Gazprom Develops in South America

Excerpt from Russian Petroleum Investor

Recently, Gazprom signed a memorandum with Venezuelan state-owned company Petroleos de Venezuela (PDVSA) to develop the shelf deposit Blanquilla Este y Tortuga. The project is the third phase ofanother large-scale project – Delta Caribe Oriental – costing a total of$20 billion (each phase has its own participants). The third phase shouldlaunch in 2016. Gazprom has a 15 percent holding in the project. PDVSA holds 60 percent, while Eni (Italy) and Petronas (Malaysia) each have 10 percent and Energias de Portugal holds 5 percent, according to a Gazprom manager. The cost of this phase amounts to $6.41 billion.

If the reserves are sufficient, a second stage will begin to construct capacities for liquefying gas, develop the deposit and sell gas both domestically and for export. This stage would create its own venture in which the participants would hold the same ownership positions as in the initial stage. The companies would retain the same stakes in all subsequent stages of the project.

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Gazprom Neft Targets Kazakhstan and Turkmenistan

Excerpt from Caspian Investor by Elena Kirillova

Gazprom Neft expects to increase its resource base in Russia, while also beginning development of foreign projects. According to the company’s deputy general director for exploration and production Boris Zilbermints, Gazprom Neft has already offered to several leading world oil and gas holdings – Chevron(US), Eni (Italy) and Royal Dutch/Shell (Netherlands/UK) – a number of its Russian assets in exchange for participation in their projects abroad.
Zilbermints noted that Kazakhstan and Turkmenistan are a priority of the company. Now Gazprom Neft delivers oil products to Kazakhstan in bulk, but in the future is planning to reach the end user. Independently, the company does not want to build gas stations. “We shall consider possible purchases,” he said. Zilbermints noted that in close proximity to Kazakhstan is the Omsk refinery from which Gazprom Neft could deliver oil products. He did not specify investment requirements for the project.

Currently in Central Asia Gazprom Neft has its own network of gas stations only in Kyrgyzstan. Having refocused on the purchase of gas stations, the company could be counting on acquiring a share in Mangistaumunaigaz, which owns a large network of Kazakh gas stations. KazMunayGaz (KMG), the Kazakh state oil and gas company, is purchasing 51 percent of Mangistaumunaigaz shares; Gazprom Neft has applied for the remaining 49 percent. The company is not going to limit cooperation to KMG. Zilbermints added that Gazprom Neft is ready for joint development of deposits in both Kazakh and Russian territory.

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Kazakhstan Introduces Major Changes in Subsoil Use Legislation

Kazakhstan Introduces Major Changes in Subsoil Use Legislation

Excerpt from Caspian Investor by Inna Gaiduk

Kazakh authorities have not limited themselves only to a victory in restructuring Kashagan ownership. At the beginning of February, Prime Minister Karim Masimov suggested to terminate contracts in which subsoil development companies have not executed obligations, with the deposits returning to the state. Experts have regarded this action as an attempt to return most of large production companies’ shares to state ownership, clearly reflecting the recent Russian approach. First, the Ministry of Finance suggested imposing taxation on mineral extraction, already applied for years in Russia. Then the Ministry of Energy and Mineral Resources lobbied for tax amendments introducing oil export customs duties by January 1, 2009, another analogy to the Russian legislation.

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The Complexities of Realizing the Shtokman Project

Excerpt from Russian Petroleum Investor

Both Total (France) and StatoilHydro (Norway) have no guarantee that they can put Shtokman reserves on their books, although Gazprom assures them there will be no problem. The participating companies intend to enter into discussions about the accepted role of each company in development of the first phase of Shtokman, specifying the realization of the project as well as the model of project finance. In addition, the discussions will consider the reserves balance at the deposit, the license for which belongs to Gazprom 100 percent owned affiliate Sevmorneftegaz. Is it possible for the foreign companies to put on their books reserves that are, in fact, virtual amounts? Gazprom remains the real owner of the reserves. In addition, Total and StatoilHydro will be compelled to discuss this issue not only with Gazprom, but also with the US Securities and Exchange Commission (SEC).

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Gazprom Agrees to Buy Central Asian Gas at European Prices

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

Gazprom announced an historic decision on March 11. The Russian natural gas giant has agreed to purchase Central Asian gas at “European prices” beginning in 2009. If the decision holds
up, it stands to place considerable control of Central Asian gas throughput to Europe in Russian hands, as well as create a significant problem for the Western-supported Trans-Caspian Gas Pipeline designed to bypass Russia. One thing appears certain, however. This agreement once implemented will fundamentally change the regional gas export dynamics.

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Enel Plans a Vertically Integrated Power Company in Russia

Excerpt from Russian Petroleum Investor by Sergei Chernyshov and Andrei Shlyapnikov

Having carried out in 2007 unprecedented purchase transactions of Russian natural gas production and electricity generating assets, the Italian company Enel has declared plans to use these assets as a foundation for a vertically integrated power company. This is a very bold move for a foreign enterprise during a period of scale transformations in the Russian energy sector. Enel's success will depend on negotiations with Gazprom, along with its own generosity and flexibility. To other foreign companies, such as E.ON, Fortum, RWE, Gaz de France and others, that have or are planning to purchase electrical power assets in Russia, the Enel example will indicate what is possible in the Russian market.

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Russia Moves to Control Caspian Gas Pipeline Directions to Europe

Excerpt from Caspian Investor by Elena Kirillova and Inna Gaiduk

Russia is intensifying efforts to connect key Caspian regional players to its new natural gas pipeline projects. These serve to render so-called "anti-Russian" pipelines less likely. Such pipelines include Nabucco (the Trans-Caspian gas main from Turkmenistan to Europe) and the South-Caucasian gas main (the Baku-Tbilisi-Erzerum pipeline, extending from Azerbaijan to Turkey and then on to Southern Europe). On November 22, the head of Gazprom Alexei Miller and the CEO of Italian Eni Paolo Scaroni signed an addendum to the June 23 Memorandum of Mutual Understanding concerning the construction of the South Stream gas pipeline across the Black Sea floor. Recently, the Russian government approved the Near-Caspian gas pipeline.

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Gazprom Sets Price for Natural Gas Sales

Gazprom will sell natural gas to Belarus for $119 per 1,000 cubic meters in the first quarter of 2008, a source at the Russian gas giant said recently. The source noted that Gazprom buys a large amount of gas from Central Asian states. Despite an earlier agreement on the purchase of Turkmen gas for $100 per 1,000 cubic meters, Turkmenistan later announced that it would sell gas at $130 per 1,000 cubic meters in the first half of 2008, he said. “Nevertheless, Russian gas will be sold to Belarus for $119 in the first quarter of 2008,” he insisted.

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