State Share in the Form of Natural Gas

Excerpt from the current issue of Russian Petroleum Investor by Inna Gaiduk and Elena Kirillova

Before his visit to Japan, Russian Prime Minister Vladimir Putin visited the Primorye territory. At a meeting with the governor Sergey Darkin, he announced the signing of a government decree providing that the share received by Russia from the production sharing agreements (PSAs) for the Sakhalin 1 and Sakhalin 2 projects should be received in the form of natural gas. That gas, he said, would supply Primorye, particularly Vladivostok. To make this arrangement effective, local and regional authorities must make the necessary decisions regarding low-pressure gas networks to ensure their smooth operation.

Earlier, deputy prime minister Igor Sechin reported that at its April 11 meeting the government considered the realization of gas projects in the Far East. In particular, discussion involved the idea of granting to Gazprom the right to be the authorized organization for royalties and shares in the Sakhalin-1 and Sakhalin-2 projects.

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Azerbaijan: Avoiding the Crisis and Increasingly Optimistic

Excerpt from Caspian Investor by Ilya Kedrov

During the first quarter, Azerbaijani authorities recognized development in both the domestic economy and the oil and gas sector. Successes included a 63 percent increase in domestic investment, growth in natural gas production, the rapid commissioning of two new offshore rigs at the “Oily Rocks” deposit, restoration of oil production at Azeri-Chyrag-Guneshli, the republic’s largest upstream project, and the commissioning of the Bakhar-Govsany-Surakhany gas pipeline, among other positive developments. Despite exploring several directions for gas export, however, Baku’s strategic plan still sees the basic direction as moving to Europe.

Read More: Azerbaijan Raises Export Potential Significantly (free)

A Russian Alternative to the European Energy Charter

Excerpt from Russian Petroleum Investor by Inna Gaiduk and Elena Kirillova


The January gas dispute between Russia and Ukraine has shown that, without an increase in responsibility of transit countries, it is impossible to provide guaranteed deliveries of energy resources. It resulted in damage to the interests of both Russia and several consuming countries. In spite of the fact that Ukraine was the initiator of the gas dispute, Europe has taken an ambiguous position in deciding not to condemn the Ukrainian actions.

In addition, Brussels and Kiev have recently signed a declaration for the modernization of the Ukrainian gas transport system (GTS), removing Russia from the process. Such European behavior obliges Moscow to reflect once again on a diversification of energy deliveries. The visit by deputy prime minister Igor Sechin to China is also a serious signal to Brussels. Russian Prime Minister Vladimir Putin’s decision not to participate in an April conference in Sofia is an additional demonstration of Moscow discontent.Observers had considered the White Stream gas pipeline project proposed several years ago by Ukrainian Prime Minister Yulia Timoshenko at best an abstract possibility. The plan had called for laying a pipeline on the Black Sea floor to Europe. The idea was to move gas from Azerbaijan and Turkmenistan to Ukraine and then on to Europe. Now, Brussels is beginning to consider the pipeline idea as likely. In addition, under the guise of reconstructing the Ukrainian GTS, Western countries are again attempting to find ways of delivering gas to Europe bypassing Russia by utilizing White Stream.

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Shelf Crisis

Excerpt from Russian Petroleum Investor by

There should be a postponement of shelf projects until economic times are better, according to Russian deputy prime minister Igor Sechin. “In the near future, the shelf will not have major promise because it requres serious capital investments and will not pay off quickly given the current situation in the market.” he said. In today’s conditions of global financial crisis, nobody can any longer afford such volume of investments -- not the government, state companies or private traders.

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Iranian Insider: Scrutiny Returns to Oil Revenue Use

Excerpt from Caspian Investor by Kent F. Moors, Ph.D., Contributing Editor

On February 17, an Iranian National Audit Office report ignited another round in the political fight over oil sale proceeds. However, for the first time, this one clearly indicates that Ahmadinejad officials have been illegally withholding funds. Issued for the Majlis (parliament), the analysis reveals that the government did not return to the treasury $1.058 billion of surplus oil revenues from the 2006-2007 budget. “This is certain to put the current government under renewed pressure,” an editor at the Tehran Times told us on February 20. “Even some of the president’s main supports are criticizing such actions.”

The report also stated that there had been no mention in government documents of the $61 million paid in taxes by the National Iranian Oil Co. (NIOC). In a related matter, “The government purchased a large amount of gasoline and gas oil during the current Iranian year [to end March 20] without parliamentary approval,” said Hamid-Reza Katouzian, head of the Majlis Energy Committee, on February 15. He called on the Majlis Presiding Board to conduct a serious probe into the situation

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NDPI Differentiation; ESPO

Excerpts from Russian Petroleum Investor

NDPI Differentiation: The First Results of Tax Reform
By Denis Borisov,Analyst of Investment & Financial Company Solid
In January 2007, a process began of differentiating the mineral extraction tax (NDPI). This has consisted of an introduction of a zero or lowered NDPI rate for taxpayers working on deposits in Eastern Siberia, as well as for exhausted and super viscous (bituminous) oil deposits. Starting in 2009, amendments to the Tax Code will provide a further decrease in the NDPI. The tax-free cut off price for the tax calculation will increase from $9 to $15 for barrel. In addition, there will be an opportunity of applying lower NDPI rates without the obligatory requirement of putting equipment for preferential deposits in commercial accounting units. For the tax payers working on remote deposits – new deposits on the continental shelf or above the Arctic Circle – tax vacations will result. Experts also believe that additional NDPI differentiation may result from the geological deterioration of developed deposits and the high sector rates of inflation.

First Segment of ESPO Commissioned
By Michael Barkov, Vice President of Transneft
On October 4, Transneft commissioned the first reverse segment on the main East Siberia-Pacific Ocean (ESPO) oil pipeline. The line extends 1,105 kilometers from the Talakan deposit in the Republic of Sakha (Yakutia) to the city of Taishet in the Irkutsk region. A year before the commissioning of the first ESPO stage, Transneft has created the necessary infrastructure to provide for the acceptance of oil from Eastern Siberia and Sakha (Yakutia) to the Russian pipeline system. Until that time, oil will move west, that is, in reverse direction. Transneft has already received applications from oil companies exceeding the 30 million ton capacity of the ESPO first stage.

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Russia Nearing Creation of a Gas OPEC, Kalmykia Remains Optimistic on Hydrocarbon Potential

Excerpts from Russian Petroleum Investor

Russia Nearing Creation of a Gas OPEC
by Inna Gaiduk
On October 21, Russia, Iran and Qatar declared creation of a “big gas troika” and indicated that the Gas Exporting Countries Forum (GECF) will soon become a permanently operating organization. The charter is subject to approval by the members in a December 23 Moscow meeting. In the interim, Gazprom has become more active in two directions. First, it is strengthening its presence and assets in those countries likely to become part of the future gas cartel. Second, it is beginning to form a pool of potential buyers and, simultaneously, strategic partners in the countries of the Asian-Pacific region. Both approaches are to offset the possibility of Europe taking a pro-American position and attempting to reduce the Russian presence in the European market.

Kalmykia Remains Optimistic on Hydrocarbon Potential
By Elena Kirillova
In 2007, the president of Kalmykia Kirsan Ilyumzhinov promised to transform the republic into “a second Kuwait” with annual crude oil production increasing to 5 million tons by 2020 (currently, it is almost 200,000 tons a year). However, few geologists share that conviction. Only foreign majors can handle the complex development and investment requirements. Nonetheless, Kalmykian authorities continue to express the opinion that discoveries of large deposits are not far off. Despite an abundance of investors searching for oil in the republic, nothing significant has yet emerged.

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