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Oil & Gas

World Gas Reserves by Country (2007)

Top 20 countries in the world, ranked by gas reserves (in Tcf – Source: EIA)
(Source: Energy Tribune)

(source: Oxford Energy Institute)

Pipelines: All pipelines in the Russian Federation are built under the auspices of Transneft, which handles oil piping, the coordination and management of oil transportation through long-distance oil pipelines to refineries in Russia and abroad. Transneft was established under Presidential Decree #1403 (17/11/92) and is the legal successor of Soviet Ministry of Oil’s Dept of Oil Transportation and Supplies (Glavtransneft). Transneft manages over 46,000km of pipelines. Gazprom & Rosneft will secure a respective 33.3% stake in the consortium that is to operate the slated Burgas-Alexandropoulos (Bulgaria2Greece) oil pipeline. TNK-BP was coordinating the project for a time prior to ceding the role to Transneft.

Transneft Interactive map of Russian Oil & Gas Pipelines

Static Regional Pipeline Maps

Pricing Mechanisms & Competetive Advantage: The present mechanism of determining the size of an export customs duty on the basis of an average price of Urals crude offers privileged terms to companies that have access to deposits where oil quality is higher than that of Urals crude. This gives them competitive advantages and has a negative impact on the economic efficiency of developing deposits containing lower-quality oil.

In January 2007 the Kremlin moved the administration of all offshore oil and natural gas deposits to state-controlled Gazprom and Rosneft. Experts say the move is designed to deter foreign investors from acquiring large stakes in the deposits. Shelf deposits will be allocated through contests, rather than auctions, where technological and environmental criteria will prevail over cost.

Gas spot Market – 3 Month Figures:

Spot trading session figures from Dec-Feb, indicate Rosneft and NOVATEK were the top sellers after Gazprom. The first gas trading sessions’ results were mixed, though 978m m3 of natural gas was sold at an attractive price, up to 30% above the regulated tariff. From February 1, Gazprom’s Mezhregiongaz will be holding trading sessions every 10 days, as opposed to once a month. Troika Group observed a dearth of sellers on the market – as Gazprom is not allowed sell more gas at market than independents. The effect is to drastically reduce the size and significance of the spot exchange.

LNG: Despite declarations that Gazprom would retain the exclusive right to develop the Shtokman field in the Barents Sea, thus implying that the gas would be piped to European markets rather than shipped to the United States, the company’s board has considered developing a liquid natural gas refinery. None of Russia’s LNG plants has yet begun operation. Of all the potential LNG projects – Shtokman in the Murmansk Region, Baltic in the Leningrad Region, Yamal (Kharasaveiskoye deposit), Tambei (South-Tambeiskoye deposit) and Sakhalin II – the first and the last are considered the most lucrative as they ahve geographical advantages for deliveries to the U.S.A. over every other source except Norway’s Snohvit (Snow White) and deposits in Trinidad and Tobago.

Production Sharing Agreements (PSA’s)

Project Fields/Blocks Participants Recoverable Reserves Project Status
Sakhalin-1 Chayvo,
Exxon Neftegaz Ltd (US) 30%
SODECO Ltd. (Japan) 30%
ONGC Videsh Ltd (India) 20%
SMNG-Shelf (Rus) 11.5%
Rosneft-Astra (rus) 8.5%

307 mln tons oil, 85 bcm of gas.

Phase 1: early oil. 1st oil oct ’05.

Astokhskoye (oil),
Lunskoye (gas)
Operator: Sakhalin Energy Investment Co.
Royal Dutch Shell (Ned) 55%
Mitsui (Japan) 25%
Mitsubishi (Japan) 20%
660 mln tons oil: 700 bcm gas
Phase 1: early oil 1999
Phase 2: Gas/LNG in 2007/8.
Sakhalin-3 Krinskii Operator: Pegastar
Exxon Mobil (US) 33.3%
Chevron Texaco (US) 33.3%
Rosneft (Rus) 22.2%
453 mln tons oil, 700 bcm gas.
Suspended due to los of exploration rights
Sakhalin-3 Vostochno Odoptinski,
Exxon Mobil (US) 66.6%
Rosneft (Rus) 33.3%
167 miln tons oil, 67 bmc gas.
Idle, now suspended.
Sakhalin-3 Veninski Rosneft (Rus) 51%
Sakhalin Oil Co.
(Rus) 24%
Sinopec (China) 24%
51 mln tons oil, 578 bmc gas. First drilling summer 2006
Sakhalin-4 Astrakhanovskii Offshore Rosneft (Rus) 51%
BP (UK) 49%
89 bcm gas Project stopped by Rosneft
Kaigan/Vasukan &
Zapadno Schmidovski
JV Co “Elvary Neftegas”:
Rosneft (Rus) 51%
BP (UK) 49%
600 mln tons oil, 600 bcm gas
Phase 1: Exploration.
Sakhalin-5 Lopukhovski Gazpromneft (Rus) 100% (originally Sibneft) 130 mln tons of oil, 5 bcm of gas Sibneft acquired block from TNK-BP
Sakhalin-6 Progranichnii Urals Energy 200 mln tons of oil Originally held by Alfa-Echo


In 2006, Russia generated $250 million from all Production Sharing Agreements, according to teh Ministry of Industry and Energy.
The Deputy Chairman of Russia’s Environmental Monitoring Agency, Rosprirodnadzor, stated that the Natural Resources Ministry had violated nature conservation legislation when it approved  the ecological findings on Sakhalin II’s second stage, which lead to the revocation of ‘order 600’, approving the ecological conditions for the Sakhalin II Production Sharing Agreement (PSA), and a suspension of work on pipelines, production & shipment facilities. The Sakhalin II PSA, Russia’s first, was signed in 1994, and became effective in 1996.
PSA’s were developed by the Russian government as a means of attracting foreign investment into Russia’s oil and gas industry during the 1990’s. A PSA relieves companies developing a field from almost all taxes, except for the unified social tax, the profit tax, payments for subsurface use at a discounted rate and favorable excise conditions. The exemptions apply until the developing company has re-couped all of its outlay, and as such, includes budget over-runs and unforeseen development costs, which have totaled $10 billion at Sakhalin II alone. The favourable terms offered to Shell/Mitsui/Mitsubishi, Exxon and Total for developing mega-projects in the 1990’s have recently been commented on by Kremlin liberals including Presidential aide
Igor Shuvalov, who prefers bringing PSA partners into the national tax regime proper, and Minister for Economic Trade and Development German Gref, who feels the present investment climate in Russia obviates the need for PSA’s. The stabilization and development of Russia’s economy, along with Gazprom’s emergence as a vehicle for state interests, has profoundly changed the context for PSA’s however.
Gazprom is presently seeking to renegotiate a swap deal agreed in a memorandum of understanding signed with Shell on July 7th 2006, in which Gazprom would take up a 25%+1 share stake in Sakhalin II while Shell would receive a 50 percent stake in Gazprom’s Zapolyarnoe field in Siberia. Shortly after the signing Shell announced that its Sakhalin-2 project was over-running by some $10 billion and 1 year. Shell CEO Jeroen Van der Veer said he was “absolutely staggered” at the figures, denying any knowledge of them when entering into the memo of understanding with Gazprom. The government was asked to accept an extra $10 billion in write-offs and product delivery a year late (spring 2008). Gazprom sought to reduce the stake in Zapolyarnoe it is offering to Shell on the basis that the value of the Sakhalin asset had fallen. This situtation has been further compounded by the revocation of order 600,  prompting Japan’s Chief Cabinet Secretary, nationalist Shinzo Abe, to express concern on behalf of Shell’s Sakhalin partners, Mitsui Co. and Mitsubishi. Their shares fell 3.1% and 1.8% respectively following news of order to cease work at Sakhalin.

Meanwhile near Sakhalin 1’s Odoptu field, in which Rosneft has a 20% stake, ExxonMobil 30%,  Japan’s SODECO 20% and India’s ONGC 20%, Exxon & the government are at odds over rights to newly discovered reserves at the Lebedinskoye deposit (approx 75 million tonnes of oil) adjacent to the Sakhalin plot. The size of the field made it, under law, a strategic asset though Exxon felt strongly that under the terms of their PSA, they had rights to the deposit. However, Minister of Natural Resources Trutnev auctioned the field, to the only applicant, Rosneft.

The Natural Resources Ministry is also reviewing Total’s PSA for the Kharyaginsk oil project. This comes after comments from Total’s senior vice president for Continental Europe and Central Asia (to Dow Jones Newswires) that after missing out on opportunities in post-Communist Russia, Total now hopes the Shtokman field will provide a way into Russia’s market. Total was shortlisted in June 2005 to partner Gazprom on the EUR15 billion Shtokman LNG project, along with Chevron Corporation and ConocoPhillips, Norway’s Statoil ASA and Norsk Hydro ASA. However, the Russian Government chos to develop Shtokman availing of technological assistance from foreign partners, without offering a stake in the project.

Kovytka: The Kovykta gas field is about 280 miles from the city of Irkutsk in the north of the Irkutsk region of Eastern Siberia. It is estimated that the field has resources totaling about 2.0 trillion cubic meters of gas. BP was developing Kovykta through TNK-BP, which owned 62 percent of Russia Petroleum, the field’s operator. Russian regulator Rosnedra threatened to withdraw the Kovykta license due to the developer’s failure to fulfill a commitment to ramp up the field’s oil output. TNK-BP claimed Gazprom was stalling on a pipeline which would have facilitated an increase in production. Pressure peaked around the G8 Summit at Heiligendamm and St Peteresburg Economic Forum.

Tony Hayward, BP’s CEO spoke at a Moscow conference in June ’07, saying “Russia, like anywhere, has its risks. You only have to look at BP’s experience in the US over the last two years to understand that doing business anywhere in the world can be challenging from time to time. Russia is no different,” Tony Hayward, BP’s chief executive, said in a speech at a conference in Moscow in June.

A week later the group agreed to sell Gazprom its 62.89% stake in Russia Petroleum, or in other words the license for the Kovykta gas field, and its 50% interest in the East Siberian Gas Company (ESGCo), the company constructing the regional gasification project, for a total fee of between $700 and $900 million. Russia Petroleum’s stakeholders were TNK-BP (63%), Vladimir Potanin’s Interros conglomerate (26%) and the Irkutsk regional government (11%). The price has been universally regarded as bargain basement.

TNK-BP remains in Russia however. Mr Hayward confirmed that TNK-BP will be in Russia for the long-haul, describing the Kovykta issue as “one of those bumps in the road, which we all have to navigate occasionally.” TNK-BP has a capital spending programme of US$3.4 billion in 2007. Part of the budget will be invested in the 35 new licenses it secured in 2006. The group is also working with Rosneft in another Russian joint venture Elvaryneftegas, which plans to drill two wells this year in the West Shmidt block, an unexplored region in the north of Sakhalin, added Hayward. BP’s aim is to continue to invest in Russia. We continue to make progress and… we are in this for the long haul.”

TNK-BP owns many other fields in Russia, including the East-Urengoigas condensate fields in the Yamalo-Nenets Autonomous District with a projected annual potential of 2.7 billion cubic meters of gas and 700,000 tons of gas condensate by 2008, and the Verkh-Tarskoe field in the north of the Novosibirsk Region. Novosibirskneftegaz, a TNK-BP company, holds licenses for the Rakitinskoe, Mezhovskoe, Vostochnoe, and Vostochno-Mezhovskoe license areas. TNK-BP acounts for a quarter of BP’s production worldwide, and a tenth of its profits (TNK-BP recorded a $6.3 billion profit in 2006). Moreover TNK-BP continues to find more oil than it pumps, something that BP’s other units have strugggled to do in recent years. Following the announcement of the sale of the Kovytka license to Gazprom, media has speculated that BP could buy back into Kovytka by purchasing the 23% stake held by Interros.

The Kovytka agreement also provides for joint participation in a $3bn project internationally, with GazpromExport CEO Alexander Medvedev confirming Gazprom will pay for its share in cash, an working example the reciprocity fundamental to international co-operation with Russia in strategic sectors. The potential project is likely to invlolve LNG. BP is expected to commission a 9m tonne LNG terminal in New Jersey next year, and Gazprom may wish to participate. The partners may also be interested in the UK’s gas retail business, though this idea will probably face political hurdles in the EU. TNK-BP core shareholder Viktor Vekselberg also stated that the company would like to contribute the stake in Rospan. Unlike Kovykta, Rospan does belong to TNK-BP Holding and thus touches the interests of the company’s minority shareholders. Should Gazprom get involved in Rospan (479m boe in 1P and 2.8bn boe in 3P reserves) it could unlock the value of TNK-BP Holding’s substantial gas reserves. The outfit can potentially produce 16.8bn m3 in several years’ time if Gazprom allows pipeline access.

See Joint Press Release 22nd June 2007

Russneft: Mikhail Gutseriyev, head of mid size oil company RussNeft has been charged with “large scale illegal businesss activity”, according to the Interior Ministry.
The investigative division of the Interior Ministry said in a statement on May 15th it was charging Mr Gutseriyev with conducting illegal activity as part of an “organized group”, wording strongly reminiscent of charges facing former Yukos chief executive, Mikhail Khodorkovsky, who has been jailed since October 2003 for fraud and tax evasion while his company has been taken over by state-controlled Rosneft (source: FT)

Legislation: On July 8 2006, the Duma, passed a bill establishing a zero mineral extraction tax rate for new oil deposits. The policy will apply to all new fields in Siberia’s Yakutia Republic, Irkutsk and Krasnoyarsk Regions. It also provides for a sliding coefficient of mineral extraction tax for oil fields that are 80-percent depleted or more. The bill is designed to encourage oil companies to invest in new deposits and technologies to prolong the production life of older deposits. Ten year tax holidays will be established for crude oil and natural gas production licenses, stretching to 15 years for prospecting licenses. Tax breaks can be withdrawn ahead of time of oil production reaches 25 million tons a year.

Legislation: At its July 5 2006 plenary session, the State Duma passed the bill “On Gas Export” in the second and third readings. Some 355 deputies voted for the bill, 64 deputies voted against it, with no abstentions. The bill’s procedure governing gas export applies both to pipeline and liquefied gas. According to the new legislation, gas export is to be regulated by international agreements signed by Russia, by legislation “On Gas Export” itself, and by other applicable laws and regulations. At the same time, this bill does not apply to export of gas produced under Production Sharing Agreements signed prior to enactment of the new legislation. Gazprom deputy CEO Alexander Ananenkov called for legislation granting Gazprom near-exclusive rights to export gas to be amended to include projects under PSA’s in June 2007.

Three projects in Russia are operated under PSA conditions: Kharyaginsk field ($800 million has been invested, Total is operating the project) and two offshore projects in the Okhotsk Sea: Sakhalin-1 (over $5.6 billion invested ExxonMobil is the operator) and Sakhalin-2 (over $20 billion, Shell. Mitsui & Mitsubishi Corporation). According to the report, in 2005, total income of Russia from PSA projects amounted to $110.3 million. The federal budget received an equal sum for the right to use names “Russia” and “Russian Federation” in the names of companies.


November 2007

November 21

The Nord Stream gas pipeline project will be completed on schedule, said Russia’s First Deputy Prime Minister Dmitry Medvedev. The Nord Stream (North-European) gas pipeline, which will run across the Baltic seabed, is a joint Russian-German project led by Russian natural gas monopoly Gazprom. Minor changes could be made but they should not affect the more general approach and the schedule, he said.

According to Medvedev, the project was conceived at a time when gas production was falling in Europe while new sources had not appeared yet. “Some countries do not want to participate in it and they have the right to do so. I think common sense will finally prevail and our colleagues will realise that this project will benefit all countries,” Medvedev said.

November 20

Independent gas companies will increase Russia’s production of natural gas by 140 to 180 billion cubic centimeters a year, said Alexander Berezikov, vice president of Russian-British oil venture TNK-BP.

Russia produced 656 bcm of natural gas in 2006, with Gazprom accounting for around 83.9% of the total. It means that independent gas companies produced 105 billion cubic centimeters. According to Itera International Group, one of the largest independent producers and traders of natural gas operating in the CIS and the Baltic states, the share of natural gas contributed by independent companies to Russia’s annual gas production has been growing since 2002, amounting to 16% in 2006 and less than 15 in 2005.

Berezikov also said Gazprom and TNK-BP have postponed the deal to establish a joint venture, which was to be concluded by December 1 until the end of 2007. The sides had not yet decided on several minor parameters of the agreement. According to him, Gazprom’s entry into the Kovykta project has not been postponed so far.

In June, Russian-British joint venture TNK-BP and BP agreed to sell their stake in the Kovykta gas condensate deposit in the Irkutsk region to Russian natural gas monopoly Gazprom for $700 to $900 million.

November 16

Gazprom leaders discussed the preparation and progress of four gas production centers in Russia’s far east, in the Island of Sakhalin, the Republic of Sakha (Yakutia), the Krasnoyarsk Territory and the Irkutsk Region. Sakhalin is considered one of the most promising offshore gas-bearing areas in Russia’s Far East.

The Russian gas giant was appointed by the government to coordinate the program for installing a unified system of extraction, transportation and distribution of natural gas in East Siberia and the Far East, and the projected gas exports to China and other Asia-Pacific nations.

US-based Siberian Energy Group has secured five-year exploration and development licenses for two blocks in the west Siberian Khanty-Mansi Autonomous Area through its wholly-owned subsidiary Kondaneftegaz. The two license areas – Karabashsky-61 and Karabashsky-67 – cover 672 square kilometers with an estimated 167 million barrels of C3+D0 resources.

Until recently, Siberian Energy had five development licenses in West Siberia. In March 2003, the company received three development licenses in the Kurgan Region and in June 2006 another license in the east of the same region.

Siberian Energy Group Inc is a US-based public oil and gas exploration company with 100% of its assets in West Siberia.

September 2007

Oil Field Exploration: The Russian government plans to boost financing of prospecting for new mineral deposits in East Siberia to 6.5 billion rubles ($260 million) in 2008, Deputy Mineral Resources Minister Alexei Varlamov said in September.

The increase in investment pales in comparison to the hike that will be needed from the private sector, he said. Producers invested an average of 13 billion rubles ($521 million) in exploration, but the minister said that amount should be doubled. “Our estimate is that mineral developers must spend at least 25 to 30 billion rubles in order to discover enough new deposits. That is why the licensing procedure is so important.”

Pipelines: MOSCOW – An intergovernmental agreement on the proposed Russia-China oil pipeline may be signed at the meeting of the two nations’ government heads in Moscow on November 5.

Deputy Prime Minister Alexander Zhukov said Russia insisted that the governments should agree on pipeline construction, not sign a long-term oil supply contract. The oil supply deal should be made by companies, not governments, he said.

“Price is the centrepiece of the current oil negotiations,” Zhukov said, adding that Russia’s state-owned oil company Rosneft was not happy with the price it is getting for oil exports under the current Chinese contract, which made deliveries unprofitable. He said the company has better offers from Western nations.

TALINN – Estonia’s official refusal to allow Nord Stream AG to lay the North European gas pipeline across its offshore economic zone will not slow down the project, said Alexei Miller, CEO of Russian energy giant Gazprom.

He said Gazprom had hoped the Estonian government would grant the construction permit, because “laying the gas pipeline would be more economically effective in Estonia’s economic zone, where the seabed is more level.” But the original plan also stipulated an alternative option of stretching the pipe along the Finnish seabed, Miller said, adding that Gazprom “is conducting highly constructive negotiations with the Finnish government.”

Irkutsknedra (Irkutsk Commission on Subsoil Use) announced that a giant natural gas field has been discovered in East Siberia. The Angaro-Lenskoye field in the Irkutsk Region is reported to contain an estimated 1.2trn cubic meters of gas, which is comparable in size to the Kovykta field located nearby, which holds 2trn cubic meters of reserves. The license holder of the Angaro-Lenskoye field is Petromir, a privately-owned diversified holding.

Victoria Oil & Gas PLC, London, reported a gas-condensate discovery on the 1,224 sq km West Medvezhye license in the Yamal region of Western Siberia, Russia. Well 103 flowed on test at 400 Mcfd of gas and 350 b/d of condensate at 1,500 psi tubing pressure on a 12/64-in. choke with traces of water. The well penetrated a Jurassic J2 horizon at 3,794-99 m. Victoria will test the well for 90-120 days to collect information on daily production rates, reservoir characteristics, and productivity and then submit the data to consulting engineers for review. The company has built an ice road [from Well 103] to the next exploration well, 105, and is mobilizing the rig. Well 105, to explore a 15 sq km prospect, is to spud in the second quarter of 2007. The prospect is a four-way closure that subsurface and 2D seismic data indicate covers both structural and stratigraphic accumulations. Its potential resource is 130 million boe, the largest on the license. Victoria plans to drill Well 105 to TD 3,850 m and targets sandstones at 2,760-3,780 m. (source: Reuters)

Renova Group has bought the Leningradslanents oil shale producing facility near St Petersburg and anounced plans to increase production from 50,000 to 100,000 metric tons per month.The investment will incorporate a a processing facility where shale will be converted to oil. Oil shale is used as a fuel and raw material for producing synthetic fuels. Reserves in Leningrad Region are estimated at 1.1bln metric tons, or approximately 200 mln metric tons of oil.

TNK-BP Holding paid $485 million for a 50% stake in Vanyoganneft, a joint venture with US Occidental Petroleum in West Siberia. Vanyoganneft produces about 2.2 mln metric tons of oil per annum (45,000 bpd) and has proven reserves of 25 mln metric tons.

Exploration: ZAO Evrotek, a company set up by the French Oil and Gas Suppliers Council, won the tender for the Yalyatinskoye oil and gas area in the Tazov District of the Yamal-Nenets Autonomous Area. The company paid a record Rbs2.310 bln ($87 mln) for an exploration, prospecting and production licence, while the starting price was Rbs100 mln ($3.7 mln). The deposit has 6.5 mln metric tons of oil, 82.8 bln cu m of gas and 7.2 mln metric tons of condensate, and additional prospective gas reserves are estimated at 2.4 bln cu m.

Gas Prices: The Minister of Energy and Industry. Viktor Khristenko, proposed almost doubling gas tariffs for industrial consumers (to $80/mcm) in 2007 and introducing a system of long-term supply contracts, where price is set on the basis of European net-back. A major report leaked to Vedomosti outlines how Russian energy infrastructure will require $600 billion investment to 2026.

TNK-BP/SIBUR: British/Russian joint-venture TNK-BP signed an agreement with a Gazprom’s petro-chemical unity SIBUR-holding, to process associated petroleum gas (APG) in the Khanty-Mansiisk region. Gazprom have effectively fired Gazpromneft’s former CEO Alexander Ryazanov who was widely known as a proponent of ambitious acquisitions and the keeping Gazpromneft’s independence from Gazprom. Gazpromneft was formerly known as Sibneft, half owned by Roman Abramovich, but was sold to Gazprom in August ’05 for some $13 billion. Ryazanov’s replacement is Alexander Dyukov, formerly the president of Gazprom’s petrochemical subsidiary, Sibur Holding. Initial responsees to teh appointment suggest that Gazprom wishes to exercise tighter control over Gazpromneft, to the extent that whatever Yukos assets the state monopoly wil acquire may not be consolidated with Gazpromneft – while a share buy-back may further dilute Gazpromneft’s strength.

Oct ’06: Gazprom CEO Alexei Miller announced an agreement with South Korea’s state-controlled KoGas to supply 7 to 10 buillion cubic meters of of natural gas annually to South Korea by pipeline in 2012-2013. A pipeline route has not yet been agreed though onshore, at an estimated cost of $2 billion, is cheaper but longer than offshore. Deutsche UFG’s offered in October to buy a controlling stake in Yukos (with its $21.8 billion debt, 2 production platforms and 5 refineries), mooted to be on behalf of Gazprom. A Rosneft move was deemed less likely in press reports, notwithstanding the fact that Rosneft is Yukos’ main creditor, currently owed $9.5 billion. The move could result in a bidding war between Gazprom and Rosneft. The Moscow Times cited Alexander Temerko, a former Yukos vice president, as saying that a state-owned company such as Gazprom or Rosneft could buy a controlling stake in Yukos for $3 billion to $4 billion and then use their leverage to lift its tax debts. As of Oct ’06, Yukos owes $11.5 billion in back taxes.

September ’06:
Chairman of GazpromNeft, the oilproducing subsidiary of Gazprom established to incorproate Sibneft into the state controlled group, Alexander Ryazanov, who is also Gazprom’s deputy board chairman, denied GazpromNeft has any intentions to purchase new assets until 2018, stating  “Our core shareholder has vast natural gas deposits rimmed with oil reserves.”
Kommersant reported
Rosneft is in talks with Sintez corporation on the acquisition of a stake in Arkticshelfneftegaz, owner of three oil units on the Arctic shelf.
Russian crude oil production increased 0.9 percent to a new all-time high of 9.759 million barrels per day in August, largely thanks to the Exxon-led Sakhalin-1 field coming on stream. Volumes through Transneft’s pipes fell 2.6% in August, and Druzhba (pipeline) volumes fell 4.5 percent, Transneft’s seaborne exports through ports rose 1.9%.
Rosneft & Gazprom 1H ’06 RAS results released.
The Energy Tribune reported that Surguftneftgaz is possibly being lined up for government takeover as its results continue to improve. The company has recoverable reserves of 18.3 billion barrels of oil equivalent. In 2005 it produced 1.3 million barrels of oil per day along with 1.4 Bcf of natural gas. Its stock (68% of which is held by mgmt, 24% free-floating) has risen from $10 to $70 over the past seven years giving Surgutneftegaz a market capitalization of $32 billion. The company has five production units operating strategically important licenses in Western and Eastern Siberia, as well as four refineries. Surgutneftgas has a strong reputation as a self-suficcient company which explores fields by drilling and not through expensive 3D seismic surveys. The company is also known for drilling the cheapest wells in Russia, about $200,000 for a deviated well – almost one fifth of the average on the Russian market. At over 1000 deviated & horizontal wells per annum, Surgutneftgas is the biggest driller in Russia. Unlike Rosneft, the company has not grown through takeovers, but through its own business model based on efficiencies & drilling technologies. However, Surgutneftgas industrial relations problems arose while the G8 Summit was taking place in St Petersburg. Several thousand employees staged a demonstration in Surgut, demanding higher wages and greater freedoms from their employer. Many of the slogans on the demonstrators’ signs were directed at Vladimir Bogdanov, the company’s general director.
Russia?s natural gas exports remained almost flat in January-June falling 0.7% on the year to 95.6 billion cubic meters. Natural gas exports increased 52.4% on the year to U.S. $21.79 billion in January-June. Russia?s gas exports to countries outside the CIS rose 5.8% on the year to 85.4 billion.
TNK-BP Executive Vice President for downstream operations Tony Considine confirmed that the Russian Government is offering preferential conditions for oil companies paying excise fees and export duties, enahncing the profitability of refinery-based projects.
An 8cm offshoot pipeline of Druzhba-1, Russia’s largest export pipeline burst in the
Western Bryansk region, spilling 48 tonnes of oil over 4 square kilometres and causing a spike in the oil price on European Markets ($73.95). The spillage re-opened the debate about Europe’s over-dependence on Russia energy.
Gazprom offered two times less than the expected sum of $4.2bn for 20 percent of Gazprom Neft shares owned by YUKOS.
Russneft purchased Saratovneftegaz, Orsknefteorgsintez, Orenburgnefteprodukt and Neftemaslozavod from TNK-BP on the back of a $1 billion loan from Sberbank. Rosneft bought four TNK-BP subsidiaries and 75 percent of the Krasnodarexport refinery, for almost $1 billion. Russneft is one of the ten largest Russian oil and gas companies. In 2005, the company extracted 12.2 million tons of oil. Its extractable reserves total over 630 million tons. Russneft includes thirty oil extracting enterprises, three refineries, two transport companies, and 300 filling stations.

Really Big Oil, The Economist, 08/09/06. Article advocating privatization of National Oil Companies (NOCs)

Companies Operating in Russia: Anadarko Corporation, Arawak Energy, Aurado Energy, Avery Resources, BG Exploration & Production, BP, Burren Energy, Cambrian Oil & Gas, CanArgo Energy Corporation, CanBaikal Resources, Cardinal Resources, Caspian Energy, Caspian Holdings, Chevron Corporation, Chinese Petroleum Corporation, ConocoPhillips, Dana Petroleum, Devon Energy, Dragon Oil, , EON, EEG, Emerald Energy, Eni, ExxonMobil, Frontera Resources, Gaz de France, Gazprom, Harvest Natural Resources, Heritage Oil, Hess Corporation, Hydro, Indusmin Energy, INPEX Corporation, Japan National Oil Corporation, JKX Oil & Gas, KazMunayGas, Kerr-McGee Corporation, LUKOIL, Lukoil Overseas, Maersk Olie Og Gas AS, Max Petroleum, Mitsubishi Corporation, Nelson Resources, Occidental, Patch International, Petro-Canada, Petronas, Regal Petroleum, Repsol YPF, Rosneft, RWE Dea, Sakhalin Energy, Shell E&P, Sibir Energy, Sibneft/GazpromNeft, SOCAR, Sonoran Energy, Sovereign Oil & Gas Company, Statoil, Surgutneftegas, Tatneft, TNK-BP, Total, TPAO, Transeuro Energy, Transmeridian, Valkyries Petroleum, Victoria Oil & Gas, Victoria Petroleum, West Siberian Resources, Wintershall, Yukos Oil Corporation.

Lubricants Market: The Russian market of lubricants is today among the four most promising national marketplaces worldwide. The supply of lubrication products from abroad annually grows by 20 percent. Since domestically produced good-quality lubricants have traditionally been unavailable on the Russian market, there emerged a tendency for imports to squeeze out Russian output. However, recent years have witnessed the invigoration of the Russian domestic lubricants industry. The largest Russian oil companies are playing a prominent role in its robust growth. LUKOIL, YUKOS, TNK-BP and Sibneft (now Gazprom Neft) have organized production of highquality oils. In 2005-2006, Russian companies began matching foreign production quality standards.

Russia Profile Recommends:
An Emerging Gas Cartel?, REFL Report, August 2006.
Russian Authorities to Review Shell’s Sakhalin-2 Project for Cost Overruns, MosNews, 24th July 2006
Russian moves spark ‘gas OPEC’ fears, International Security Network, 11th July 2006.
EU dangles rewards as Russia eyes G8 energy pact, Reuters, 11th July 2006.
What Energy Security Really Means, St Petersburg Times, 11th July 2006
An IPO Built on Greed and Ambition, Catherine Belton, Moscow Times, 5th July 2006
Joining Forces – But How Much Foreign Involvement in Oil is too Much? Shaun Walker, Russia Profile, 26th June 2006.
The Politics of Pipelines, Newsweek, 25th June 2006.
Gazprom widens European influence, BBC (June 20th 2006)
Schroeder: Gazprom most reliable in Europe, Financial Times (June 19th 2006)
Energy Egotism is a Road to Nowhere Wall Street Journal (February 28, 2006)
Russia’s Rush for Gas Reveals Growing Gap between Search for Wealth and Vanishing Tradition, The Guardian, 14th July 2006

Yokus break-up/Yuganskneft auction
Yugansk Auction:  Final Chapter in Yukos saga RIA Novosti (Nov. 19, 2004)
Power Play — The Kremlin clampdown on Yukos hasn’t stopped the dealmaking frenzy Time CDI summary (Nov. 16, 2004)
Yukos and the slowdown of Russian Caspian projects Central Asia-Caucasus Analyst (Nov. 2004)
Giving Foreigners the Nod — Opening Up the Oil and Gas Sector Russia Profile (Oct. 14, 2004)
Raising the Bar — Oil Remains at the Center of the Growth Debate Russia Profile (Sept. 23, 2004)
Russia’s Oil Production and Exports Grow in First Half of 2004 RIA Novosti (Aug. 23, 2004)
High oil prices: What tactic will Russia choose? RIA-Novosti  (May 27, 2004)
Russian Oil Sector:  Fueled by Strong Oil Prices…But Taxing Times Ahead? (Troika Dialog Research, Feb. 9, 2004) — Adobe Acrobat file

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