19 February 2010
Moscow-based industrial conglomerate Sistema has taken a major step towards developing an integrated oil business after submitting a regulatory petition to the Russian Federal Anti-monopoly Service to acquire a 49% stake in Russneft, Russia's sixth largest crude producer. Sistema's deep pockets will no doubt help Russneft's founder Mikhail Gutseriyev, who regained control of the producer earlier this year, to put the company back on the oil map after several years of stagnated growth.
The submission of a petition to the Russian competition authorities signals the end of negotiations between Sistema and Gutseriyev, which are believed to have begun in December of last year. At the time, Sistema's then owner Vladimir Evtushenkov went public with his intention of acquiring a controlling stake in Russneft. However, he added that the firm's bulging debt level on the balance sheet made such a move unattractive at the time.
The value of the 49% stake has not yet been disclosed but in January Gutseriyev reportedly bought out Russneft from its de-facto owner, high-profile Russian oligarch Oleg Deripaska, for $600 million in cash plus of course the assumption of $6 billion in corporate debt.
Following the Sistema farm-out, Gutseriyev is expected to remain in control of Russneft, although 1-2% could be offered to Sberbank, one of the oil company's main creditors.
Gutseriyev's return to the boardroom of Russneft and the subsequent re-employment of his management team should help serve to revive the European Russia-focused company's production, which fell by 11% between 2007 and 2009, to 252,000 barrels per day (bpd) with Deripaska at teh helm. For telecoms-focused Sistema, the deal fits perfectly with its recent push into the energy industry.
Evtushenkov entered the oil industry with a bang in the spring of last year, buying up six major companies in the Republic of Bashkortostan (Bashkiria), in the Urals region. The deal gave Sistema a 76.5% stake in Bashneft, plus majority holding stakes in five affiliated refining and marketing concerns.
At present, Bashneft produces around 230,000 bpd of crude oil from around 140 fields in Bashkiria and neighbouring Tatarstan and Udmurtia. However, Sistema's biggest oil revenue spinner is its large affiliated refining business, which accounts for around 10% of the total of Russia's refining capacity.
UpstreamOnline: Alliance rides oil price recovery
Russian-focused explorer Alliance Oil reported improved quarterly and full year results to the end of 2009 on the recovery in international oil prices.
Upstream staff 22 February 2010 07:23 GMT
Swedish-listed Alliance, which has assets in Russia and Kazakhstan, reported full year net earnings of $345 million, or $2.06 per share, up from $46 million, or 28 cents per share, in 2008.
Higher oil prices, plus an exceptional item offset a fall in revenues to $1.73 million from $2.72 million previously.
Alliance said it’s pre-tax earnings had benefited to the tune of $174.7 million from the partial reversal of a year ago impairment.
Earnings before income tax, debt and amortisation (Ebitda) fell to $387.9 million from $585 million previously.
For the year, Alliance reported it boosted proved and probable oil reserves to $525.9 million from $487.3 million previously, a replacement ratio of 342%.
Total oil production for the period fell to 16 million barrels from 17.4 million barrels previously.
For the final quarter of last year, Alliance reported net earnings of $188.3 million, or $1.09 per share, compared with a loss of $290.9 million, or a loss of $1.81 per share, in the same quarter last year.
Revenue rose to $544.7 million from $409.7 million previously.
Ebitda rose to $90.2 million from $6.2 million in the year-ago period.
The company produced 3.9 million barrels of oil in the quarter, down from 4.5 million barrel for the same period in 2008.
The integrated company said it benefited from the recovery in international and local markets and in its ability to balance the upstream and downstream sectors of its operations.
Alliance said it was targeting average daily production of 50,000 barrels per day in 2010, and total production this year of 17 million barrels.
Published: 22 February 2010 07:23 GMT | Last updated: 22 February 2010 07:23 GMT
Bloomberg: Gazprom Should Be ‘Innovative’ in Gas Contracts, Shmatko Says
February 20, 2010, 04:22 AM EST
By Anna Shiryaevskaya
Feb. 20 (Bloomberg) -- OAO Gazprom, the world’s biggest gas producer, should be “more innovative” and react quickly to market conditions without changing the system of long-term supply contracts, Russian Energy Minister Sergei Shmatko said.
“Gazprom is quite innovative and should be more innovative, and swiftly react to changed market conditions,” Shmatko told reporters in Moscow late yesterday. “But by no means should the system of long-term contracts that we have created be destroyed.”
European consumers of Russian gas, such as E.ON AG, Germany’s largest utility, have multiyear contracts linked to crude oil. Last year a drop in demand and an increase in supply cut spot prices to about half the level under long-term contracts, leading customers to discuss more flexible supplies with Gazprom, the Russian gas export monopoly.
E.ON’s gas unit has agreed with Gazprom on taking a “low double-digit” percentage of its supply at tariffs linked to spot market prices, Handelsblatt said yesterday, citing E.ON Ruhrgas AG chief Bernhard Reutersberg. The outcome of discussions with Gazprom may have been “more favorable than expected for E.ON,” Oppenheim Research GmbH analysts said in a note yesterday.
--With assistance from Nicholas Comfort in Frankfurt.
--Editors: Sara Marley, Jason Carey
To contact the reporter on this story: Anna Shiryaevskaya in Moscow at +7-495-771-7729 or email@example.com
To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or firstname.lastname@example.org
UpstreamOnline: Russia to adopt new price strategy
Russia's Gazprom, which supplies Europe with a quarter of its gas needs, has agreed to add spot gas prices to its long-term contracts with customers, according tosources.
Upstream staff 19 February 2010 15:01 GMT
"The spot market is playing a certain role and we have taken this role into account in our contracts without changing fundamental principles," a Gazprom source, who asked not to be named because of the sensitivity of the issue, told Reuters.
"The agreements reached do not put into question the fundamental principles - the system of long-term contracts, the "take-or-pay" principle and the pricing system based on a peg to a basket of oil products," he added.
Published: 19 February 2010 15:01 GMT | Last updated: 19 February 2010 15:58 GMT
Georgian Daily: Gazprom, Romania, and South Stream Routes in the Black Sea
February 20, 2010
On February 17 in Bucharest, Gazprom Vice-President Aleksandr Medvedev conferred with Romanian officials on a range of bilateral projects. Medvedev hinted at possible Romanian participation in Gazprom’s South Stream pipeline project, from Russia to Europe via the Black Sea.
On the previous day in Sofia, Gazprom CEO Aleksei Miller had unsuccessfully tried to “reactivate” Bulgaria’s participation in South Stream (see EDM, February 18).
According to Medvedev’s concluding statement and a press release from Gazprom, the Romanian side confirmed its interest in the South Stream project and presented technical data, which Gazprom had requested earlier, toward a feasibility study for South Stream in Romania. The Russian side suggested that Romania’s state-owned gas transmission operator, Transgaz, join South Stream by entering into a venture with Gazprom (Interfax, February 17; Mediafax, February 18).
Those Romanian-delivered technical data pertain almost certainly to the seabed of the Black Sea in Romania's exclusive economic zone. Gazprom had indeed requested the seabed data last year and Bucharest was slow to respond. The Romanian Economics and Trade Ministry’s press release (February 17) listed “developing the [gas] transit network”--apparently, an allusion to South Stream--as one among the topics discussed with Medvedev. The ministry ruled out a joint venture of Romgaz, the state-owned gas producing company, with Gazprom.
Previewing the talks, Russian representatives in Bucharest had told the press that Romania has good chances to be included in South Stream due to the country’s location and the unfinished negotiations between Gazprom and Bulgaria (Adevarul, February 17).
Moscow has made several overtures to Romania in this regard since autumn 2009, just after the new Bulgarian government had halted its participation in South Stream for the time being and ordered a review of the project’s terms. Moscow is trying to impress Sofia that the South Stream pipeline can be routed through Romania, if Bulgaria stalls.
Gazprom’s overtures to Romania can also unsettle Turkey, if the government in Ankara truly believes South Stream to be a realistic project. Ankara has already agreed to allow the South Stream pipeline to pass from Russia through the Turkish exclusive economic zone in the Black Sea, en route to Europe. The Russian and Turkish prime ministers signed energy partnership agreements in August 2009 and January 2010, envisaging the Turkish seabed route for South Stream (Interfax, Anatolia news agency, January 13). However, Gazprom’s use of the Romanian zone would rule out the use of the Turkish zone for the pipeline.
Bulgaria is the only country through which South Stream must necessarily pass in order to reach all the countries that have signed up to this project.
Theoretically, South Stream has two options for crossing the Black Sea from Russia to Bulgaria. One option is from the Russian through the Ukrainian, Romanian, and Bulgarian exclusive economic zones, to a landfall point in Bulgaria. The other option is through the Russian, Turkish, and Bulgarian zones, again to a Bulgarian landfall point. On the first option, Ukrainian permission seems unimaginable, as it would allow Gazprom to shift massive volumes of gas from Ukraine’s own transit pipelines into South Stream. The second option is convenient to Russia politically; but the Turkish seabed route is the longest, deepest, and the most expensive of all options.
Theoretically again, Gazprom has two bypass options against Bulgaria in the Black Sea. One option is from the Russian via the Ukrainian and Romanian zones to a Romanian landfall, then overland into central Europe. The other option is via the Russian and Turkish zones to a landfall on the European side of Turkey, then overland into southern Europe. These options, however, would imply bifurcating the South Stream pipeline in the middle of the Black Sea, then following two circuitous routes around Bulgaria toward southern Europe and central Europe, respectively. Russian planners can not consider these options seriously.
Thus, Bulgaria holds an unassailable position and its government is well placed to bargain hard with Russia over the terms of South Stream or other energy projects in Bulgaria.
South Stream can only reach the Romanian exclusive economic zone after crossing the Ukrainian zone in the Black Sea. Thus, Gazprom’s overture to Romania makes no practical sense, if it refers to the seabed route; unless, inconceivably, Ukraine sacrifices its own transit role by allowing South Stream on the seabed through the Ukrainian zone.
It is possible to speculate that Gazprom is offering to build an extension of South Stream into Romania overland, branching off from a neighboring transit country. This offer, however, would have to presuppose Bulgarian participation in South Stream. If a branch-off is laid, Romania would not be considered a transit country for South Stream, but an ordinary customer country, forfeiting transit revenue, among other advantages lost. This is the model that Moscow is currently offering to Croatia, in return for major concessions from Zagreb. In Romania's case, a branch-off line from South Stream could reduce Romania's reliance on Ukraine for the transit of Russian gas.
By all public evidence, Medvedev failed to mention any gas reserves that might be available in Russia or elsewhere for the South Stream pipeline. Nor did he mention financing. These omissions occur invariably when Russian government and Gazprom officials discuss the South Stream project with countries that have joined or consider joining the project.
Compared with most countries in its region, Romania is less reliant on natural gas in its overall energy mix; and less dependent on Russian gas in the Romanian consumption of this fuel, thanks to internal production. Gazprom, however, is the sole external supplier. Romania is said to have imported 2.04 bcm of Russian gas in 2009 (Interfax, February 17).
Economics and Trade Minister Adriean Videanu led the Romanian team in these (and some previous) talks with Gazprom. The Romanians have three main objectives in these negotiations. The goals are:
Creating a joint venture between Romania’s state-owned gas producer Romgaz and Gazprom to build underground gas storage sites in Romania. The capacities would total 5 to 6 billion cubic meters (bcm), including one site at Margineni (northeastern Romania) for 2 or 2.5 bcm. The parity-based joint venture would market the gas in European Union member countries (Agerpres, February 17).
Eliminating trading companies that Gazprom has inserted in its supply relationship with Romania. The existing supply contracts will expire in 2012, at which point Romania wants the two intermediaries, WIIE and Imex Oil, removed, and new contracts signed with Gazprom directly. Medvedev showed some receptiveness to this proposal (Mediafax, February 18).
Negotiating the prolongation of transit agreements for Russian gas via Romania en route to Bulgaria, Greece, and Turkey, through existing pipelines. The transit agreements between Gazprom and Romanian state-owned transmission operator Transgaz will expire in 2011. Bucharest is now well placed to demand an increase in the transit fees, as Bulgaria demands and Ukraine has, as of January 2010, obtained (see EDM, February 18).
One day ahead of Medvedev’s visit, and apparently timed to it, Romania’s Chamber of Deputies (lower house of parliament) ratified the inter-governmental agreement on the Nabucco project.
Russia Today: Nord Stream commencement has South Stream players looking to move quickly
22 February, 2010, 11:07
The impending construction of the Nord Stream pipeline across the Baltic, is stoking interest in its Black Sea counterpart - the South Stream project.
Greece, Romania and Turkey have been among the nations talking up South Stream over the last week. Romania is expressing an interest in the project for the first time, while Greece is moving to create the joint venture – the South Stream Project company – with Greek Prime Minister George Papandreou pushing to get things started.
“As for the South Stream, we are ready to sign an agreement to create a joint venture and we are ready to keep on working to make the project happen.”
The South Stream gas pipeline is to pass under the Black Sea from Russia to Bulgaria, bypassing Ukraine, and splitting into 2 European branches. Bulgarian officials that earlier had been mildly lukewarm about the project, were upbeat about it during a working visit by Gazprom CEO Alexei Miller to Bulgaria. They discussed the pre-investment stage of the project, meaning that Bulgaria is in, with Russian Energy Minister, Sergey Shmatko focussing on communications developments.
“Bulgaria is the most important partner for us in the realisation of the South Stream project. We already have a number of agreements and are working on creating a project entity, and we also have agreed that an inter governmental commission will create a special monitoring group to identify apparent gaps in communication and help to avoid them.”
The black sea waters might see the start of construction after the Turks give their approval – which is expected towards the end of the year. Meanwhile Russia and Turkey are deepening their energy links in other fields with officials from the two nations meeting almost monthly. Russia is bidding to construct nuclear power stations in Turkey, and Turkey is looking for oil supplies for its Sumsun-Ceyhan pipeline. The familiarity of key energy officials with each other is another factor increasing the likelihood of South Stream being built.