Russia 111215 Basic Political Developments

Activity in the Oil and Gas sector (including regulatory)

Russia to cut Jan oil export duty 2 pct to $397.5/T

http://af.reuters.com/article/commoditiesNews/idAFL6E7NF0Q020111215
Thu Dec 15, 2011 8:00am GMT

* Crude oil duty to be decreased from $406.6 per tonne in Dec

* Gasoline and naphtha duty to come in at $357.7/T

* Other refined products export fee to edge down to $262.3/T

MOSCOW, Dec 15 (Reuters) - Russia's crude oil export duty will be decreased from Jan. 1 by 2 percent to $397.5 per tonne from $406.6 in December due to lower crude prices, finance ministry data and Reuters calculations showed on Thursday.

This is slightly above the range calculated earlier this week.

The final oil export duty for January is based on the seaborne Urals URL-E crude average price from Nov. 15 to Dec. 14 inclusive.

Finance Ministry official Alexander Sakovich told Reuters the average oil price for this period stood at $109.09 per barrel, down from $111.17 in the previous time span. Urals closed at $106.21 per barrel on Wednesday.

The export rate is officially announced by the government at the end of each month.

The export duty on crude from some new fields in East Siberia -- apart from the Vankor, Talakan and Verkhechonskoye fields -- and the Caspian Sea, which enjoy a lower rate than Russian crude from other production areas, will be cut to $194.1 per tonne from $200.9 in December.

Earlier this week a government subcommission recommended to include Gazprom's Arctic offshore field Prirazlomnoye to this list of deposits with a preferential tax rate.

Exports of gasoline and naphtha, which are subject to a protective export duty to ease the domestic supply shortage, will carry a levy of $357.7 a tonne from Jan. 1, down from $365.9 in December.

The duty on other refined products, such as diesel and fuel oil, is to decrease next month to $262.3 per tonne from $268.3 this month. (Reporting by Olesya Astakhova; writing by Vladimir Soldatkin; editing by Andrey Ostroukh)

Russia confirms Bulgaria’s withdrawal from Burgas-Alexandroupolis pipeline

http://www.focus-fen.net/index.php?id=n266328

15 December 2011 | 09:52 | FOCUS News Agency

Home / World

Moscow. Russia’s Foreign Ministry confirmed it has received official notice from Bulgaria about country’s decision to give up on the Burgas-Alexandroupolis oil pipeline project, Interfax reports.
“The foreign ministry received an official notice from Bulgaria about country’s decision to terminate the intergovernmental agreement with Russia and Greece about the cooperating for the construction and exploitation of the Burgas-Alexandroupolis oil pipeline dated March 15, 2007,” the press office of the ministry announced.
Earlier Bulgarian Finance Minister Simeon Dyankov said that the government decided to give up on the project since it was unable to meet the financial conditions in the agreement reached in 2007.
Bulgaria proposes Russia and Greece for the tripartite agreement to be terminated at mutual consent. Otherwise Bulgaria will withdraw one-sidedly in 12 months.
DECEMBER 14, 2011, 9:10 A.M. ET

ONGC in Talks with Rosneft, Novatek for Russia Energy Assets

http://online.wsj.com/article/SB10001424052970204026804577098203298699204.html

By RAKESH SHARMA

NEW DELHI – Indian state-run explorer Oil & Natural Gas Corp.'s overseas investment unit is in talks with Russian companies OAO Rosneft and OAO Novatek to seek a greater share in energy assets there, India's foreign secretary said Wednesday.

"OVL [ONGC Videsh Ltd.] is keen to get involved in the development of Sakhalin-3 and they [OVL] are in discussions with Rosneft for this," Ranjan Mathai said at a news conference. "OVL is also in talks with Novatek to access gas deposits in the Yamal peninsula in the north eastern Siberian region."

Mr. Mathai was briefing the media ahead of Prime Minister Manmohan Singh's three-day visit to Russia that starts Thursday. Mr. Singh will be meeting Russian Prime Minister Vladimir Putin and President Dmitry Medvedev during his visit, Mr. Mathai said.

He didn't say if OVL would sign any deal with Russian energy companies during Mr. Singh's visit.

OVL holds a 20% stake in Russia's east offshore Sakhalin-1 oil and gas field, which is operated by ExxonMobil. Rosneft is exploring Veninsky licensed block of the Sakhalin-3 project, the Russian state oil producer's website showed.

Independent natural gas producer Novatek's Yamal LNG project holds the exploration and production license for the South-Tambeyskoye field, which has proved reserves of 418 billion cubic meters of natural gas and 15 million tons of gas condensate, the company's website showed. Novatek plans to start LNG production in 2016 and eventually reach production of 15 million tons a year.

OVL produced 9.45 million tons of oil and oil-equivalent gas in the year ended March 31, 2011. The New Delhi-based company aims to source 20 million tons a year from overseas assets by 2020, and is looking to pick up stakes in overseas exploration and production assets to realize the target.

Apart from its stake in Russia's Sakhalin, OVL also owns Russia-focused Imperial Energy, which it acquired in January 2009 for $2.12 billion to establish a presence in Western Siberia, one of the world's largest oil and gas producing regions.

OVL hasn't been able to ramp up production at Imperial as it seeks tax concessions from Russia to further invest in the field.

Mr. Mathai said the issue of Imperial's tax liability is under discussion. "The matter hasn't been finally settled and will continue to be raised and discussed with the Russian side," he said.

Write to Rakesh Sharma at [e-mail]

TNK-BP Raises Russian Retail Fuel Sales 25%, Vice President Says

http://www.bloomberg.com/news/2011-12-14/tnk-bp-raises-russian-retail-fuel-sales-25-vice-president-says.html
Q

By Jake Rudnitsky - Dec 14, 2011 7:27 PM GMT+0400

TNK-BP, BP Plc (BP/)’s Russian venture, expects to increase sales in its retail business by 25 percent to $8.8 billion this year, a company official said.

Fuel sales advanced 16 percent to 3.6 million metric tons, Alexander Nesterov, vice president for marketing, said today at a press conference in Moscow. The company opened 36 retail stations under its TNK and BP brands this year, bringing the total to 774 outlets.

TNK-BP’s retail operations are its most profitable business, Nesterov said. “There needs to be some motivation to expand in the retail business,” he said.

Earnings before interest, taxes, depreciation and amortization for those operations will be about $600 million, up 13 percent from 2010, Nesterov said.

To contact the reporter on this story: Jake Rudnitsky in Moscow at [e-mail]

To contact the editor responsible for this story: Stephen Voss at [e-mail]

Russia’s Lukoil to invest $900m in Ghana, Ivory Coast, Sierra Leone oil field projects

http://www.ghanabusinessnews.com/2011/12/14/russias-lukoil-to-invest-900m-in-ghana-ivory-coast-sierra-leone-oil-field-projects-2/
Page last updated at Wednesday, December 14, 2011 17:17 PM

Russian oil giant, Lukoil will be pumping up to $900 million into oil field projects in Ghana, Ivory Coast and Sierra Leone, the Russian Today news publication reported December 14, 2011.

According to the publication, investment in the new projects in Ghana and Sierra Leone has already increased 54% in the first nine months of the year (2011) and was about $205 million.

It cited Lukoil’s Vice Chief Executive Officer, Leonid Fedun, saying that the West African projects could yield up to six billion barrels of oil and gas.

Lukoil has 56.66% stake in Ghana’s Cape Three Points Deep Water with America’s Vanco Energy having 28.34% stake and the Ghana National Petroleum Corporation (GNPC) 15%.

On December 8, 2011, Lukoil together with Vanco and Petroci Holding announced a discovery of oil offshore Ivory Coast.

By Ekow Quandzie

LukOil Overseas agrees to reduce stake in Karachaganak field

http://www.stockmarketwire.com/article/4276559/LukOil-Overseas-agrees-to-reduce-stake-in-Karachaganak-field.html
14 December 2011 | 16:04pm

StockMarketWire.com - LukOil Overseas has agreed to transfer 10% of its interest in the Karachaganak oil and gas condensate field to Kazakhstan's state-owned KazMunaiGas.

LukOil is part of a consortium which has sold the interest for $3bn.

Of the total consideration, the contracting parties will be responsible for paying taxes worth $1bn to the budget of the Republic of Kazakhstan.

To finance the acquisition of the stake, the consortium will accommodate KMG with a loan of $1bn, on market conditions, to be repaid over a period of three years.

LukOil Overseas president Andrey Kuzyaev said: "The agreements reached will form a basis for a new stage in the development of the Karachaganak project, with greater investments, higher production and sales of gas, and with a longer plateau in the production of liquid hydrocarbons."

Russian shipyard starts building tankers for state oil firm

http://en.rian.ru/russia/20111215/170260341.html
10:34 15/12/2011

MOSCOW, December 15 (RIA Novosti)

A shipyard in Russia’s Far East has started building an ice-breaker tanker for the state oil company Rosneft.

Zvezda shipyard said this particular tanker was the first in a new series of “enhanced ice-class” tankers.

Two vessels will be delivered to Rosneft in 2013.

Each ship is expected to have a capacity of over 5,100 tons.

Novatek: down but not out

http://blogs.ft.com/beyond-brics/2011/12/14/novatek-down-but-not-out/#axzz1gaNmKeLh
December 14, 2011 6:33 pm by Isabel Gorst

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [e-mail] to buy additional rights. http://blogs.ft.com/beyond-brics/2011/12/14/novatek-down-but-not-out/#ixzz1gaNr53iY

Novatek, Russia’s leading independent gas company, appears to have everything it needs to succeed: huge gas reserves, low cost production, good management and strong political connections.

A strategic partnership forged with Total, the French oil major, this year to tackle Russia’s flagship Arctic liquefied natural gas development, only added to the rosy outlook: Novatek, already a star performer in Russia, would become a force in the global gas industry.

However, Novatek has taken a hit since protests erupted in Moscow last week in the wake of a controversial parliamentary election.

Investors have begun wondering if the friendship between Vladimir Putin and one of Novatek’s main shareholders is such a good thing after all and they have taken their concerns to the stock market. Novatek’s share price has dropped by close to 20 per cent in the week since the protests began.

“Novatek has unwittingly become the focus of political concern among Russian blue chips,” said Chris Weafer, chief strategist at Troika Dialog.

This goes to show that even a well run Russian company in an industry where the country has a strategic advantage is highly vulnerable to shifts in the political climate. Russia’s prime minister is still powerful, but he does not look invincible any more. By default Novatek is also weakened although not broken.

Novatek began life about ten years ago and quickly emerged as Russia’s leading independent gas producer seeing off competition from established oil majors such as Lukoil and TNK-BP that are increasingly turning their attention to gas.

In the competition for gas licenses, Novatek has, fared well scooping up huge reserves in the Yamal Peninsular in Arctic west Siberia, one of the world’s most promising gas provinces.

Last year Novatek produced 38bn cubic metres of gas – a tiny amount compared to Gazprom’s 508bcm – but enough to place it in the big league of global gas producers. If Novatek fulfils its goal to boost production to 112.5bcm in 2020 it could well become the world’s biggest producer after Gazprom.

Industry watchers say Novatek is well managed , but owes some of its success to the close ties between Gennady Timchenko, the Russian billionaire businessman and friend of Putin, who bought about 20 per cent of the company in 2009.

“Novatek’s strong position has been bolstered by Timchenko,” says Victoria Maisuradze, associate director at Moody’s rating agency. Putin has denied giving a leg up to Timchenko who controls Russian Gunvor, the world’s biggest oil trader.

Despite Russia’s vast gas reserves, most independent producers, given the chance, grumble about Gazprom’s monopoly of the industry. Gazprom refuses to share the lucrative gas export market with competitors and can use its control over the country’s pipeline network to decide which producer sells gas where and when.

Novatek has much less to complain about – Gazprom is one of its shareholder and has an interest in being cooperative.

Novatek may be going through a bad patch on the stock market, but it’s gas business in Russia is going well. Earlier this month Gazprom agreed to hand the company control of gas sales in the Chelyabinsk region in the Urals, one of Russia’s premium gas markets.

Customers in the area include energy guzzling industrial companies such as Magnitorgorsk Iron and Steel Company and Mechel, the metals and mining group, that pay a higher price for energy supplies than household users. The deal, according to Maisuradze, “highlighted the high level of political support Novatek enjoys in Russia and the company’s preferential position in collaboration with Gazprom,”

So it’s too soon for investors to pull out of Novatek and might even be a good moment to buy in.

“Novatek is still one of the main stocks to own in Russia and the political phobia that has knocked its value by one fifth has created a clear buying opportunity,” said Weafer.

Gazprom

Gazprom drops Austria from S.Stream gas route-source

http://www.reuters.com/article/2011/12/14/south-stream-idUSL6E7NE3XY20111214
Wed, Dec 14 2011

* South Stream to terminate in Italy

* EU blocked a Gazprom deal in Austria -Russian media

* EU-Russia summit begins Thursday

By Denis Pinchuk

MOSCOW, Dec 14 (Reuters) - Russia's Gazprom has picked Italy over Austria as the destination of its South Stream gas pipeline project, a source at the company said after reports the EU had blocked a Gazprom plan to buy part of a trading platform in Austria.

Local Russian media said the European Commission had blocked Gazprom's acquisition of a 50 percent stake in the gas trading platform of the Central European Gas Hub (CEGH) in Austria -- an outlet also coveted by the rival EU-backed Nabucco gas link.

One of the options for South Stream's route was to run from Russia under the Black Sea to the Balkans, with a branch passing through Austrian oil and gas company OMV's hub in Baumgarten.

"There will be no transit through Austria, only a spur will run to them," the Gazprom source told Reuters on Wednesday.

The source added that South Stream will terminate in Italy, rather than in Central Europe.

A Gazprom spokesman declined to comment.

Gazprom owns 50 percent of the project, while 20 percent belongs to Italy's Eni. France's EDF and Germany's Wintershall have 15 percent each.

GAZPROM UNDER PRESSURE

Gazprom's stance emerged a day before an EU-Russia summit in Brussels on Thursday where bilateral trade relations will be under scrutiny.

Gazprom, which supplies around a quarter of European gas imports, has been under pressure as Europe seeks to wean itself off dependence on Russian energy resources.

In September, Gazprom's European offices were raided by EU's anti-monopoly authorities in a wide probe into alleged breaches of competition regulations, while new energy rules aim to force the Russian company to "unbundle" its transportation capacity.

The company also faces strong rivalry in Europe from cheaper fuel sources such as liquefied natural gas and the spot market.

South Stream, with construction expenditure estimated at up to $15 billion, is expected to export 63 billion cubic metres (bcm) of gas to Europe starting from 2015, bypassing transit countries such as Ukraine and Belarus.

Gazprom said it would increase its gas exports to the EU next year to 164 bcm from the planned 152 bcm in 2011 after the November launch of the Nord Stream pipeline which runs direct from Russia to German under the Baltic Sea.

Analysts have criticised Gazprom for its spending spree on underwater sea links, designed to bypass transit countries that have in the past temporarily blocked Russian gas supplies to Europe due to pricing standoffs.

"It would be wiser to invest 3 billion-5 billion euros into Ukraine's gas system modernisation than plough 20 billion euros into South Stream construction," Troika Dialog analyst Valery Nesterov said. (Reporting by Denis Pinchuk; Writing by Vladimir Soldatkin; Editing by John Bowker and Anthony Barker)

South Stream will stay Southward

http://rt.com/business/news/south-stream-goes-italy-783/
Published: 14 December, 2011, 19:52
Edited: 14 December, 2011, 19:56

Russia’s Gazprom is to make radical changes to its South Stream gas pipeline project to Southern Europe.

The gas monopoly has decided to completely by-pass Austria’s East European gas hub (CEGH) and terminates the pipeline in Northern Italy. The proposed southern leg of the pipeline through Greece to Italy will be abandoned.

The changes mean Austria will no longer take part in the project, even though Gazprom and Austria’s OMV signed a joint venture agreement last year. As part of the deal Gazprom would have acquired a 50% stake in the CEGH.

The CEGH has large underground reservoirs, and already serves as a major transit point for Russian natural gas imported into Europe.

The European Commission wanted to block the deal, which the Deputy Chairman of Gazprom Alexander Medvedev described as ‘unacceptable’.

Austria has been actively lobbying for the rival European gas pipeline called Nabucco, which is aimed at reducing the reliance on Russian energy supplies.

The new route sees the South Stream pipeline going through Bulgaria, Serbia, Hungary, and Slovenia, finally ending up in Italy.

“The country that provides the route for Gazprom pipes can enjoy better development: may be some future discounts, may be some privileges etc. Obviously it’s a win-win situation. It’s a pure commerce and I think Italy in the way it finds itself right now may be offering Gazprom better rates”, says Vladimir Rozhankovsky at Nord Capital.

Bulgaria has confirmed its participation in the project, with the Government giving it national project status.

Greece, Serbia and Croatia, will be customers and have access to gas from the pipeline.