Showing posts with label gas supply. Show all posts
Showing posts with label gas supply. Show all posts
[ASIA] Azerbaijan resumes gas supply to Georgia
Published | 13-May-2008
Azerbaijan has resumed export of natural gas to Georgia in the volume of 1.5 million cubic meters daily. Tamara Shoshiashvili, head of the PR department of the Georgian Oil and Gas Corporation (COGC), told Interfax Saturday that under the contract, signed between Georgian Oil and Gas Corporation and the State Oil Company of Azerbaijan (SOCAR), the Azerbaijani gas will be supplied until the end of 2008.She, however, found it difficult to name the price, saying that she does not have any information about it.
As has been reported, the gas supplies to Georgia, conducted by State Oil Company of Azerbaijan, stopped in January of 2008 upon expiration of the due contract.
Before that-within 2007-State Oil Company of Azerbaijan supplied nearly 1.3 million cubic meters of gas per day by $120 per 1,000 cubic meters. Yet, due to the rise in prices on fuel on the world market, Azerbaijani side decided to raise price of gas and it was said to be $180-200 per 1,000 cubic meters during the talks for 2008.
Currently, Georgia receives 1,000,000 cubic meters of gas daily in the framework of the Shah Deniz project by the privilege price of $63 per 1,000 cubic meters and 10% of the volume of Russian gas, transported to Armenia, as a price for transit. At the same time, a number of enterprises of Georgia purchase Russian gas for $235 per 1,000 cubic meters under direct contracts.
Georgia's demand for gas is estimated at 1.8 billion cubic meters per year.
Source: Today.AZ
EUROASIA: The energy war. Gazprom and Europe
Published | 21-Feb-2008
Russia will encounter natural gas deficit in the short-term perspective. Western experts state: despite vast deposits, just in some seven years Russia will no longer be able to satisfy even its own demand for energy resources, not to mention the supplies to Europe’s market, where there has been no alternative to Russia’s gas yet.
Neither to Oneself, Nor to Europe
Europe satisfies over the half of its demand for natural gas by means of Russian supplies. Russia’s share in Europe’s import was expected to double in absolute terms by 2030. However, it is now questionable whether Russia is capable to maintain and increase the amount of gas supplies.
European analysts say the major part of Russian oil and gas is extracted from a small number of large but already old deposits. The extraction is falling, while gas consumption in Russia is rapidly growing. If the trend persists, Russia will simply be unable to carry out its contract obligations mapped out till 2010.
The International Energy Agency (IEA) believes that Russia needs to open up new deposits in order to maintain at least the current level of supplies. Considering the severe climate and the remoteness from chief transport junctions and market outlets, new deposits’ development requires building new infrastructure. Meanwhile, Gazprom now has neither the necessary technologies, nor enough means (the International Energy Agency estimated the exploration of new deposits will require investment of at least $11 billion annually). Despite all the five-year economic development plans adopted between 1991 and 2006, the company has never allocated significant funds for implementing them. So, there is nothing unexpected in the prognosis that Russian gas export will reduce by 25 percent by 2015.
“Gazprom is undergoing a crisis now,” said Michael Fredholm, expert of Conflict Studies Research Center, UK Defense Academy. According to the International Energy Agency , the Russian company is losing at least 30 billion cubic meters of natural gas annually due to the lack of proper funding. The losses, comparable to one fifth of Russia’s export to Europe, are caused by technologic drawbacks and outdated transport infrastructure, which often leads to gas leaks and inflammation.
Gazprom and Russian officials more and more often have to deny that Europe’s energy supply is at risk. Yet, they give no clear answer to the question about how Russia is going to manage the growing domestic demand without impinging upon the obligations to European counteragents.
Russia’s authorities hope to decrease the domestic market’s gas consumption by means of switching some Russian consumers to coal. “It will trigger higher prices on electric energy, but will help Gazprom to manage its energy supply obligations to the foreign market for a while,” reads Fredholm’s report. However, even a large-scale transfer of the domestic market to coal will not make it much easier for Russia to fulfill all of its export and domestic obligations.
Speaking of export difficulties, Russia will be trying to solve them by means of Central Asian gas, which it buys at low prices from Turkmenistan and Kazakhstan, and, taking advantage of its monopolistic transit position, resells to Western consumers three times more expensively. Anyway, even if Gazprom succeeds in keeping up extraction at 560 billion cubic meters annually (which is impossible without investment in new deposits), and in increasing Central Asian supplies up to 70 billion cubic meters, it will not guarantee the export obligations’ fulfillment, reads the report by Swiss investment bank UBS, presented in summer 2006.
No-Alternative Choice
Europe began questioning the reliability of its major supplier with the start of Russia-Ukraine gas wars. Certainly, Russia uses its dominating position on the energy resources market for achieving its political purposes. However, it now concerns more basic issues: there will simply be not enough Russian gas for all consumers.
From now on, the decrease in Russia’s supplies means not only political independence, but also basic survival for many European states. European Union countries have been hatching long-standing plans for diversifying the supply sources by means of gaining direct access to Central Asian and Caspian deposits. However, the Russian government has been successfully counteracting all those plans, for the energy competition will reduce not only prices of energy resources, but also Russia’s political weight. According to European Union plans, the Nabucco gas pipeline is to open the access to gas deposits bypassing Russia. Nabucco’s construction was scheduled to be launched in 2007.
The new pipeline is to carry gas from the Caspian region (mainly from Azerbaijan and Turkmenistan) through Turkey to Bulgaria, Romania, Hungary, and Austria; the latter will distribute gas to other European consumers. “If there is a project capable to rid Europe of Russian dependence, than it is Nabucco,” experts said. However, in late 1990s, when Nabucco was just mentioned for the first time, Moscow began building its Blue Stream gas pipeline along the Black Sea bed to Turkey. Upon finishing it, Russia announced a new plan for extending it from Turkey to Europe (Blue Stream 2). Russia’s project was becoming Nabucco’s chief rival.
Soon afterwards, Moscow began enticing the European project’s investors. Austria will become Europe’s chief energy-distributing center if the Nabucco plan is implemented. Russia promised that favorable strategic position to Hungary, if the latter agrees to take part in the Blue Stream 2 project. The policy of dividing and ruling brought its fruit. Although Hungary’s oil-and-gas company MOL is a member of Nabucco Consortium, MOL signed in June 2006 an agreement with Gazprom for laying the gas pipeline from Turkey through the Balkans to Hungary. In March 2007, Hungary’s Prime Minister Ferenz Durchan said: “Nabucco is a big dream, but we don’t need dreams, we need projects”.
Neither to Oneself, Nor to Europe
Europe satisfies over the half of its demand for natural gas by means of Russian supplies. Russia’s share in Europe’s import was expected to double in absolute terms by 2030. However, it is now questionable whether Russia is capable to maintain and increase the amount of gas supplies.
European analysts say the major part of Russian oil and gas is extracted from a small number of large but already old deposits. The extraction is falling, while gas consumption in Russia is rapidly growing. If the trend persists, Russia will simply be unable to carry out its contract obligations mapped out till 2010.
The International Energy Agency (IEA) believes that Russia needs to open up new deposits in order to maintain at least the current level of supplies. Considering the severe climate and the remoteness from chief transport junctions and market outlets, new deposits’ development requires building new infrastructure. Meanwhile, Gazprom now has neither the necessary technologies, nor enough means (the International Energy Agency estimated the exploration of new deposits will require investment of at least $11 billion annually). Despite all the five-year economic development plans adopted between 1991 and 2006, the company has never allocated significant funds for implementing them. So, there is nothing unexpected in the prognosis that Russian gas export will reduce by 25 percent by 2015.
“Gazprom is undergoing a crisis now,” said Michael Fredholm, expert of Conflict Studies Research Center, UK Defense Academy. According to the International Energy Agency , the Russian company is losing at least 30 billion cubic meters of natural gas annually due to the lack of proper funding. The losses, comparable to one fifth of Russia’s export to Europe, are caused by technologic drawbacks and outdated transport infrastructure, which often leads to gas leaks and inflammation.
Gazprom and Russian officials more and more often have to deny that Europe’s energy supply is at risk. Yet, they give no clear answer to the question about how Russia is going to manage the growing domestic demand without impinging upon the obligations to European counteragents.
Russia’s authorities hope to decrease the domestic market’s gas consumption by means of switching some Russian consumers to coal. “It will trigger higher prices on electric energy, but will help Gazprom to manage its energy supply obligations to the foreign market for a while,” reads Fredholm’s report. However, even a large-scale transfer of the domestic market to coal will not make it much easier for Russia to fulfill all of its export and domestic obligations.
Speaking of export difficulties, Russia will be trying to solve them by means of Central Asian gas, which it buys at low prices from Turkmenistan and Kazakhstan, and, taking advantage of its monopolistic transit position, resells to Western consumers three times more expensively. Anyway, even if Gazprom succeeds in keeping up extraction at 560 billion cubic meters annually (which is impossible without investment in new deposits), and in increasing Central Asian supplies up to 70 billion cubic meters, it will not guarantee the export obligations’ fulfillment, reads the report by Swiss investment bank UBS, presented in summer 2006.
No-Alternative Choice
Europe began questioning the reliability of its major supplier with the start of Russia-Ukraine gas wars. Certainly, Russia uses its dominating position on the energy resources market for achieving its political purposes. However, it now concerns more basic issues: there will simply be not enough Russian gas for all consumers.
From now on, the decrease in Russia’s supplies means not only political independence, but also basic survival for many European states. European Union countries have been hatching long-standing plans for diversifying the supply sources by means of gaining direct access to Central Asian and Caspian deposits. However, the Russian government has been successfully counteracting all those plans, for the energy competition will reduce not only prices of energy resources, but also Russia’s political weight. According to European Union plans, the Nabucco gas pipeline is to open the access to gas deposits bypassing Russia. Nabucco’s construction was scheduled to be launched in 2007.
The new pipeline is to carry gas from the Caspian region (mainly from Azerbaijan and Turkmenistan) through Turkey to Bulgaria, Romania, Hungary, and Austria; the latter will distribute gas to other European consumers. “If there is a project capable to rid Europe of Russian dependence, than it is Nabucco,” experts said. However, in late 1990s, when Nabucco was just mentioned for the first time, Moscow began building its Blue Stream gas pipeline along the Black Sea bed to Turkey. Upon finishing it, Russia announced a new plan for extending it from Turkey to Europe (Blue Stream 2). Russia’s project was becoming Nabucco’s chief rival.
Soon afterwards, Moscow began enticing the European project’s investors. Austria will become Europe’s chief energy-distributing center if the Nabucco plan is implemented. Russia promised that favorable strategic position to Hungary, if the latter agrees to take part in the Blue Stream 2 project. The policy of dividing and ruling brought its fruit. Although Hungary’s oil-and-gas company MOL is a member of Nabucco Consortium, MOL signed in June 2006 an agreement with Gazprom for laying the gas pipeline from Turkey through the Balkans to Hungary. In March 2007, Hungary’s Prime Minister Ferenz Durchan said: “Nabucco is a big dream, but we don’t need dreams, we need projects”.
However, the pipeline’s route changed drastically when Turkey decided not to support it, and openly backed the alternative Nabucco pipeline. Moscow decided to build its pipeline (now called South Stream) directly from Russia to Bulgaria, along the Black Sea bed, and to attract Italy’s Eni to funding it. South Stream is to split into two pipelines in Bulgaria. One will lead through Serbia and Hungary to Austria, and the other – through Greece to Italy’s south (see map).
Gazprom does not hide its hurry to implement the South Stream project due to its direct competition with Nabucco. The chief European pipeline’s construction was put off many times due to differences between the states involved and to the uncertainty with suppliers. It is now scheduled for 2009. Yet, even with the most favorable circumstances, Nabucco will not be put into service earlier than in 2012.
Europe’s another hope is to build the Trans-Caspian gas pipeline. However, Moscow has been successfully blocking this one as well.
According to the project, the pipeline is to transport gas from the eastern Caspian shore along the seabed to Azerbaijan, then to Turkey, from where it can be carried to European consumers (by means of Nabucco, for instance). Yet, there is no consensus between the five Caspian states – Azerbaijan, Iran, Kazakhstan, Turkmenistan, and Russia – on how to divide Caspian energy resources. Taking advantage of the uncertainty of the Caspian Sea’s legal status, Russian politicians said that regardless of where the pipeline begins, all five countries in question should give their consent to its construction.
Beside Russia, Iran strongly opposes the Trans-Caspian project as well. In July 2001, the Iranian authorities sent a military ship to prevent exploration works in Azerbaijan’s sector of the Caspian shore. The works were being carried out by BP under a contract with Azerbaijan. The West admits of a possibility that the Kremlin might be sponsoring such irreconcilable position, although Iran certainly has its own reasons for not letting Europeans near the Caspian Sea.
Experts say that Moscow does everything to block EU states’ access to cheaper energy resources. In 2006, Gazprom was in cooperation talks with Algerian company Sonatrach, second largest gas supplier to Europe’s market after Russia. It is unnecessary to say how much that circumstance disturbed European consumers.
Inter-State Split-Up
Experts agree on one point: Europe needs to give up inner competition in the gas sphere and act as a united front if it wants to weaken such energy monster as Russia. However, each European country has been so far trying to peg gas supplies for itself only.
In winter 2005-06, when energy supplies to Europe were at risk, Germany signed an agreement with Russia on building a new gas pipeline – Nord Stream – allowing to transport gas directly to Germany, bypassing Ukraine, Belarus, and Poland. Having learned about it, Polish President Alexander Kvasnevsky compared it to the Molotov-Ribbentrop Pact. Anyway, despite the energy arm-twisting opportunities which Moscow acquires with Nord Stream, Germany has secured its energy safety.
Other European states behave in a similar way. They hurried to sign bilateral agreements with Russia. In the last two years, Gazprom signed contracts with Italian, French, and Dutch oil-and-gas companies, whose playing against one another allows Russia to push for more favorable terms and to receive larger profits. According to apt statement by Zeyno Baran, director of Hudson’s Center for Eurasian Policy, “while Europe is trying to coordinate its actions, Putin is signing deals”.
Gazprom does not hide its hurry to implement the South Stream project due to its direct competition with Nabucco. The chief European pipeline’s construction was put off many times due to differences between the states involved and to the uncertainty with suppliers. It is now scheduled for 2009. Yet, even with the most favorable circumstances, Nabucco will not be put into service earlier than in 2012.
Europe’s another hope is to build the Trans-Caspian gas pipeline. However, Moscow has been successfully blocking this one as well.
According to the project, the pipeline is to transport gas from the eastern Caspian shore along the seabed to Azerbaijan, then to Turkey, from where it can be carried to European consumers (by means of Nabucco, for instance). Yet, there is no consensus between the five Caspian states – Azerbaijan, Iran, Kazakhstan, Turkmenistan, and Russia – on how to divide Caspian energy resources. Taking advantage of the uncertainty of the Caspian Sea’s legal status, Russian politicians said that regardless of where the pipeline begins, all five countries in question should give their consent to its construction.
Beside Russia, Iran strongly opposes the Trans-Caspian project as well. In July 2001, the Iranian authorities sent a military ship to prevent exploration works in Azerbaijan’s sector of the Caspian shore. The works were being carried out by BP under a contract with Azerbaijan. The West admits of a possibility that the Kremlin might be sponsoring such irreconcilable position, although Iran certainly has its own reasons for not letting Europeans near the Caspian Sea.
Experts say that Moscow does everything to block EU states’ access to cheaper energy resources. In 2006, Gazprom was in cooperation talks with Algerian company Sonatrach, second largest gas supplier to Europe’s market after Russia. It is unnecessary to say how much that circumstance disturbed European consumers.
Inter-State Split-Up
Experts agree on one point: Europe needs to give up inner competition in the gas sphere and act as a united front if it wants to weaken such energy monster as Russia. However, each European country has been so far trying to peg gas supplies for itself only.
In winter 2005-06, when energy supplies to Europe were at risk, Germany signed an agreement with Russia on building a new gas pipeline – Nord Stream – allowing to transport gas directly to Germany, bypassing Ukraine, Belarus, and Poland. Having learned about it, Polish President Alexander Kvasnevsky compared it to the Molotov-Ribbentrop Pact. Anyway, despite the energy arm-twisting opportunities which Moscow acquires with Nord Stream, Germany has secured its energy safety.
Other European states behave in a similar way. They hurried to sign bilateral agreements with Russia. In the last two years, Gazprom signed contracts with Italian, French, and Dutch oil-and-gas companies, whose playing against one another allows Russia to push for more favorable terms and to receive larger profits. According to apt statement by Zeyno Baran, director of Hudson’s Center for Eurasian Policy, “while Europe is trying to coordinate its actions, Putin is signing deals”.
Source: Kommersant|Maria Klochkova
AUSTRIA: Austrian Oil and Gas Group in gas transfer talks with Iranian party
Published | 19-Dec-2007
Chairman and Chief Executive of Austrian Oil and Gas Group (OMV AG) Wolfgang Ruttenstrofer said talks are underway on a project on transfer of liquid gas from Iran to Austria.
Monday issue of Austrian daily Uberstreichen Nachrichten quoted Ruttenstrofer as saying that Iranian gas fields are the biggest in the world and his company will undertake a part of a exploration project on which it is highly skilled.
Asked on the US pressures in that connection, Ruttenstrofer said his company has thus far observed current regulations.
A Dlrs 30 billion contract was signed between OMV AG and National Iranian Oil Company for transfer of liquid gas from Iran to Austria.
Monday issue of Austrian daily Uberstreichen Nachrichten quoted Ruttenstrofer as saying that Iranian gas fields are the biggest in the world and his company will undertake a part of a exploration project on which it is highly skilled.
Asked on the US pressures in that connection, Ruttenstrofer said his company has thus far observed current regulations.
A Dlrs 30 billion contract was signed between OMV AG and National Iranian Oil Company for transfer of liquid gas from Iran to Austria.
Via: Islamic Republic News Agency
EUROASIA: GAZPROM, The Plus Gasification of Entire Europe
Published | 15-Jul-2007All major Gazprom’s projects have political underpinning. Sometimes, it makes them look contradictory. For instance, former Gazprom chairman Rem Vyakhirev said in 1998 that the North-European pipeline project was economically unfeasible. Ten years later, the same project, under the new name of Nord Stream, is considered one of the most promising routes to directly link Russia and the EU.
Subsidiary is to Return
Rem Vyakhirev’s team was the successor of Viktor Chernomyrdin’s team. Consequently, it carried on all drawbacks and advantages of the USSR Oil and Natural Gas Ministry’s Soviet ways. Meanwhile, younger and more business-aggressive managers prevail in Alexei Miller’s team.
Vyakhirev, who headed Gazprom in 1992-2001, faced a strategic task: to create a competitive environment on the ruins of the post-Soviet oil and gas ministry authorized to do business. Vyakhirev implemented the task quite successfully. Beside numerous small private companies, several vertically-integrated corporations, such as NOVATEK, Itera, Nortgaz, Trans Nafta, were created. The new times set other tasks to Gazprom’s new leader Alexei Miller.
The general centralization of power in Russia required the consolidation of energy resources. Other management decisions became necessary for implementing that task.
Nowadays, Gazprom has 29.1 trillion cubic meters of natural gas in undeveloped deposits. Independent gas producers have 9.8 trillion cubic meters, and Russia’s undistributed fund is 11 trillion. DeGolyer & MacNaughton independent auditor examined 90.5 percent of Russia’s gas deposits, 89 percent of gas condensate deposits, and 67 percent of oil deposits. The auditor estimated the cost of all Gazprom’s hydrocarbon resources at $87 billion, as of March 31, 2006. For a second year running, deposit increase exceeds extraction in Gazprom. The increase in 2006 made up 587.5 billion cubic meters in the S1 category. So, the replenishment of the mineral resources base in 2006 by means of geologic exploration works exceeded 100 percent (Gazprom extracted 556 billion cubic meters of gas in 2006). Three gas condensate and two oil deposits, two gas, six gas condensate, and 25 oil reservoirs were discovered by the exploration works. Meanwhile, almost no funds were being allocated for geologic exploration in Vyakhirev’s times, and Gazprom’s deposit increase was minimal, 81.7 billion cubic meters in the S1 category according to Gazprom’s annual report for 2000.
In recent years, Gazprom built up gas extraction by means of bringing into development Pestsovoe and Etypurovskoe deposits, developing at full capacity Zapolyarnoe deposit (100 billion cubic meters annually), and increasing extraction at Vyngayakhinskoe and Enyakhinskoe deposits, as well as by means of returning and acquiring assets of independent gas suppliers and oil companies.
Over the last six years, Gazprom systematically took away from various companies the assets which had been given to them earlier either by additional issuing of shares of enterprises holding extraction licenses, or by giving licenses to subsidiaries and then changing the ownership pattern of the company-owner. For instance, in May 2006, Gazprom established control over Nortgaz, whose owner was British company REDI Holding, controlled by Farkhat Akhmedov, Senator for the Krasnodar Territory (since May 2007, for the Nenets Autonomous Area).
Back in 1999, Urengoigazprom (100 percent belongs to Gazprom) lost control over Nortgaz, when it failed to buy out the latter’s additionally issued shares (its share fell from 51 to 0.01 percent). It explains why Gazprom, during the court hearings in 2005, gained back Nortgaz almost for free (it paid $1 for 51 percent of shares). However, Senator Akhmedov (or, rather, his British company, owns 49 percent and can veto any strategic decisions of the company).
Speaking of another asset, Gazprom’s deputy chairman Alexander Ananenkov said: “The subsidiary is to return.” Gazprom acquired Sibneftegaz’ controlling stock for $132 million. Gazprom says that is how much creating Sibneftegaz’ infrastructure costs. In the 1990s, the asset belonged to Gazprom, but was sold to Itera for $9 million.
By a similar scheme, Gazprom acquired 51 percent of Purgaz, which owns a license for developing Gubkinskoe gas deposit by extracting 18 billion cubic meters annually).
In summer 2006, Gazprom made another good bargain, buying Tambeineftegaz, which owned 100 percent of Yuzhno-Tambeiskoe deposit of 1 trillion cubic meters, for just $350 million. Gazprom undertook that step so as to prevent such a large part of resources from leaking abroad: Tambeineftegaz’ owner Nikolai Bogachev offered to sell the company’s controlling stock to U.S. and Spanish holdings: Shell, ConocoPhillips, and Repsol. Gazprom thus showed that foreign companies in Russia should reach agreement only with it, as the executive of the state policy in the sphere of gas extraction and processing.
Civilized Manners of the Russian Monopoly
Gazprom bought 72 percent of Sibneft oil company (now called Gazprom Neft) in 2005 for $14 billion from the structures on whose behalf acted businessman Roman Abramovich. The deal was to show to the world what market conditions are created in Russia for the resources business. However, it went during the international denouncing of Russia for destroying YUKOS.
Gazprom made another overbank when entering the Sakhalin-2 project. The formal pretext and the only argument of the PR support was that the Natural Resources Ministry discovered violations of the nature-protection laws by Sakhalin Energy company, which owned the license for developing. It remains a secret why Shell basically surrendered its chief project in Russia. Apparently, the upcoming years will uncover the reasons why Shell gave up its leading role in the project. Formally, Gazprom bought the company’s 51 percent of shares for $7.45 billion. It turned out later the spent $3.6 billion out of $19.4 billion of planned investments of former shareholders will not be returned to them.
Price Cataclysms
The key change that occurred in the last six years was that Alexei Miller’s team managed to persuade the Russian government, with President Vladimir Putin’s direct support, that it is necessary to liberalize prices at the domestic market. So, natural gas in Russia grew from $10 to $50 per 1,000 cubic meters on average in the last five years, and the price keeps growing. Five billion cubic meters is to be sold at the exchange in 2007 (the average price is $65 for 1,000 cubic meters). Gazprom’s revenues from selling gas at Russia’s domestic market grew from 138 billion rubles to 366 billion rubles in the last six years. Although Gazprom declares losses from doing business at the domestic market, which is quite reasonable considering taxation, the corporation’s profits in 2001-2006 grew by nearly seven times, from 70.6 billion rubles to 411 billion rubles.
The gas prices for industry and energy sector will reach $98 in 2010. It is a truly revolutionary decision, although it will be implemented already at the times of Vladimir Putin’s successor. However, Miller’s contract for chairing Gazprom was prolonged in autumn 2006 till 2010, and Miller has good chances to remain there till that period comes.
However, the growth of prices at the domestic market was helped primarily by Russia’s aspiration to join the WTO, and then by the growth of gas prices in the EU and the U.S., as a consequence of the absence of effective energy-saving policy. For instance, RAO UES of Russia consumed 6 million metric tons of fuel oil and over 100 billion cubic meters of gas in 2006. By the way, oil and gas consumption in Russia’s energy system was much better balanced at the times of the planned economy of the USSR and the 1990s. Moreover, Rem Vyakhirev’s team was made up mainly of people with oil-and-gas education, who did not allow technologic excesses in the sector’s development. On the contrary, Anatoly Chubais’ and Alexei Miller’s teams have financial and economy experts on key positions, instead of gas and energy professionals. Gazprom’s deputy chairman Alexander Ananenkov is a deterrent for the numerous initiatives of his colleagues in the monopoly; he prevents the company from taking some abrupt steps.
One of the brightest periods of Gazprom’s history was the transfer of gas contracts with CIS countries to European standards. For the sake of separating the contracts for gas transportation from those for gas supplies, Gazprom had to virtually declare war to transit countries – Belarus, Ukraine, Poland, and Bulgaria. From the commercial point of view, Gazprom won those wars, and increased gas prices from $65 to $130 per 1,000 cubic meters for Ukraine, and from $46.68 to $100 for Belarus. However, this tactic victory led to a serious exacerbation of Russia-EU relations. Let us hope, it will not end by the gas monopoly’s Pyrrhic victory in Europe. Although Russia has already received certain negative consequences. Presidents of Turkmenistan and Kazakhstan, Gurbanguly Berdymuhammed and Nursultan Nazarbaev, signed an agreement with Gazprom on building the Caspian Shore pipeline, and then immediately supported the project of the Trans-Caspian seabed pipeline bypassing Russia.
Adoption of the law “About natural gas export” should be definitely noted among the achievements of Miller’s team. In Vyakhirev times, Itera and other commercial traders dealt with export. Now, the law prohibited other export ways bypassing Gazprom Export (100 percent belongs to Gazprom). Consequently, Gazprom’s export revenues have considerably grown in the recent years. By selling one third of the total amount of extracted gas (150 billion cubic meters annually), Gazprom Export earned $38 billion in 2006, compared to $26 billion in 2005. By the way, Gazprom doubled in 2001-2006 its earnings from selling gas to foreign non-CIS countries, and the net profits in this sphere of business tripled, growing from 164 billion rubles to 456 billion rubles.
Supplies to CIS countries became more expensive by nearly five times, growing from 40 billion rubles to 192 billion rubles. The profits in this sector of the market increased by 3.5 times, from 12 billion rubles to 42 billion rubles. Miller team’s questionable decision was raising the purchasing price on Turkmen gas in 2006, from $44 to $100 per 1,000 cubic meters. It was the first revolutionary step in Russia’s relations with Central Asian states. Until then, the gas prices were growing by $10 per 1,000 cubic meters a year. Since mid-2006, no Central Asian country would agree to sell gas for less than $100.
Despite the general opinion, Gazprom is carrying out a consistent policy abroad. It both consolidates assets by purchasing EU traders, and uses price policy. So, the Committee of High Trust, consisting of 14 gas-exporting countries, has been created in Doha (Qatar). It will work out and coordinate the formula of price formation between the major gas exporters.
Management’s Behavior Trends
Under Rem Vyakhirev’s leadership, Gazprom actively sold gas through affiliated traders, legally independent from Gazprom. For instance, Itera worked at all CIS markets, with multibillion dollar contracts. Nowadays the situation is somewhat different. At the domestic market, Gazprom sells gas through Mezhregiongaz (100 percent belongs to Gazprom), at commercial prices as well. So, Gazprom actively uses the following instrument: it buys gas from independent producers at the drill hole at a price 10-15 percent higher than the prime cost, and thus puts all possible profits into its extra charges. This way, Gazprom was buying gas at 480 rubles for 1,000 cubic meters in 2006 from Nortgaz, and at 580 rubles from Sibneftegaz in 2007, while the selling price for industrial consumers of Russia’s first belt is 780 rubles for 1,000 cubic meters. On the other hand, all producers working with Gazprom for a long time gradually receive a higher price. For instance, LUKOIL sells gas of Nakhodka deposit at 1,000 rubles. Experts say this policy is much more honest to gas producers.
Direct subsidiaries have privileges in Russia, just like in any other country. For instance, all subsidiaries of Gazprom pipe gas through the unified gas-supply system at a lower tariff than independent gas producers. “This inequality is considered legal and quite logical,” said Troika Dialog analyst Valery Nesterov. “There are less popular examples of the management’s personal interestedness. For instance, Alexander Ryazanov brought into Gazprom ESN Energo company of businessman Grigory Berezkin. ESN Energo secured one third of the electricity consumption by all Gazprom enterprises. After Ryazanov’s resignation in autumn 2006, ESN Energo began to be gradually replaced by Mezhregion-Energosbyt (100 percent belongs to Gazprom through Mezhregiongaz).
Despite that Stroitransgaz’ controlling stock was sold to external organizations, unofficial sources say, the construction company is still supervised by Gazprom managers. It became harder to join Gazprom now. The reputation of Miller team’s key players is quite high. I daresay that not a single project in Russia goes without the support of certain responsible officials. Yet, Gazprom’s major projects follow the interests of the state.
Coal Strip Mine
The last news from the country’s chief newsmaker’s camp: the monopoly begins developing coalmine methane in Kuzbass. Its total amounts in the region are estimated at 13 trillion cubic meters. That is, the gas monopoly has found new considerable gas resources. “Very soon, already this year, the company will begin intensive works in coal strip mines in Kemerovo for developing methane deposits in coal mines,” said Gazprom’s deputy chairman Alexander Ananenkov. According to the monopoly’s estimations, the prognosis resources of coalmine methane in Russia are comparable to the traditional gas resources, and are estimated at 49 trillion cubic meters (15 percent of world deposits of coalmine methane). “Unfortunately, all that methane is not so far used for good purposes,” said Ananenkov. “Since 2002, we conducted works, and we have very good results.”
It is difficult and not very profitable to extract methane. In Russia, it is effective only together with coal extraction. So, experts think the project will be aimed not at gas extraction as such, but at obtaining quotas under the Kyoto protocol for Gazprom. Russia ratified the protocol in 2004. It stipulates exchanging quotas for harmful emissions into the atmosphere. Thus, by using coalmine methane, Gazprom, as a national producer, will obtain the right to trade quotas.
Politics and Gazprom
In the last five years, all major Gazprom’s projects have political underpinning. For instance, former Gazprom chairman Rem Vyakhirev said in 1998 that the North-European pipeline project was economically unfeasible. Ten years later, the same project, under the new name of Nord Stream, is considered one of the most promising routes to directly link Russia and the EU. The pipeline worth $7.5 billion suddenly becomes more attractive for Russia than the second branch of the Yamal-Europe pipeline worth $2.5 billion. Politically, it sounds like the desire to bypass Poland and other transit countries. However, the exacerbation of the Russia-Poland economic relations (after 2010) will soon lead to the necessity to settle a serious political crisis between the two countries, whose positions on many issues drastically diverge. Nord Stream will not bring the desired political dividends to Russia. It is not bringing direct dividends to Gazprom shareholders already now.
In summer 2006, Gazprom, EON, and BASF signed the final agreement on Nord Stream’s project, determining its legal and financial framework. Yet, the agreement does not contain the scheme of the project’s financing, and the certain sums due to be paid by the parties. It means the Nord Stream partners have not yet reached agreement on these issues. By the way, the terms of developing the Nord Stream financing scheme have already been repeatedly postponed, and remain unknown so far. The project’s feasibility study is not ready yet.
However, Gazprom will obviously make all efforts to launch the pipeline on time, because it has contracted nearly the entire amount of gas for 25 years ahead, beginning since 2011. The Russian gas monopoly is to supply these amounts anyway, by functioning pipelines if Nord Stream is not ready by 2011.
By the way, the Nord Stream project is a bargaining chip in the Russia-EU talks on the Energy Charter. EU guidelines on gas, adopted as a supplement to the agreement on the Energy Charter, question Nord Stream’s pay-back capacity. Gazprom’s deputy chairman Alexander Medvedev demanded to “eliminate points concerning the access of third parties to the gas-transporting facilities” from the guidelines. He justified his request by reminding that there exist such restrictions for the BBL pipeline under construction, which is to link the Netherlands and Great Britain. Russia is trying to carry out the Nord Stream project, changing the EU gas legislation en passant. So far, there have occurred no system changes in that sphere.
Gazprom plans to surround Europe with pipelines in the north (Nord Stream), in the middle (Yamal-Europe), and in the south (Blue Stream-2). The monopoly will be able to really control the gas streams in the EU only if it creates a complete ring supplies system. The plan’s weak link is the Blue Stream-2 project, so far. The matter is, after laying the first thread of the pipeline along the Black Sea bottom from Russia to Turkey, Gazprom encountered the problem of customers’ absence, because the gas-transporting network is not developed in Turkey. Then, Gazprom decided to turn the Blue Stream to Europe. It plans to lay the second thread along the Black Sea bed. Then, it will pipe gas through Turkey’s gas system, build an underwater bridge along the Bosporus seabed, till Greece or to Bulgaria. So far, Blue Stream has not been cost-effective. The project was developed by Rem Vyakhirev’s team. So, its low effectiveness cannot be blamed on Miller’s team only. On the contrary, Blue Stream-2 is to save the under-loaded Blue Stream.
It is hard to insist that such projects bring losses to Gazprom’s shareholders, because they might either bring positive or negative results in different time periods. Yet, they obviously upset the balance at the gas market and create instability. It is likely that Nord Stream and the Altai project (gas supplies to China) might be postponed for undetermined time or cancelled. Anyway, Gazprom’s plans to organize extraction from shelf sea, to develop the functioning transporting network, and to apply new technologies will remain stable.
In summer 2005, Alexei Miller said that Gazprom will grow to the level of a largest world energy holding. The corporation has been gradually fulfilling that task in the last two years. Gazprom bought up to 64 percent of Mosenergo shares, and is now discussing the scheme to exchange 10.49 percent of RAO UES of Russia’s shares for the assets of subsidiary energy companies. The salaries of Gazprom CEOs were raised in 2006 to the level of international energy giants. Each of the 16 members of Gazprom board earned $1.3 million on average, including the salary. Gazprom’s market cap drastically jumped up over the last year. The shares grew from $8 to $11.5 per share, although they fell to $10 in June 2007.
Blogalaxia Tags: REPSOL,ConocoPhillips,China
, Subsidiary is to Return
Rem Vyakhirev’s team was the successor of Viktor Chernomyrdin’s team. Consequently, it carried on all drawbacks and advantages of the USSR Oil and Natural Gas Ministry’s Soviet ways. Meanwhile, younger and more business-aggressive managers prevail in Alexei Miller’s team.
Vyakhirev, who headed Gazprom in 1992-2001, faced a strategic task: to create a competitive environment on the ruins of the post-Soviet oil and gas ministry authorized to do business. Vyakhirev implemented the task quite successfully. Beside numerous small private companies, several vertically-integrated corporations, such as NOVATEK, Itera, Nortgaz, Trans Nafta, were created. The new times set other tasks to Gazprom’s new leader Alexei Miller.
The general centralization of power in Russia required the consolidation of energy resources. Other management decisions became necessary for implementing that task.Nowadays, Gazprom has 29.1 trillion cubic meters of natural gas in undeveloped deposits. Independent gas producers have 9.8 trillion cubic meters, and Russia’s undistributed fund is 11 trillion. DeGolyer & MacNaughton independent auditor examined 90.5 percent of Russia’s gas deposits, 89 percent of gas condensate deposits, and 67 percent of oil deposits. The auditor estimated the cost of all Gazprom’s hydrocarbon resources at $87 billion, as of March 31, 2006. For a second year running, deposit increase exceeds extraction in Gazprom. The increase in 2006 made up 587.5 billion cubic meters in the S1 category. So, the replenishment of the mineral resources base in 2006 by means of geologic exploration works exceeded 100 percent (Gazprom extracted 556 billion cubic meters of gas in 2006). Three gas condensate and two oil deposits, two gas, six gas condensate, and 25 oil reservoirs were discovered by the exploration works. Meanwhile, almost no funds were being allocated for geologic exploration in Vyakhirev’s times, and Gazprom’s deposit increase was minimal, 81.7 billion cubic meters in the S1 category according to Gazprom’s annual report for 2000.
In recent years, Gazprom built up gas extraction by means of bringing into development Pestsovoe and Etypurovskoe deposits, developing at full capacity Zapolyarnoe deposit (100 billion cubic meters annually), and increasing extraction at Vyngayakhinskoe and Enyakhinskoe deposits, as well as by means of returning and acquiring assets of independent gas suppliers and oil companies.
Over the last six years, Gazprom systematically took away from various companies the assets which had been given to them earlier either by additional issuing of shares of enterprises holding extraction licenses, or by giving licenses to subsidiaries and then changing the ownership pattern of the company-owner. For instance, in May 2006, Gazprom established control over Nortgaz, whose owner was British company REDI Holding, controlled by Farkhat Akhmedov, Senator for the Krasnodar Territory (since May 2007, for the Nenets Autonomous Area).
Back in 1999, Urengoigazprom (100 percent belongs to Gazprom) lost control over Nortgaz, when it failed to buy out the latter’s additionally issued shares (its share fell from 51 to 0.01 percent). It explains why Gazprom, during the court hearings in 2005, gained back Nortgaz almost for free (it paid $1 for 51 percent of shares). However, Senator Akhmedov (or, rather, his British company, owns 49 percent and can veto any strategic decisions of the company).Speaking of another asset, Gazprom’s deputy chairman Alexander Ananenkov said: “The subsidiary is to return.” Gazprom acquired Sibneftegaz’ controlling stock for $132 million. Gazprom says that is how much creating Sibneftegaz’ infrastructure costs. In the 1990s, the asset belonged to Gazprom, but was sold to Itera for $9 million.
By a similar scheme, Gazprom acquired 51 percent of Purgaz, which owns a license for developing Gubkinskoe gas deposit by extracting 18 billion cubic meters annually).
In summer 2006, Gazprom made another good bargain, buying Tambeineftegaz, which owned 100 percent of Yuzhno-Tambeiskoe deposit of 1 trillion cubic meters, for just $350 million. Gazprom undertook that step so as to prevent such a large part of resources from leaking abroad: Tambeineftegaz’ owner Nikolai Bogachev offered to sell the company’s controlling stock to U.S. and Spanish holdings: Shell, ConocoPhillips, and Repsol. Gazprom thus showed that foreign companies in Russia should reach agreement only with it, as the executive of the state policy in the sphere of gas extraction and processing.
Civilized Manners of the Russian Monopoly
Gazprom bought 72 percent of Sibneft oil company (now called Gazprom Neft) in 2005 for $14 billion from the structures on whose behalf acted businessman Roman Abramovich. The deal was to show to the world what market conditions are created in Russia for the resources business. However, it went during the international denouncing of Russia for destroying YUKOS.
Gazprom made another overbank when entering the Sakhalin-2 project. The formal pretext and the only argument of the PR support was that the Natural Resources Ministry discovered violations of the nature-protection laws by Sakhalin Energy company, which owned the license for developing. It remains a secret why Shell basically surrendered its chief project in Russia. Apparently, the upcoming years will uncover the reasons why Shell gave up its leading role in the project. Formally, Gazprom bought the company’s 51 percent of shares for $7.45 billion. It turned out later the spent $3.6 billion out of $19.4 billion of planned investments of former shareholders will not be returned to them.
Price Cataclysms
The key change that occurred in the last six years was that Alexei Miller’s team managed to persuade the Russian government, with President Vladimir Putin’s direct support, that it is necessary to liberalize prices at the domestic market. So, natural gas in Russia grew from $10 to $50 per 1,000 cubic meters on average in the last five years, and the price keeps growing. Five billion cubic meters is to be sold at the exchange in 2007 (the average price is $65 for 1,000 cubic meters). Gazprom’s revenues from selling gas at Russia’s domestic market grew from 138 billion rubles to 366 billion rubles in the last six years. Although Gazprom declares losses from doing business at the domestic market, which is quite reasonable considering taxation, the corporation’s profits in 2001-2006 grew by nearly seven times, from 70.6 billion rubles to 411 billion rubles.
The gas prices for industry and energy sector will reach $98 in 2010. It is a truly revolutionary decision, although it will be implemented already at the times of Vladimir Putin’s successor. However, Miller’s contract for chairing Gazprom was prolonged in autumn 2006 till 2010, and Miller has good chances to remain there till that period comes.However, the growth of prices at the domestic market was helped primarily by Russia’s aspiration to join the WTO, and then by the growth of gas prices in the EU and the U.S., as a consequence of the absence of effective energy-saving policy. For instance, RAO UES of Russia consumed 6 million metric tons of fuel oil and over 100 billion cubic meters of gas in 2006. By the way, oil and gas consumption in Russia’s energy system was much better balanced at the times of the planned economy of the USSR and the 1990s. Moreover, Rem Vyakhirev’s team was made up mainly of people with oil-and-gas education, who did not allow technologic excesses in the sector’s development. On the contrary, Anatoly Chubais’ and Alexei Miller’s teams have financial and economy experts on key positions, instead of gas and energy professionals. Gazprom’s deputy chairman Alexander Ananenkov is a deterrent for the numerous initiatives of his colleagues in the monopoly; he prevents the company from taking some abrupt steps.
One of the brightest periods of Gazprom’s history was the transfer of gas contracts with CIS countries to European standards. For the sake of separating the contracts for gas transportation from those for gas supplies, Gazprom had to virtually declare war to transit countries – Belarus, Ukraine, Poland, and Bulgaria. From the commercial point of view, Gazprom won those wars, and increased gas prices from $65 to $130 per 1,000 cubic meters for Ukraine, and from $46.68 to $100 for Belarus. However, this tactic victory led to a serious exacerbation of Russia-EU relations. Let us hope, it will not end by the gas monopoly’s Pyrrhic victory in Europe. Although Russia has already received certain negative consequences. Presidents of Turkmenistan and Kazakhstan, Gurbanguly Berdymuhammed and Nursultan Nazarbaev, signed an agreement with Gazprom on building the Caspian Shore pipeline, and then immediately supported the project of the Trans-Caspian seabed pipeline bypassing Russia.
Adoption of the law “About natural gas export” should be definitely noted among the achievements of Miller’s team. In Vyakhirev times, Itera and other commercial traders dealt with export. Now, the law prohibited other export ways bypassing Gazprom Export (100 percent belongs to Gazprom). Consequently, Gazprom’s export revenues have considerably grown in the recent years. By selling one third of the total amount of extracted gas (150 billion cubic meters annually), Gazprom Export earned $38 billion in 2006, compared to $26 billion in 2005. By the way, Gazprom doubled in 2001-2006 its earnings from selling gas to foreign non-CIS countries, and the net profits in this sphere of business tripled, growing from 164 billion rubles to 456 billion rubles.
Supplies to CIS countries became more expensive by nearly five times, growing from 40 billion rubles to 192 billion rubles. The profits in this sector of the market increased by 3.5 times, from 12 billion rubles to 42 billion rubles. Miller team’s questionable decision was raising the purchasing price on Turkmen gas in 2006, from $44 to $100 per 1,000 cubic meters. It was the first revolutionary step in Russia’s relations with Central Asian states. Until then, the gas prices were growing by $10 per 1,000 cubic meters a year. Since mid-2006, no Central Asian country would agree to sell gas for less than $100.
Despite the general opinion, Gazprom is carrying out a consistent policy abroad. It both consolidates assets by purchasing EU traders, and uses price policy. So, the Committee of High Trust, consisting of 14 gas-exporting countries, has been created in Doha (Qatar). It will work out and coordinate the formula of price formation between the major gas exporters.
Management’s Behavior Trends
Under Rem Vyakhirev’s leadership, Gazprom actively sold gas through affiliated traders, legally independent from Gazprom. For instance, Itera worked at all CIS markets, with multibillion dollar contracts. Nowadays the situation is somewhat different. At the domestic market, Gazprom sells gas through Mezhregiongaz (100 percent belongs to Gazprom), at commercial prices as well. So, Gazprom actively uses the following instrument: it buys gas from independent producers at the drill hole at a price 10-15 percent higher than the prime cost, and thus puts all possible profits into its extra charges. This way, Gazprom was buying gas at 480 rubles for 1,000 cubic meters in 2006 from Nortgaz, and at 580 rubles from Sibneftegaz in 2007, while the selling price for industrial consumers of Russia’s first belt is 780 rubles for 1,000 cubic meters. On the other hand, all producers working with Gazprom for a long time gradually receive a higher price. For instance, LUKOIL sells gas of Nakhodka deposit at 1,000 rubles. Experts say this policy is much more honest to gas producers.
Direct subsidiaries have privileges in Russia, just like in any other country. For instance, all subsidiaries of Gazprom pipe gas through the unified gas-supply system at a lower tariff than independent gas producers. “This inequality is considered legal and quite logical,” said Troika Dialog analyst Valery Nesterov. “There are less popular examples of the management’s personal interestedness. For instance, Alexander Ryazanov brought into Gazprom ESN Energo company of businessman Grigory Berezkin. ESN Energo secured one third of the electricity consumption by all Gazprom enterprises. After Ryazanov’s resignation in autumn 2006, ESN Energo began to be gradually replaced by Mezhregion-Energosbyt (100 percent belongs to Gazprom through Mezhregiongaz).
Despite that Stroitransgaz’ controlling stock was sold to external organizations, unofficial sources say, the construction company is still supervised by Gazprom managers. It became harder to join Gazprom now. The reputation of Miller team’s key players is quite high. I daresay that not a single project in Russia goes without the support of certain responsible officials. Yet, Gazprom’s major projects follow the interests of the state.
Coal Strip Mine
The last news from the country’s chief newsmaker’s camp: the monopoly begins developing coalmine methane in Kuzbass. Its total amounts in the region are estimated at 13 trillion cubic meters. That is, the gas monopoly has found new considerable gas resources. “Very soon, already this year, the company will begin intensive works in coal strip mines in Kemerovo for developing methane deposits in coal mines,” said Gazprom’s deputy chairman Alexander Ananenkov. According to the monopoly’s estimations, the prognosis resources of coalmine methane in Russia are comparable to the traditional gas resources, and are estimated at 49 trillion cubic meters (15 percent of world deposits of coalmine methane). “Unfortunately, all that methane is not so far used for good purposes,” said Ananenkov. “Since 2002, we conducted works, and we have very good results.”
It is difficult and not very profitable to extract methane. In Russia, it is effective only together with coal extraction. So, experts think the project will be aimed not at gas extraction as such, but at obtaining quotas under the Kyoto protocol for Gazprom. Russia ratified the protocol in 2004. It stipulates exchanging quotas for harmful emissions into the atmosphere. Thus, by using coalmine methane, Gazprom, as a national producer, will obtain the right to trade quotas.
Politics and Gazprom
In the last five years, all major Gazprom’s projects have political underpinning. For instance, former Gazprom chairman Rem Vyakhirev said in 1998 that the North-European pipeline project was economically unfeasible. Ten years later, the same project, under the new name of Nord Stream, is considered one of the most promising routes to directly link Russia and the EU. The pipeline worth $7.5 billion suddenly becomes more attractive for Russia than the second branch of the Yamal-Europe pipeline worth $2.5 billion. Politically, it sounds like the desire to bypass Poland and other transit countries. However, the exacerbation of the Russia-Poland economic relations (after 2010) will soon lead to the necessity to settle a serious political crisis between the two countries, whose positions on many issues drastically diverge. Nord Stream will not bring the desired political dividends to Russia. It is not bringing direct dividends to Gazprom shareholders already now.
In summer 2006, Gazprom, EON, and BASF signed the final agreement on Nord Stream’s project, determining its legal and financial framework. Yet, the agreement does not contain the scheme of the project’s financing, and the certain sums due to be paid by the parties. It means the Nord Stream partners have not yet reached agreement on these issues. By the way, the terms of developing the Nord Stream financing scheme have already been repeatedly postponed, and remain unknown so far. The project’s feasibility study is not ready yet.
However, Gazprom will obviously make all efforts to launch the pipeline on time, because it has contracted nearly the entire amount of gas for 25 years ahead, beginning since 2011. The Russian gas monopoly is to supply these amounts anyway, by functioning pipelines if Nord Stream is not ready by 2011.
By the way, the Nord Stream project is a bargaining chip in the Russia-EU talks on the Energy Charter. EU guidelines on gas, adopted as a supplement to the agreement on the Energy Charter, question Nord Stream’s pay-back capacity. Gazprom’s deputy chairman Alexander Medvedev demanded to “eliminate points concerning the access of third parties to the gas-transporting facilities” from the guidelines. He justified his request by reminding that there exist such restrictions for the BBL pipeline under construction, which is to link the Netherlands and Great Britain. Russia is trying to carry out the Nord Stream project, changing the EU gas legislation en passant. So far, there have occurred no system changes in that sphere.
Gazprom plans to surround Europe with pipelines in the north (Nord Stream), in the middle (Yamal-Europe), and in the south (Blue Stream-2). The monopoly will be able to really control the gas streams in the EU only if it creates a complete ring supplies system. The plan’s weak link is the Blue Stream-2 project, so far. The matter is, after laying the first thread of the pipeline along the Black Sea bottom from Russia to Turkey, Gazprom encountered the problem of customers’ absence, because the gas-transporting network is not developed in Turkey. Then, Gazprom decided to turn the Blue Stream to Europe. It plans to lay the second thread along the Black Sea bed. Then, it will pipe gas through Turkey’s gas system, build an underwater bridge along the Bosporus seabed, till Greece or to Bulgaria. So far, Blue Stream has not been cost-effective. The project was developed by Rem Vyakhirev’s team. So, its low effectiveness cannot be blamed on Miller’s team only. On the contrary, Blue Stream-2 is to save the under-loaded Blue Stream.
It is hard to insist that such projects bring losses to Gazprom’s shareholders, because they might either bring positive or negative results in different time periods. Yet, they obviously upset the balance at the gas market and create instability. It is likely that Nord Stream and the Altai project (gas supplies to China) might be postponed for undetermined time or cancelled. Anyway, Gazprom’s plans to organize extraction from shelf sea, to develop the functioning transporting network, and to apply new technologies will remain stable.
In summer 2005, Alexei Miller said that Gazprom will grow to the level of a largest world energy holding. The corporation has been gradually fulfilling that task in the last two years. Gazprom bought up to 64 percent of Mosenergo shares, and is now discussing the scheme to exchange 10.49 percent of RAO UES of Russia’s shares for the assets of subsidiary energy companies. The salaries of Gazprom CEOs were raised in 2006 to the level of international energy giants. Each of the 16 members of Gazprom board earned $1.3 million on average, including the salary. Gazprom’s market cap drastically jumped up over the last year. The shares grew from $8 to $11.5 per share, although they fell to $10 in June 2007.
Blogalaxia Tags: REPSOL,ConocoPhillips,China
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EUROASIA
IRAN - AUSTRIA: Both got a 30-bn-dlr agreement, 1st step to export gas to Europe
Published | 22-Apr-2007Oil Minister Kazem Vaziri-Hamaneh said here Sunday that Iran-Austria 30-billion-dollar agreement was the major step towards export of Iranian gas to Europe. The statement was made at a press conference on the sidelines of the 12th international oil, gas and petrochemical exhibition.
"Given the world's limited energy reserves and the decisive role of gas in the energy basket of consumer countries, Europe held talks with Iran about purchase of gas.
"The 30-billion-dollar document, which was signed on Saturday afternoon, is an agreement on sale of LNG and participation in a joint project," he added.
Based on the inked agreement, the Austrian company (OMV) will participate in the 12th phase of South Pars development project and will purchase part of its products.
The minister said that transfer of Turkey's gas to Europe is one of the major issues that will soon be solved.
"The 5-6 percent rise in the number of participants in the conference compared to last year shows the interest of foreign enterprises in joint oil projects," said Vaziri-Hamaneh.
The 12th international oil, gas and petrochemical exhibition opened at Tehran's International Fairground on Wednesday and ended Sunday.
The event was attended by 797 domestic and 510 foreign companies from 35 countries.
"Given the world's limited energy reserves and the decisive role of gas in the energy basket of consumer countries, Europe held talks with Iran about purchase of gas.
"The 30-billion-dollar document, which was signed on Saturday afternoon, is an agreement on sale of LNG and participation in a joint project," he added.Based on the inked agreement, the Austrian company (OMV) will participate in the 12th phase of South Pars development project and will purchase part of its products.
The minister said that transfer of Turkey's gas to Europe is one of the major issues that will soon be solved.
"The 5-6 percent rise in the number of participants in the conference compared to last year shows the interest of foreign enterprises in joint oil projects," said Vaziri-Hamaneh.
The 12th international oil, gas and petrochemical exhibition opened at Tehran's International Fairground on Wednesday and ended Sunday.
The event was attended by 797 domestic and 510 foreign companies from 35 countries.
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eNergy
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RUSSIA: It is to Halt Gas Supply to Georgia
Published | 17-Apr-2007Russia is to cut gas supply lines to Georgia due to repair work at a pipeline in Russia, the Rustavi 2 TV channel reported Sunday. Moscow is to turn off the tap for two days on Sunday night.
The temporary suspension of the gas supply is not going to affect Georgians, according the national oil and gas corporation. Shipments from the Shah Deniz field in Azerbaijan are to cover the shortage.Russia and Azerbaijan are sending 1 million cu. meters of gas to Georgia daily. Azerbaijan’s Azerigas earlier supplied the country with a daily 1.3 million cu. meters, but the delivery was suspended after the contract expired.
Talks on a new deal are still underway.Gazprom doubled gas prices for Georgia to $235 per 1,000 cu. meters this year, and still has plans to sell as much as 1.1 billion cu. meters of gas to the country in 2007.
Georgia buys Azerbaijan’s gas at $120/1,000 cu. meters. The supply is expected to be boosted following a hike in production at the giant Shah Deniz field to make Azerbaijan the biggest gas supplier for Georgia.<