027 Basic Political Developments

For the Record

http://www.themoscowtimes.com/business/article/for-the-record/421187.html
27 October 2010

PODGORICA, Montenegro — Montenegro regained 29 percent ownership in the nation’s biggest aluminum smelter, which is majority owned by Oleg Deripaska, enabling the government to have one representative on the managing board with the right to veto some of the company’s decisions.

(AP)

Siberian Coal Energy Company, also known as SUEK, signed up on Tuesday for a loan backed by export revenue, now increased to $900 million, almost 30 percent more than it initially sought.

(Bloomberg)

The government may sell as much as 15 percent of Russian Railways shares in an initial public offering after 2013, Interfax reported Tuesday, citing company chief executive Vladimir Yakunin.

(Bloomberg)

Activity in the Oil and Gas sector (including regulatory)

11:50

Russian gas exports up 13.3% in 9 mths - Econ Ministry

http://www.interfax.com/news.asp

Rosneft Raises Crude Output Target as Quarterly Net Doubles

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afi90qah8q4I

By Stephen Bierman

Oct. 26 (Bloomberg) -- OAO Rosneft, Russia’s largest oil company, raised its output growth target for 2010 after third- quarter earnings beat estimates on tax-exempt production.

The Moscow-based company posted net income of $2.57 billion, up from $1.16 billion in the same period a year earlier. That beat the $2.38 billion average estimate of six analysts surveyed by Bloomberg News. Revenue climbed 19 percent to $15.5 billion.

“We can increase our estimated oil output growth target for the year from 4.5 percent to 5.5 percent to 6 percent,” Chief Executive Officer Eduard Khudainatov said in an e-mailed statement today.

Prices for Russia’s Urals export blend advanced 11 percent to an average of $75.64 a barrel in the third quarter, according to Bloomberg data. Rosneft boosted oil production 5.3 percent to 2.33 million barrels a day in the third quarter and oil-product output by 3.4 percent to 12.4 million metric tons.

“Ramping up Vankor was the key,” Ildar Davletshin, an oil and gas analyst at Renaissance Capital, said by telephone from Moscow. “Any positive news about an extension of tax relief for this field beyond this year would be a big catalyst for the stock.”

Discounted Tax

Production from the Vankor oil field that started in August last year reached about 264,000 barrels of oil a day as of September, according to the Energy Ministry’s CDU TEK statistics unit. Oil produced at the Vankor field was exempt from export duties, Russia’s most burdensome oil tax, until July 1 when the state imposed a discounted tax.

Rosneft pays almost no tax on oil exported from the deposit under discounted duties at prices of $60 to $70 a barrel, Peter O’Brien, Rosneft’s vice president for finance, said by telephone from Moscow.

Net debt fell 26 percent to $14 billion at the end of the third quarter, Rosneft said. That is about the net debt level Rosneft had before becoming the country’s biggest oil producer through the acquisition of bankrupt Yukos Oil Co.’s assets in 2007, according to data compiled by Bloomberg. Rosneft is “confident” about reaching its leverage target by the end of 2010, O’Brien said.

The company spent around $6.2 billion in the first nine months of the year and expects capital expenditure to be in the bottom end of a range of $9 billion to $10 billion by the end of the year, O’Brien said.

Rosneft will release a more complete set of results and hold an investor conference call on Nov. 2, according to the company’s website.

To contact the reporter on this story: Stephen Bierman in Moscow [e-mail].

To contact the editor responsible for this story: Will Kennedy at [e-mail].

Last Updated: October 26, 2010 10:25 EDT

UPDATE 1- Rosneft Q3 net more than doubles, beats forecast

http://af.reuters.com/article/energyOilNews/idAFLDE69P1O220101026
Tue Oct 26, 2010 1:54pm GMT

* Net income $2.57 bln vs $2.46 bln

* Q3 EBITDA up 26.8 pct to $4.64 bln

* Ups year-end production growth goal to 5.5-6 pct

*

By Jessica Bachman

MOSCOW, Oct 26 (Reuters) - Rosneft (ROSN.MM), Russia's largest oil producer, said on Tuesday third-quarter earnings more than doubled on record-high oil production rates, beating analysts' estimates.

The state-owned company, in which the government is looking to privatise 15 percent in coming years, said earnings rose to $2.57 billion from $1.16 billion in the third quarter last year. That was above the $2.46 billion analysts polled by Reuters had predicted.

Crude output rose 5.3 percent to 2.332 million barrels per day (bpd) from 2.214 million bpd in the same period last year.

During the first nine months of this year, output was up 7.5 percent on the back of rising production from East Siberian greenfields, prompting Rosneft to increase its 2010 output growth target.

"Our production intensification has allowed us to raise our output target for 2010 from 4.5 percent to 5.5-6 percent. That said, we are still the most effective company in terms of production costs," said the firm's president, Eduard Khudainatov.

The company also said it reduced its net debt to $13.95 billion from $15.8 billion in the second quarter. Capital expenditure during the third quarter was $2.32 billion.

Rosneft's vice president for finance and investment, Peter O'Brien, said he expects full-year capital spending at the low end of the $9 billion to $10 billion range the company set as its target.

The company said transportation costs for the first nine months of year rose by 36 percent to $5.2 billion, and tax payments equaled 49 percent of total revenues, compared with 45 percent.

"We paid $22 billion in taxes during the first nine months alone, which is almost 52 percent more than in the same period of 2009," said Khudainato

27.10.2010

TNK-BP, Ukraine To Cooperate In Gas Exploration

http://www.oilandgaseurasia.com/news/p/0/news/9289
TNK-BP and the UKrainian government will sign a memorandum of cooperation to explore for gas deposits at the conclusion of a Ukrainian-Russian intergovernmental meeting on economic cooperation, RBK reports.

At the same meeting, Russia and UKraine will sign an intergovernmental agreement on shipbuilding.

Copyright 2010, TNK-BP. All rights reserved.

TNK-BP Third-Quarter Net Rises on Inventories, Ruble (Update1)

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=ajJCb4dKJ5cI

By Stephen Bierman

Oct. 26 (Bloomberg) -- TNK-BP International Ltd., BP Plc’s venture with Russian billionaires, said profit rose 25 percent in the third quarter from the previous three months after selling inventories and benefiting from a weaker ruble.

Net income rose to $1.45 billion from $1.16 billion in the second quarter, the Moscow-based company said in a statement today. Compared with the third quarter of last year, net fell 14 percent from $1.68 billion, according to Bloomberg calculations based on information on TNK-BP’s website.

Sales rose 8.4 percent to $11.4 billion from the second quarter, Russia’s third-largest oil producer said. TNK-BP sold about 1.2 million metric tons of oil and products in the period that had been produced in the second quarter, according to the company.

The Russian currency weakened 0.9 percent in the quarter to average 30.6 rubles to the dollar, benefiting exporters with dollar-denominated revenue and ruble costs.

TNK-BP cut net debt about 26 percent to $4.29 billion as of Sept. 30 from $5.82 billion at the end of June, the company said. The company plans to take $1 billion from a credit facility in November, with no immediate plans to take the remaining $1 billion, Chief Financial Officer Jonathan Muir told reporters in Moscow.

Small Acquisitions, BP Stakes

TNK-BP is looking at small acquisitions in retail and natural-gas projects, Muir said. The venture agreed to buy BP’s stakes in some Venezuelan and Vietnamese projects for $1.8 billion on Oct. 18. BP’s partners in Vietnam have two months to decide on exercising their right of first refusal, Muir said.

The venture plans to reduce capital expenditures to $4 billion this year from an earlier planned $4.4 billion, because of lower ruble costs and delays at a Siberian project after failing to agree on access to an oil pipeline controlled by OAO Rosneft, Muir said.

Crude output was little changed at 1.53 million barrels a day, while gas output fell 16 percent to 182,000 barrels of oil equivalent a day, TNK-BP said. Prices for Russia’s Urals blend crude exports fell 1.7 percent to average $75.60 a barrel in the quarter from the previous three-month period, TNK-BP said.

TNK-BP International controls about 95 percent of OAO TNK- BP Holding, its Moscow-traded entity, and additional assets, including almost 50 percent of OAO Slavneft, a venture with OAO Gazprom Neft, and the Linik refinery in Ukraine.

TNK-BP said its ZAO Rospan International gas production unit agreed in September on gaining access to OAO Gazprom’s pipeline network for 6 years with volumes reaching 13.2 billion cubic meters a year in 2016.

To contact the reporter on this story: Stephen Bierman in Moscow [e-mail].

To contact the editor responsible for this story: Will Kennedy at [e-mail].

Last Updated: October 26, 2010 07:42 EDT

Higher output and prices push up TNK-BP sales

http://www.ft.com/cms/s/0/09ff1658-e134-11df-90b7-00144feabdc0.html

By Courtney Weaver

Published: October 26 2010 20:55 | Last updated: October 26 2010 20:55

Sales at BP’s Russian joint venture rose by more than 11 per cent between June and September on the back of higher crude prices and increased production.

TNK-BP said it was targeting production growth of 3 per cent for the full year and between 1 and 3 per cent in 2011 as it builds its presence with a series of small retail and natural gas acquisitions. This month, the company agreed to pay $1.8bn (£1.1bn) for BP’s Venezuelan and Vietnamese assets in its first move to expand abroad and could eventually acquire BP’s assets in Algeria.

Jonathan Muir, TNK-BP’s chief financial officer, said the company was at an “initial point” in discussions with BP regarding the Algerian business and confirmed the company would take control of the Venezuelan and Vietnamese production and pipeline facilities by June next year providing the oil group PetroVietnam and India’s ONGC did not exercise their rights to block the deals. TNK-BP said it would fund the new acquisitions itself.

Sales totalled $11.4bn in the third quarter, an 11.1 per cent increase from the previous year and an 8.4 per cent increase from the previous three months. However, net profit at $1.4m fell 13.7 per cent year-on-year on the back of higher transportation costs and tariffs.

Analysts said the results reflected the company’s improvement from the previous three months, with net profit rising 25 per cent quarter-on-quarter.

“[TNK-BP] has invested big time in greenfields in the past year and now they’re enjoying growth due to these previous investments,” said Lev Snykov, an analyst at VTB Capital in Moscow. He said it was unlikely ONGC and PetroVietnam would block the Venezuelan and Vietnamese acquisitions that were agreed to by TNK-BP and its parent company.

TNK-BP views the acquisitions as a means to fulfil its long-standing ambitions of international expansion.

Previously, BP’s Russian partners claimed BP was blocking TNK-BP’s global expansion during a feud between the two sides for control of the company.

LUKOIL says to invest $100 mln in Turkey in near-term

http://af.reuters.com/article/energyOilNews/idAFLDE69P2IS20101026
Tue Oct 26, 2010 7:18pm GMT

ISTANBUL Oct 26 (Reuters) - LUKOIL (LKOH.MM) plans to invest $100 million in Turkey in the near-term, the Russian oil company's president Vagit Alekperov told reporters in Istanbul on Tuesday.

The investment would take the form of expansion of its oil distribution network, oil terminals, and modernisation of its Izmit facilities on the Sea of Marmara coast.

Alekporov added, "We will also focus on our logistics and on projects with Iraq."

LUKOIL, Russia's No. 2 oil company has a large downstream presence in Turkey.

(Reporting by Evrim Ergin; Editing by David Gregorio)

LUKoil Output May Drop

http://www.themoscowtimes.com/business/article/lukoil-output-may-drop/421185.html
27 October 2010

Oil output from LUKoil may drop under its new 10-year strategy, as the company redirects investment to the Caspian region, Iraq and West Africa, RIA-Novosti reported Tuesday, citing chief executive Vagit Alekperov.

The company’s crude production will probably slump to about 90 million metric tons this year from 97.6 million tons last year, the agency reported. LUKoil plans to invest more than $10 billion annually over the next five to six years. 

(Bloomberg)

Sakhalin-1 Operator May Be Changed

http://www.themoscowtimes.com/business/article/sakhalin-1-operator-may-be-changed/421157.html
27 October 2010

Reuters

The ExxonMobil-led Sakhalin-1 oil and gas project could see a change of operator, Interfax quoted an official from Russia's budget watchdog as saying Tuesday.

"Today their [foreigners'] place may be taken up by Russian companies," Interfax quoted an Audit Chamber representative, Mikhail Beskhmelnitsyn, as saying, when asked whether he would rule out the possibility of dismissing Exxon as the project operator.

But he added that the chamber is not discussing Sakhalin-1's license withdrawal.

Exxon has long been in heated debates with Russian authorities and the state-run gas export monopoly Gazprom over gas sales from Sakhalin-1.

The project budget has also yet to be confirmed for this year.

Both Exxon and Japan's Sakhalin Oil and Gas Development Company, or Sodeko, hold 30 percent stakes in Sakhalin-1, whose three deposits hold an estimated 2.3 billion barrels of oil.

State-owned oil company Rosneft and India's ONGC own the remaining 40 percent.

Audit Chamber warns Exxon Neftegas over Sakhalin-1 spending

http://www.businessneweurope.eu/dispatch_text13311

RIA Novosti/VTB Capital

October 27, 2010

The Russian government may replace Exxon Mobil as operator of Sakhalin-1 oil and gas project for raising its spending to $95.3 billion from $42.8 billion for the period until 2055, Audit Chamber auditor Mikhail Beskhmelnitsyn said on Tuesday.

"In August 2010, Exxon Neftegas presented a long-term operation program, cost estimates for the full development of the field until 2055. A significant reduction in production is envisaged and at the same time spending rose from the planned volume of $42.8 billion to $95.3 billion. This is a growth of 120 percent ...compared to the costs envisaged in a feasibility study provided for the signing of the Production Sharing Agreement. This will lead to a significant reduction in the state's profit," Beskhmelnitsyn said.

"We have no irreplaceables, this is why any issues and proposals can be considered. Today Russian companies can replace (foreign firms)." The Natural Resources Ministry has also said the government and Exxon Neftegas were at odds over this year's spending and negotiations were difficult.

VTB: We believe a change of operator would not help the investment climate in Russian oil and gas. The most probable candidate for the position of new operator could be Rosneft. We’ve already seen similar situation in 2006 with Sakhalin-2 project, when Gazprom replaced Shell, which was an operator before. Yet it would be largely a formal development and would not affect valuation of Rosneft.

Gazprom

Gaz-System, Europol Gaz Sign Deal on Yamal Pipeline Management

http://www.businessweek.com/news/2010-10-27/gaz-system-europol-gaz-sign-deal-on-yamal-pipeline-management.html
October 27, 2010, 1:06 AM EDT

By Ewa Krukowska

Oct. 26 (Bloomberg) -- Poland’s pipeline operator Gaz- System SA said it signed a deal to take over the management of the Yamal natural gas pipeline from EuRoPol Gaz SA, a joint venture of OAO Gazprom of Russia and Poland’s Polskie Gornictwo Naftowe i Gazownictwo SA.

The deal, initialed on Oct. 18, will pave the way for the Polish energy regulator to officially name Gaz-System as the operator of the Yamal pipeline on the territory of Poland, the company said in an e-mailed statement today.

To contact the editor responsible for this story: Ben Livesey at [e-mail]

Gazprom Neft Launches Field http://www.energyintel.com/DocumentDetail.asp?Try=Yes&document_id=692072&publication_id=31 Copyright © 2010 Energy Intelligence Group, Inc.  (click for details) Wednesday, October 27, 2010

Summary
Russia's fifth largest crude oil producer, Gazprom Neft, has launched commercial production at its Ravninnoye field in the Yamal-Nenets region, in line with plans outlined earlier to boost oil output and offset current declines at mature West Siberian fields.