RUSENERGY

Markets

Refining Fever:
Volumes of Exported and Refined Crude Are Almost Equal in Russia
Regardless of the soaring crude prices worldwide, Russian companies are gradually shifting their aims to refining. The tendency may become even more pronounced if the US dollar regains its value and oil prices edge down. Gazprom may also add to the encouragement if it trims domestic supply of natural gas.

Yuri Kogtev, Ivan Yegorov-Tismenko
© RusEnergy

Projects

Pipes Galore:
Gazprom Wins Over New Allies for Its South Stream Project
Gazprom added Greece to the list of the countries that have agreed to participate in its pipeline venture in the south and keeps looking for more allies. The politicized gas transportation project is regarded as a replacement for the commercially unfeasible Nabucco, the pet idea of the European Union. However, the Russian concept of the pipeline seems to be poorly substantiated, too.

Mikhail Kroutikhin
© RusEnergy

Investment Rating

Changing Hands:
TNK-BP Shareholders Pay $2.4 Billion to Themselves
The 2007 dividend topped the topics of the short pre-holiday week. So far, Tatneft, Gazprom Neft and Lukoil are the leaders in terms of the dividend size, but they cannot even dream to compare with the dividend policy of TNK-BP in the first quarter. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) gained another 0.11% during the week and reached 289.88.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Downstream

Oriental Chemistry:
Arab Investors Want to Gain Access to Central Asia through Petrochemical Ventures
The desire of Central Asian government to develop the downstream sector inspires foreign investors to capitalize on it. Companies from Arab countries that came too late to get a piece of the area’s oil and gas riches after the demise of the Soviet Union are making attempts to enter through the back door, by proposing to carry out petrochemical projects.

Sergei Gavrichev
© RusEnergy

Taxes

Tax Collectors as Scapegoats:
Does Russian Fiscal System Impede Upstream Development?
Oil industry officials and a good number of politicians keep complaining about the heavy burden of taxes that allegedly prevent the Russian oil industry from rapid development. The Russian fiscal system is certainly far from perfect, but there evidently are other powerful factors than discourage oil business from investing on a large scale.

Mikhail Kroutikhin
© RusEnergy

Investment Rating

Courting the Shareholders:
Analysts Expect Gazprom to Assume Control of TNK-BP
The sale of a controlling interest in TNK-BP to Gazprom promises to become the event of the week for the Russian energy sector. Industry watchers regard the deal as possible and logical. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) gained 0.07% during the week and reached 289.57.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Transportation

Knotted Solution:
Kazakhstan Fine-Tunes Oil Export Projects
While the Caspian Pipeline Consortium’s negotiations in Moscow on the expansion of the CPC route are hardly moving ahead, Kazakhstan and Azerbaijan promote their own scheme of oil transportation across the sea. The scheme will take quite long to materialize, and this offers Russia with an opportunity to act before it is too late.

Sergei Gavrichev, Kulpash Konyrova
© RusEnergy

Natural Gas

Forever Gazprom:
Diversification of Suppliers Does Not Save European Gas Markets from Russian Domination
Desiring to alleviate dependence on Russian natural gas, Europe has opted for speedy expansion of LNG import facilities. However, the quicker the worldwide LNG business develops, the easier it will be for Gazprom and other suppliers to link the natural gas price to the price of liquefied gas. This means higher prices, whatever the source and form of imported gas.

Natalya Timakova
© RusEnergy

Politics

Under the Rug:
Rivalries in Kazakhstan’s Oil Lobby May Affect Foreign Investors
Having lost their informal leader last summer, the Kazakh oil industry officials began fighting each other to gain more influence. The battles go on against the backdrop of inconspicuous purges of the industry’s elite. In the mess, international companies’ projects may become hostage of political games.

Igor Ivakhnenko, Victoria Aleksandrova
© RusEnergy

Projects

Deadlines and Pipelines:
Modified ESPO Schedule Meets New Obstacles
The current version of the ESPO pipeline construction schedule defines the commissioning date as December 25, 2009, one year later than originally planned. Transneft officials, however, are still concerned about the viability of the deadline. They still expect the government to help them eliminate quite a few important obstacles.

Mikhail Kroutikhin
© RusEnergy

Investment Rating

Creating the Precedent:
Gazprom Will Get More Reserves without Bidding
It was the week of Gazprom. The monopoly obtained the rights to the Chayanda gas field without an auction or tender, reached an agreement on cooperation with the Libyans, and finalized the terms of acquiring petrochemical facilities in Tatarstan. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) grew 0.03% during the week and reached 289.38.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Dividing TNK-BP:
BP May Lose Kovykta but Get Gazprom as a Strategic Partner
Gazprom Chairman Alexei Miller has confirmed that his company would get the controlling interest in the Kovykta gas project soon. Industry observers, however, anticipate a series of consequent deals, which will result in splitting TNK-BP’s oil and gas assets and a formation of a joint venture between Gazprom and BP in Russia and, probably, in China.

Natalya Timakova
© RusEnergy

Projects

A Caspian Pearl:
Shell Intends to Merge Two Offshore Blocks in Kazakhstan
Shell has been nurturing the idea of merging two offshore blocks in the Kazakh sector of the Caspian Sea since a year ago. The company evidently wishes to both save on infrastructure costs and enhance its influence in the area.

Igor Ivakhnenko
© RusEnergy

Projects

Asset or Liability?
The Destiny of Gazprom’s New Acquisition in Yalutia Is Uncertain
The new acquisition of Gazprom, the Chayanda field in Yakutia, comes with a multitude of problem the gas monopoly will have to deal with before gas starts flowing from the wells. In any case, it would be premature to expect a very fast project, which in a long-term perspective targets gas markets of China and Korea.

Mikhail Kroutikhin
© RusEnergy

Natural Gas

The Asian Express:
Chinese Gas Pipeline in Uzbekistan to Be in Place in 2010
The planned Bagtiyarlyk-Urumqi gas pipeline from Turkmenistan to China project is moving ahead. One of the transit nations, Uzbekistan, has finalized an initial design and determined specific terms for the construction.

Igor Ivakhnenko
© RusEnergy

Investment Rating

Who’s the Best?
The Race of Rosneft and Lukoil Has Not Revealed the Winner Yet
The leaders of the industry Rosneft and Lukoil have published their 2007 reports showing that both are boosting revenues and controlling costs. It is still unclear which of the companies—public or state-controlled—is more efficient. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) grew 0.15% during the week and reached 289.30.

Konstantin Repin, Victoria Sadykova
© RusEnergy

Taxes

Trial Run:
Kazakhstan Introduces Export Tax on Oil
The export tax on crude oil, introduced in April, affects about half of this Caspian nation’s overall oil production. The government seems to be testing the industry’s survival powers.

Interview

Vertical or Pyramid?
Russian Oil and Gas Reserves Suffer from Domination of State Mega-Holdings in the Industry
The Russian government seems to be unaware of the fact that the time of state-controlled mega-holdings has passed and the remaining oil and gas reserves require custom-made taxes and small operators’ private initiative. This is what Valery Kryukov, Head of the Economic Issues of West Siberian Oil and Gas Development Section at the Russian Academy of Sciences’ Siberian Branch and the author of a proposed scheme of natural gas taxation, tells RusEnergy in an exclusive interview.

Companies

Thrifty Giant:
Gazprom Promises Upstream Funding Boost, Again
The Russian gas monopoly has announced an impressive program of capex for 2008-2010, promising to finance both ambitious pipeline projects and gas field developments. Experience shows that it is too early celebrate: previous annual programs tended to shrink significantly during the year.

Politics

The Big Purge:
Nazarbayev Trims Influence of His Son-in-Law
The allies of Timur Kulibayev, recently the most influential figure in Kazakhstan’s oil and gas industry, are losing jobs. The attack comes from Kulibayev’s father-in-law, President Nursultan Nazarbayev who apparently wants to nip all threats to his powers in the bud.

Investment Rating

Proven Stagnation:
Production of Russia’s Major Companies Kept Shrinking in March
March reports of oil producers have eliminated whatever doubts remained about the stagnation in the industry. Year-on-year production volume decreased 1.6%. Six leading companies posted negative growth figures, including Gazprom Neft, Slavneft and Lukoil. The summary index of Russian oil and gas companies’ long-term investment credibility rating (LICRA) retreated 0.22% during the week to 288.88.

Projects

Tax-Free Decade:
Uzbekistan Lures International Investors into Petrochemical Production
Uzbekistan has awarded the rights to one of its few largest remaining gas fields to a South Korean company. A major petrochemical facility will be built on the site. Tenders for contractors are already under way.

Exploration

State Matters:
Russian Government Boosts Exploration Budget but Discriminates Private Explorers
The government of Russian decided that its budget for geological surveys has to be almost doubled, to prevent decline of available mineral reserves and avoid a threat to national energy security. Paradoxically, new legislation is simultaneously adopted to restrict private investments in the search for reserves.

Politics

Polar Security:
NATO and EU Keep an Eye on Russian Politics in Arctic Waters
President Vladimir Putin is scheduled for the first time to attend the NATO summit in Bucharest on April 2-4. In addition to such controversial issues as the expansion of the North Atlantic bloc eastwards, the summit will address another topic, which is of interest both for Russia and other nations: disputed arctic waters. The attitude of Russia worries Western countries because the area may contain substantial energy reserves the world needs so badly.