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Russian energy geopolitics - Aug 14

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Russia-Algeria Gas Agreement Can Mean Higher Prices for Europe — Italian Minister

MosNews
Europeans could pay more for natural gas as a result of a deal between Russian and Algerian state-controlled gas groups, Italian Industry Minister Pierluigi Bersani has warned on Tuesday, Aug. 8.

Earlier this month Russia’s natural gas monopoly Gazprom and Algeria’s Sonatrach signed a memorandum of understanding, in which they agreed to work together in the liquefied natural gas (LNG) business and consider joint bids for foreign assets. Gazprom currently meets a quarter of the European Union’s gas needs, while Algeria is among the biggest suppliers of this fuel to the 25-member union. Europe currently depends on foreign producers for 50 percent of its gas supplies, but the European Commission predicted that this figure could rise to 70 percent by 2030.

Russia and Algeria are expected to become increasingly important energy providers to the 25-member club, but the European nations repeatedly express concerns that the Kremlin uses Gazprom as a political tool. Moscow’s decision to briefly cut supplies to Ukraine over a bitter price dispute back in January has relieved Russia of its reputation as a reliable supplier in the eyes of its European customers. Following that incident, Paolo Scaroni, chief executive of the Italian oil and gas group Eni, warned that Russia and Algeria could create an OPEC-style gas concern. Russian officials have vehemently denied all the accusations, but the damage has already been done.
(9 Aug 2006)


Gazprom, Rosneft’s fierce rivalry key to shaping Russia’s oil future

Reuters, Gulf Times
The Kremlin’s drive for greater control over Russia’s energy sector will accelerate but, in contrast to other resource-rich countries, will involve fierce rivalry between two state champions, analysts said.

Western oil investors seeking a foothold in Russia have accepted the idea that they will have to partner either state oil firm Rosneft or gas monopoly Gazprom in any big future projects.

But they would not dream of pulling out of Russia – where booking substantial oil reserves or buying minority stakes in sizeable producers is still possible – unless the Kremlin launches a direct attack on their interests.

"It has become clear that it will be increasingly difficult to implement major energy projects in Russia without the involvement of state champions," said Elena Anankina from Standard & Poors.

"But where Russia differs from Latin America or Kazakhstan is that it has fierce competition between two state giants, which will most likely become more acute over time."
(10 Aug 2006)


Malaysia oil fears prompt Petronas to buy into Russian producer

John Burton, Financial Times
Concerns about Malaysia's dwindling oil reserves have been underscored by a recent decision by Petronas, the state energy group, to take a stake in Rosneft, the Russian oil producer.

The $1.1bn (€855m, £575m) deal to gain access to Russia's oil fields comes after Petronas recently reported that domestic oil production last year had fallen by nearly 5 per cent to 700,000 barrels a day. Malaysia is south-east Asia's largest oil producer after Indonesia.

Petronas blamed the decline on shutdowns for "major maintenance and repair works in several fields" operated by joint venture partners, which include ExxonMobil and Royal Dutch Shell...

Najib Razak, the deputy prime minister, warned last year that Malaysia could become a net oil importer by 2009 if it did not find new oil reserves and domestic demand continued to surge. "This means we cannot continue to lean on the oil sector," he said...

"Costs to find, develop and produce oil and gas have increased by an average of 50 per cent over the past two years," Mr Hassan recently told an energy conference in Kuala Lumpur. "The increase in capital expenditures and shortage in capacity in contracting services may result in the deferment and delay of some projects."
(8 Aug 2006)
The decline is inline with the March 2005 ASPO country assessment of Malaysia:

Some 20 wildcats had been drilled prior to 1930, mainly in Sarawak and Brunei. Exploration drilling then lapsed until after the Second World War, reaching peaks of about forty wells a year in 1970 and 1991, but has now declined to about half that number. It has resulted in the discovery of almost 10 Gb, of oil, of which almost 6 Gb have been produced. Exploration is now at a mature stage, as confirmed by the decline in drilling, and is not expected to yield more than about another 500 Mb. Production stands at 855 kb/d, which is believed to be the peak, being set to decline at about 6% a year, which is typical of an offshore environment. If so, production will have declined to about 570 kb/d in 2010 and 300 kb/ in 2020. Consumption stands at 520 kb/d meaning that the need for imports is set to rise markedly in the years ahead, which will likely pose a serious economic constraint.

-AF


Moscow Court Confirms $130M Back Tax Claim Against Russian-British Oil Major TNK-BP

MosNews
A Moscow arbitration court has confirmed a $130 million back-tax claim for fiscal 2001 against Russian-British joint venture TNK-BP, Russian newspapers reported on Monday, Aug. 14.

TNK-BP, Russia’s third-largest crude producer, had disputed the tax claim before the court ruling last Friday, Aug. 11,, business daily Vedomosti said.

Analysts at investment bank UFG Deutsche Bank said that the claim was a modest one for TNK-BP, but added that it “lessens its chances of reducing another back-tax claim of about $2.1 billion dollars”. TNK-BP, which has set aside $1.5 billion in view of numerous tax claims against it, could not be reached for comment.

Fiscal claims, which are common in Russia due to frequent changes in legislation, are one of the key risks facing businesses, and are frequently condemned by businesspeople as a means of exerting pressure on them.

TNK-BP is 50 percent held by BP PLC and 50 percent by the Russian groups Alfa Group and Access/Renova
(14 Aug 2006)


Russians prepare for African energy, mining push

John Helmer, Mineweb
Russian energy and mining companies are preparing for the visit to Africa early next month of President Vladimir Putin. But the black backdrop of the visit, the first in half a century by a Russian head of state, is the increasingly aggressive reaction of the Bush administration in Washington to the combination of arms and business which the Russians are offering those whom the US considers to belong to its camp.

Behind the scenes then of the Russian initiatives toward South Africa, Angola and Namibia -- the three countries currently on Putin's agenda for September 5-10 -- there is a US campaign of threats, inducements, and even sanctions...

There is considerable potential for joint oil search ventures with the Russians in Angola, where LUKoil, Russia's largest oil producer and exporter, is negotiating concessions; and in other African countries where PetroSA is also active; these include Equatorial Guinea, Nigeria, Gabon, Sudan, Mozambique, and Algeria.

The Algerian case is one of the few in Africa to trigger a US reaction. In March, during President Putin's visit to Algiers, agreement was struck for the supply of aircraft, missile batteries, and other arms. At the same time, Algeria's state gas corporation Sonatrach and its Russian counterpart Gazprom initialled a protocol with the intention of expanding their cooperation in exploring for fresh gas sources in the Sahara, share markets for gas in Europe and North America, and exchange technology for gas liquefication.

According to Russian sources, the US has applied political pressure on Sonatrach not to complete its cooperation agreement. As a result, the formal signing in Moscow has been twice postponed. It was finalized last Friday with agreements between Sonatrach, Gazprom, and LUKoil.
(7 Aug 2006)

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