RUSENERGY

Law

The King of the Hill:
Russia’s New Mineral Licensing Model Is Tailor-Made for Vladimir Putin
The petroleum community had hardly enough time to get accustomed to the amended mineral legislation, in effect from May 5, when two weeks later a new series of amendments were adopted for the laws on continental shelf, subsoil and gas supply. The changes leave no doubt: the best blocks will be awarded to Gazprom and Rosneft by direct orders of Vladimir Putin and his Cabinet.

Natalya Timakova
© RusEnergy

Transportation

A Two-Way Switch:
Ukraine’s Controversial Pipeline Fuels Political Skirmishes
The Odessa-Brody pipeline is again in the center of a political scandal caused by recent disruptions of Russian oil supply to the Czech Republic. Russia’s prime minister blames Ukrainian president, who bashes the head of his cabinet, etc. The political battles do not add oil in the pipes that feed eastern and Central Europe, alas.

Mikhail Kroutikhin
© RusEnergy

Markets

Rigs for Pumps:
Gazprom Neft and KazMunaiGaz Negotiate Siberian Ventures
Russian and Kazakh oil officials are dividing their own and partners’ assets. The Russian need retail markets in neighboring countries, and the Kazakhs are looking in to explored, but untapped, oil reserves.

Sergei Gavrichev
© RusEnergy

Investment Rating

A Tricky Trillion:
Gazprom Will Hardly Raise Capitalization Unless It Stops Growth of Costs
Gazprom posted a significant growth of expenses this year. Even though the goals of investments are justified, experts are not sure the company will remain as profitable as it is today if it does not execute a better cost control. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) edged up by another 0.06% to 289.32.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Natural Gas

Custom-Made Access:
Gazprom Helps Oil Producers, Oil Producers Help Gazprom
Gazprom will be obliged to accept rules of non-discriminatory access to its pipelines by independent gas producers. In exchange, the gas monopoly may hope to see domestic gas prices accelerate their movement toward liberalization and reach the desired level in 2011 rather than in 2014 as the Ministry of Economic Development is planning. Free gas prices will be appreciated by both oil and gas companies. As usual, it will be the consumers who have to pay.

Natalya Timakova
© RusEnergy

Transportation

Port Swaps:
Russia Cedes Black Sea Oil Export Capacity to Kazakhstan
The largest oil exporters in the former USSR, Russia and Kazakhstan, have apparently divided European markets between them. The Russians focus on the Baltic Sea terminals and the Kazakhs operate via the Black Sea. Having passed the southern export capacities to Kazakhstan, Moscow will probably encourage the Kazakh exporters there with unidentified yet benefits.

Igor Ivakhnenko
© RusEnergy

Exploration

3D Chess:
Russia Adopts New Classification of Reserves
Minister of Natural Resources and Ecology Yuri Trutnev announced that a new classification of oil reserves would become effective from the beginning of 2009. The switch to a new system has been on the agenda for quite a few years, but even after the official launch it will take a long transitional period to become really operational.

Mikhail Kroutikhin
© RusEnergy

Natural Gas

Cash Test:
Pipeline from Central Asia to China Paves Way for Other Gas Transportation Projects in the Area
The construction of a gas pipeline from Central Asia to East Asia promises to be quick and costly. The project has got neither a feasibility study, nor a budget, nor confirmed gas resources—just the Chinese pledge of finance. Its implementation will show whether cash can solve geological, technical and marketing problems of the new transportation corridor.

Sergei Gavrichev
© RusEnergy

Investment Rating

Prince Igor:
It Is Vladimir Putin Who Makes Sechin’s Proposals Public
It was not the best week for a few majors including Gazprom, Gazprom Neft and TNK-BP. The industry as a whole, however, heard new promises of support from the government. The expectations have pushed down the summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA). It fell 0.11% to make 289.14.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Companies

The Vekselberg Defense:
The Quarrel with BP Helps Russian Co-Owners of TNK-BP Avoid Selling Their Stakes below Price
For a superficial observer, the conflict within TNK-BP does not involve the Russian government or its pet monopoly Gazprom. President Dmitry Medvedev and Gazprom officials vehemently deny any interference. Still, it is the looming shadow of the gas monster that makes the opponents of BP act in a reckless manner.

Natalya Timakova
© RusEnergy

Transportation

Pirated Oil:
Russian Transit Pipelines Face Competition of Caspian Shipping Companies
Changes are approaching in the pattern of oil transportation to the Black Sea. Some market players are in search of new routes, some look for new projects, and some want to change their profile. It seems to be a time for interesting events.

Igor Ivakhnenko
© RusEnergy

Projects

Steps, Not Leaps:
The Shtokman Project Makes a Slow Start
Gazprom's windowcase project in the Barents Sea seems to be moving ahead at long last. The understructure for an arctic drilling ring is being built in Vyborg. In August, the construction of the onshore LNG plant is scheduled to begin. Some experts, however, warn that the work may take longer than the planners expect.

Mikhail Kroutikhin
© RusEnergy

Natural Gas

Russian Rescuers:
Gazprom Helps Caspian Natural Gas Business to Prosper
Russia’s desire to keep Caspian gas exports under its control in a blessing for local producers. Gazprom promises to pay premium prices for Caspian gas, encouraging regional governments and investors to stop restraining upstream projects.

Sergei Gavrichev
© RusEnergy

Investment Rating

Exorbitant Expenses:
Oil and Gas Companies Lose Control of Operating Costs
Gazprom and TNK-BP cannot keep their costs under control: this is a conclusion industry observers made after scrutinizing the companies’ annual reports. To make it even worse, leading Russian operators—as well as Russia as a whole—post oil production decline against the previous year. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) fell 0.09% during the week and reached 289.45.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Politics

Not a Cartel:
Just Higher Natural Gas Prices
Officials of gas exporting nations vehemently deny accusations of a cartel conspiracy, but insist on linking natural gas prices to crude oil. The result is predictable: gas will get more expensive. The hyperactivity of major producers of natural gas is an indicator of their actual intentions.

Natalya Timakova, Marina Sysoyeva
© RusEnergy

Politics

Reluctant Liberalism:
Igor Sechin and Energy Ministry Charged with Keeping Oil Production from Decline
The Russian Ministry of Energy is gradually beginning to get involved in managing the national oil industry, but the future role of this agency is ancillary. The decisionmaking center is located in the office of Deputy Prime Minister Igor Sechin. The bureaucrats intend to encourage producers to keep oil flowing—and the petroleum community can use this chance to neutralize some part of the harm the industry suffered after the dismemberment of Yukos.

Natalya Timakova
© RusEnergy

Companies

Gas-Filled Reports:
Gazprom’s Plans and Reports Fail to Inspire Optimism
The annual general shareholders’ meeting of Gazprom convened in an enthusiastic atmosphere. Chairman Alexei Miller reported about successful discovery of new reserves, lauded the growth of his company’s market capitalization, and declared that Gazprom would be the world’s most promising gas producer for another twenty years. It is the role of a producer, however, that makes observes wonder about the declarations.

Politics

In Dubious Battle:
Oil Bosses of Kazakhstan Fight Each Other
A new round of redistributing ownership right in Kazakhstan has engulfed many influential persons. Industry bosses and local tycoons are not fighting for oil alone. Non-core assets are also at stake.

Investment Rating

Oilmen’s Failures:
Lukoil and Gazprom Neft Report Dusters
Lukoil admitted it had drilled a dry well at a Caspian offshore project, and Gazprom Neft abandoned two licenses on the Yamal Peninsula after earmarking them as unpromising. Still, positive news during the week helped the summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) to grow by another 0.05% to 289.72.

Taxes

The Lobby’s Revenge:
Kazakhstan’s Petroleum Community Defends Its Interests
The new version of the Tax Code is not going to make the life of Kazakh upstream operators as miserable as it seemed a few months ago. Many ongoing projects will retain their privileges and the informal leader of the industry Timur Kulibayev will go on defending the interests of the oil and gas community.

Law

Useful Ambiguities:
Russia’s Foreign Investments Law Contains Quite a Few Loopholes
The May 7 law on foreign investments, as well as the amendments to the subsoil legislation it has made, does not contain an unequivocal definition of a “foreign investor.” Legal inconsistencies and omissions may provoke ownership conflicts, but they may also enable lawyers to contest some provisions of the new legislation.

Transportation

The Generous Giant:
Gazprom Doubles Estimates of Pipeline Maintenance and Expansion Costs
Gazprom’s newly publicized plan of investments through 2020 envisages allocating half of all the money to upgrading and expanding Russia’s gas pipelines. The proportion is about the same as today, but the size of the planned budget shows that the figures are going to exceed the most optimistic forecasts of Gazprom’s own economists.

Exploration

Poor Riches:
Production Estimates in Kazakhstan ‘s Sector of the Caspian Sea Keep Falling
Investors are discouraged by exploration of the Bozashi zone in the Caspian Sea. The initial estimate, some 1.45 bln tons of oil equivalent, turns out to be an exaggeration: another wildcat is a duster.

Investment Rating

Ambition and Risk:
Gazprom’s Plans Are Enormous, but Hardly Realistic
Gazprom and TNK-BP have shared the title of the main newsmaker during the week. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) lost 0.02% to 289.58.