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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Expected 2008 Changes in Subsoil Use Legislation

Excerpt from Russian Petroleum Investor by Inna Gaiduk

The Ministry of Natural Resources expects that the government will approve amendments to the "About Subsoil" law that will considerably expand opportunities to distribute licenses by competitions, including investment. In addition, the package of amendments presented to the government includes revisions toughening the performance requirements under license agreement conditions and also regulates the modification procedures for operating licenses. There is also a second block of amendments to the law that concern restrictions of foreign participation in development of strategic deposits, but currently that package is undergoing interdepartmental coordination. By the end of 2008, the government plans to consider amendments defining the calculation of the size of harm caused to the state by subsoil users, changes to the procedures on conducting tenders and auctions for subsoil use rights and also revisions to the definition of the bases as well as the manner of change and specifications for subsoil blocks.

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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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Agreement on Near-Caspian Pipeline Reached

Excerpt from Caspian Investor

Recently in Moscow, the governments of Russia, Kazakhstan and Turkmenistan signed an agreement to construct the Near-Caspian (also called the Pre-Caspian) gas pipeline. The signing took place in the Kremlin following talks between Russian President Vladimir Putin and Kazakh President Nursultan Nazarbayev. Turkmen President Gurbanguly Berdymukhammedov was apprised by telephone during these discussions. The pipeline should be brought into operation no later than the end of 2010, according to Victor Khristenko, Russian Minister of Industry and Energy.

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Tehran Again Attacks Petrodollar System

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



Sources in both Tehran and Europe are telling Caspian Investor that Iran is renewing its attack on dollar-denominated oil trade. The move is hardly new. Tehran is introducing its own oil exchange and new benchmark sour crude rate, neither of which is to designate sales in dollars. Current Iranian requirements prevent any purchase of its oil or natural gas with dollars, and some of these restrictions have begun to affect a few secondary trades and swaps in oil contracts through Dubai.



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