פרסם אצלנו
צור קשר
יום ראשון 21.04.2024
Russian Energy Overview
11/11/2009 18:57

platt ,אחד מכתבי העת המקצועיים המובילים בתחום האנרגיה,הקדיש החודש סקירה רבת היקף על תחום האנרגיה ברוסיה.אנו מביאים את הסקירה במלואה.

November 5, 2009 - In 1999, Russian oil production just about topped 6 million b/d as the country struggled to recover from its Soviet-era output highs. The country was also only just emerging from its worst ever financial crisis the year before, and the Russian government under then President Boris Yeltsin was considering selling off major stakes in the state-owned energy companies Gazprom and Rosneft.

What a difference ten years can make. By October 2009, Russia's oil production exceeded 10 million b/d for the first time in the post-Soviet Union era. (See related story: Russia's October oil output hits record 10 million barrels per day)

Russia's growing predominance as the world's leading oil producer has been given a major fillip by OPEC's decision late last year, in the face of plunging oil demand, to remove 4.2 million b/d of oversupply from world markets. Saudi Arabia's share of that cut was around 1.3 million b/d.

2009 has seen a welcome resurgence in Russian oil production after 2008 witnessed the first decline in output since the lowly days of 1999. Analysts and market observers then feared the significant growth of the previous decade was about to end, and the decline in production from the mature fields of Western Siberia would trigger an overall drop in the years to come.
Oil output fell by about 1% year on year in every month of 2008 and in the first two months of 2009. Overall 2008 oil production fell 0.7% to 488.105 million mt--the first annual production decline in 10 years.

Analysts, in the first quarter of 2009, were adamant the output decline would continue over the year, and even the government predicted a continuing fall in production.

In March, Russian Prime Minister Vladimir Putin himself forecast Russian crude output would drop 1.1% to 482 million mt (9.64 million b/d) in 2009.

The crude output forecast was, according to the prime minister's office, based on "insufficient volumes of financial resources to maintain production from old depleted fields, mainly in Western Siberia, and to develop new fields in East Siberia and the Timan-Pechora oil province."

Since then, though, Russian oil producers have managed to increase production thanks to the ruble's depreciation against both the dollar and euro and lower oil export duties.

In addition, companies have brought online new fields, that have more than compensated for the falling production from the more mature fields in Western Siberia.

One massive injection of oil came in August from the country's biggest oil producer, Rosneft, launching its giant Vankor field. The company plans to increase output from the field to 220,000 b/d by the end of the year from the current 130,000 b/d.

In addition, Lukoil brought production at its new field, Yuzhno-Khylchuyu, to its planned peak output of 7.5 million mt/year, while TNK-BP, thanks to its Uvat project launch early in 2009, continued to see growth in crude output.

Analysts, however, remain uncertain as to whether Russia can sustain its output growth. Despite some bullish forecasts, some of which see Russian production increasing to around 13 million b/d in the future, most industry observers see 10 million b/d as the country's production plateau.

In a recent report, analysts at Bernstein Research said output would begin to stagnate next year and then tail off as mature fields lose production capacity.

With traditional oil producing regions on the decline, Russia is looking to new, more remote and difficult to exploit areas, particularly in Eastern Siberia.

However, companies are looking for beneficial tax regimes there in order to stimulate activity.

Russian Prime Minister Vladimir Putin approved in July the decision to introduce a zero rate export duty for East Siberian crude to stimulate the development of the remote oil province. But it has been unclear when it will come into force and how long it will last.

"There is no clarity if the planned zero rate for export duty for East Siberian crude will last for three or five years. Without that understanding it is difficult for us to take investment decisions," Peter O'Brien, vice president of Russian oil major Rosneft, said October 21.

He urged the government to clarify its tax policy plans for East Siberia as the company needs to take urgently investment decisions for new fields in the region.

Russian Energy Minister Sergei Shmatko said October 26 the zero rate export duty for East Siberian crude is likely to last a minimum of five to seven years.

Shmatko said it should take five to seven years for companies to recover costs at new fields in East Siberia, and therefore the zero rate should be set in line with this time frame.

"Based on such logic... [the zero rate export duty] should be for a minimum of five to seven years," he said.

The timing on the export duty is still uncertain, however, as Shmatko's proposed time frame has yet to receive formal approval from Russia's government.

OPEC cooperation

Another important factor in Russian crude output growth is whether it will formalize its relations with the oil exporting cartel, OPEC. For a number of years, Russia has hinted it could support OPEC's actions on balancing the crude supply market.

Towards the end of 2008, when oil prices plummeted from all-time highs, OPEC formally requested that non-OPEC producers--specifically Russia, Norway and Mexico--cut output to boost prices.

But despite rhetoric from senior Russian officials, and claims from major producers such as Lukoil that helping OPEC would be beneficial for everyone, Russia made no pledge to help OPEC out.

At the end of October, OPEC invited Russia to take part in the next OPEC meeting, which is due to take place in Angola in December. Russia is to send a delegation to take part in the meeting, energy minister Shmatko said, adding that Russia remained "interested in cooperation with OPEC."

Shmatko also reiterated that Russia expects to hold a join seminar with OPEC before the end of this year in Moscow to discuss greater cooperation. "We are to discuss available steps for cooperation, in particular in the exchange of information and analyses of market scenarios and preparing specialists," he said.

Speaking after the most recent OPEC meeting in September, the group's secretary-general Abdalla el-Badri refrained from criticizing Russia, saying OPEC could not interfere in Moscow's decisions, though he described the rise in Russian output as "disappointing."

Asked at that time whether OPEC would again request non-OPEC help to try to balance markets, Badri said that his visits to Russia in the past had failed to produce any concrete results, though the discussions would continue.
Russia's October oil output hits record 10 million barrels per day

Russia's October crude oil production rose to 42.469 million mt (10 million barrels/day) setting a post-Soviet era record high for the third consecutive month and gaining 1.8% on the year, according to preliminary data released Monday by Russia's Central Dispatching Unit, a division of the country's energy ministry.

In August, Russia's crude output of 9.93 million b/d beat the post-Soviet record of October 2007, when oil producers pumped 9.89 million b/d. September crude output climbed further to 9.965 million b/d.

Since August, Russia has displaced Saudi Arabia as the world's biggest oil producer, benefiting not only from its own volume growth but also from a sizable reduction in Saudi output as part of OPEC's moves to cut supply.

The current growth, however, is unlikely to persist for long as there is no increase in production wells drilling, said Valery Nesterov, an analyst with Moscow-based Troika-Dialog investment bank. In fact drilling is declining, he said, adding that the recent growth in crude production was partly due to rising oil prices.
Russia's oil output began to rise again in March after falling by nearly 1% on the year in every month of 2008 and the first two months of 2009. The increased production came partly from new fields brought on stream by Rosneft, Lukoil, and TNK-BP and partly due to an improving fiscal regime.

Nesterov said Rosneft's giant Vankor oil field in East Siberia, which was launched in August, was likely to help maintain the country's production growth through the end of this year and possibly next year.

In October, Peter O'Brien, a vice president of Russia's biggest oil producer Rosneft, said his company was confident it would be able to maintain crude production growth to 2013.

The company must take investment decisions urgently if it is to secure crude output growth beyond 2013. However, this is difficult due to the lack of clarity over the government's plans for tax policy in the region, O'Brien said.

Russia's energy ministry recently revised up its 2009 output forecast by about 1% on the year from 488.1 million mt (9.735 million b/d) in 2008. The government had expected 2009 to show a 1.1% decline on the year.

Russia's crude production totaled 410.303 million mt in the first ten months of the year, up 0.8% from the same period a year ago.

Non-CIS September exports up 8.4%

Exports of Russian crude to countries outside the Commonwealth of Independent States rose 0.7% on the year to 17.827 million mt (4.2 million b/d) in October.

The CIS comprises 12 former Soviet Republics: Russia, Ukraine, Belarus, Uzbekistan, Armenia, Azerbaijan, Turkmenistan, Georgia, Kazakhstan, Kyrgyzstan, Moldova and Tajikistan.

Russia transported a total of 20.05 million mt of crude to non-CIS countries, up 1.8% on the year, including 2.223 million mt of transit crude from other countries, mainly Kazakhstan.

Oil exports to non-CIS countries through Transneft's national pipeline system were 17.923 million mt, up 0.7% on the year.

Russia's October crude oil exports to the CIS countries rose 4.8% to 2.722 million mt.

In October, Russia stopped crude deliveries via Transneft's pipelines to China. In the previous three months it had transported over 200,000 mt/month via the route.

The reason for the halt in crude supplies via Transneft's pipelines to China is unclear as a representative from Transneft was not able to comment on the issue when contacted. Representatives of TNK-BP and Gazprom Neft, which normally use the route, could also not provide immediate comments.

October crude deliveries to Russian refineries totaled 19.473 million mt compared with 20.328 million mt in October 2008.
Until relatively recently, all the talk in Russia had been about providing ever-larger volumes of gas to Europe and other emerging markets, with the country’s gas giant Gazprom promising increased investment into finding and producing ever-more gas.

However, the unprecedented global recession in recent months and subsequent fall in oil and gas prices has put paid--at least for the time being--to Gazprom’s ambitious expansion plans.

Gazprom has seen a huge drop in gas demand from European customers, which has impacted considerably on the company’s revenues. In addition, finding financing for new projects, or even funding existing production efforts, has become much more difficult given the reluctance of banks to lend in the current climate. And this even for a company as huge and with as much political backing as Gazprom.

The most visible result of the company’s recent problems was a one-day drop in May in gas production volumes below 1 billion cubic meters, Gazprom’s lowest daily output figure for 26 years. On May 10, Gazprom’s gas output was just 975.7 million cu m. Gazprom remained tight-lipped about the historic fall, commenting only to say: "Daily production volumes have been adjusted to respond to a decline in gas demand."
European utilities scaled back on gas purchases from Russia, opting to wait for prices to decline before buying and storing. In early April, Gazprom said it expected domestic and European consumption to pick up from the end of the second quarter, suggesting that consumption already had recovered in March and that the company expected consumption at higher-than-planned levels in April.

This, clearly, was not the case.

And despite the expected demand recovery, JP Morgan still sees Gazprom’s 2009 output down 12% at an estimated 486 Bcm. This is a far cry from the picture late last year when Gazprom said it would produce around 565 Bcm in 2009.

The fall in demand was borne out by a massive drop in Russian gas exports--in the first four months of 2009, they plunged by more than half compared with the same period in 2008. Russia exported 34 Bcm of gas in the January-April period, down from almost 73 Bcm in the corresponding period of 2008.

In the first quarter, Germany, traditionally the largest end-user of Russian gas, saw deliveries cut in half to 6.09 Bcm, according to data released with Gazprom’s first-quarter results in May.

A gas pricing dispute between Russia and Ukraine, which brought supplies to Ukraine and Europe to a halt for more than two weeks at the start of the year, was a major factor in the decrease, but falling demand in Europe has also taken its toll on the Russian giant’s first-quarter sales.

The fall in volumes -- and price -- of Gazprom’s gas also means the company could be struggling financially. It emerged earlier this month that Gazprom was seeking further state guarantees from Italy for financing the massive Nord Stream gas pipeline project across the Baltic Sea. Gazprom is believed to have asked Italy’s SACE export financing agency to increase existing guarantees to Eur1.7 billion ($2.3 billion) from Eur1 billion for the underwater pipeline and provide additional guarantees of Eur440 million for the construction of the inland line.

Gazprom’s capital expenditure this year will certainly be much lower than the Rb920.44 billion ($27.55 billion) budget approved in December 2008, a fact confirmed by company officials in April.

And in a sure sign that the boom era of Russian energy could be over, President Dmitry Medvedev said this month that he would personally oversee a push to diversify the economy away from oil and gas. Medvedev said he would head a commission that would oversee the modernization of the economy, which he said had become too heavily dependent on oil and gas exports. Medvedev went as far as to say Russia’s dependence on raw material exports was one of the "main strategic risks and threats to national security in the economic sphere."
Russia seeks foreign investment

The main problem facing the Russian gas sector looking forward is securing funding for massive new projects. The remote Yamal Peninsula is seen as probably the biggest potential supplier of new gas, but its location and lack of infrastructure mean developing the region will be challenging at best.

In September, Putin opened wide the door for international majors to help develop the vast resources of the Yamal Peninsula, with a development plan for the region expected to be finalized in the first quarter of 2010.

Putin invited the heads of at least 11 majors to attend a meeting in Salekhard in the Yamal-Nenets Autonomous region and outlined the country's plans to tap the area's "challenging reserves."

Russia sees Yamal as a key region to compensate for falling natural gas production from the country's existing gas fields, and for increasing its role in LNG production. However, exploiting the region would most likely require foreign expertise and technology.

Included among those companies invited were France's Total, Norway's StatoilHydro, Anglo-Dutch major Shell, Japan's Mitsui and Mitsubishi, ExxonMobil, ConocoPhillips, Germany's E.ON, France-based GDF Suez, South Korea's Kogas and Malaysia's Petronas.

"We are ready to expand cooperation. That's why we have invited you to Salekhard," Putin told the company heads. "We want you to see that we are working openly and transparently. The key condition is that the cooperation must be stable and long-term. We will find a way to secure the interests of our partners...as well as Russia's interests.
Putin said Russia would welcome foreign partners to bring not only money but also new technology, both of which are scarce presently in Russia. Economy Minister Elvira Nabiullina, speaking at the same event, said Russia expects foreign majors to help it establish gas field development technology, build complex infrastructure, including ice-breaking tankers, secure new gas markets and bring in project financing.

In order to stimulate activity in Yamal, Putin also said Russia could provide tax incentives. "I believe it is possible to create favorable taxation [for the area]," he said. Russia already has introduced a temporary exemption from mineral extraction tax for some territories, as well as zero export duty for crude from East Siberia, to stimulate the development of new territories.

The difficulties of the region were emphasized at the meeting, broadcast on Russian television, but the IOCs said they were confident of being able to help Russia develop Yamal.

"We believe that difficulties can be overcome through a constructive partnership between Russian and international companies," Shell CEO Peter Voser said. Based on its experience at the Sakhalin 2 project, where Shell partners with Gazprom and Japanese companies, the company "is ready to undertake a study on the viability" of LNG projects in Yamal, Voser said.

ConocoPhillips CEO James Mulva, however, called for clarity on how new projects at Yamal would be organized. "It is necessary to develop as soon as possible a formula, a term contract for the industry to understand how companies will invest their money," he said. "It is also very important to know not only what the incentives [for the project] will be, but also how the project will be managed."

Gazprom is considering the construction of an LNG plant based on the Tambei group of fields at Yamal. Gazprom's Zapadno- and Severo-Tambeiskoye and Novatek's Yuzhno-Tambeiskoye fields hold combined reserves of 2.3 trillion cubic meters of gas and could be used to feed a liquefaction facility.

Novatek CEO Leonid Mikhelson said the development of just Yuzhno-Tambeiskoye would secure production of 25 Bcm/year over at least 25 years. Gazprom also plans to include fields offshore the Yamal Peninsula in the Yamal LNG project at later stages of its development.

Gazprom plans to launch the first gas field in Yamal, Bovanenkovo, in late 2012. This is the biggest gas field in the region, with reserves estimated at 4.9 trillion cu m. Gazprom plans that once on stream, Bovanenkovo's output would grow from an initial 15 Bcm/year to 115 Bcm/year and then to 140 Bcm/year at later stages.

Gazprom has said previously that the Yamal fields combined would be producing 75-115 Bcm/year in 2015, 135-175 Bcm/year in 2020, 200-250 Bcm/year in 2025 and 310-360 Bcm/year in 2030.

Separately, Putin also said Russian companies have received invitations to acquire refineries in Europe and that they would like to take advantage of asset swaps with foreign investors as a way of promoting mutual trust.

"There were offers to our companies to acquire refineries nearby in Europe," he said. "This is a good offer, and of course our companies will take advantage of it."

Putin said asset swapping was the "most correct" way to enhance mutual trust between investors.

Total, Europe's biggest refiner, earlier this month announced its interest in selling some of its European refining assets. According to reports in Russian media, Total has approached Russian companies inviting them to acquire these assets. Total already sold last month a 45% stake in the Vlissingen refinery in the Netherlands to Russian major Lukoil.
Gazprom hits take-or-pay dirt

Russia's export monopoly Gazprom finds itself in a difficult situation. It freely trades at spot markets in Europe, and this is much lower than its term contract prices.

Importers are seeking relief from an estimated $2.5 billion payment for gas they will not take.

Russian gas exporter Gazprom is in a tough position over its European gas export contracts, where sales this year have been lower than the buyers' commitments.

Exports have slumped, and one of its biggest customers, Germany's E.ON Ruhrgas, has said it is in talks with it to defer the amount of gas it is to take on long-term contracts.

It is unlikely to be alone in this. All European buyers would prefer to take their needs from the spot market, where the marginal gas price is now running at about half that of the long-term contracts.

The latter reflect European oil and product prices as they were earlier this year, while the spot price reflects supply and demand. Importers optimize between the two
"Gazprom is under a lot of market pressure," said Unicredit Securities' Artyom Konchin in a phone interview with Platts. "There is a lot of new gas coming to Europe, with a slew of liquefied natural gas projects this year and next, and American companies looking at shale gas in Europe, and there is African gas coming as well," he said. "I am not a big proponent of Gazprom's dominance in Europe," he said.

This will put pressure on Gazprom to reach some accommodation, he said. "Clearly there is the threat of litigation. But punishing customers is not good business practice," he said, "and yet take or pay is not something you can get out of. The threat of penalties will be in the buyers' minds. Gazprom will be seeking concessions."

He said he agreed with published figures that show that Gazprom is likely to sell next year 150 billion cubic meters, while its customer's take or pay commitments extend to 160 Bcm. This means that Gazprom is entitled to receive $2.5 billion, assuming a price of $250/'000 cu m, without actually delivering that gas.

He also did not set much store by the argument that European customers did Gazprom any favors by not suing it over the disruption to supplies earlier this year during the dispute with Ukraine. "Ukraine is a separate case," he said. "There is probably some force-majeure clause engraved in its contracts to cover that." And Gazprom's decision to relieve Ukraine of its take-or-pay obligations did not mean that other countries could assume the same terms.

This year has already seen a big reduction in Gazprom's exports, with Valeri Yazev, the head of the Russian Gas Society, telling an industry meeting in Brussels earlier this month that Gazprom's key customers underbought. He said this was a much graver threat to security of supply than the events in Ukraine in January.

E.ON's CEO Wulf Bernotat said in October that long-term contracts formed the backbone of European gas supply and were constantly adapted in line with market changes, including the current oversupply situation in Europe. They constitute the long-term basis for cooperation between producers and importers. It is in this spirit that we are holding talks with the producers, E.ON Ruhrgas said, declining to comment on any details.

StatoilHydro said when it was announcing its second-quarter results that it had deferred gas from Q2 to a future year, suggesting that its talks had gone well, from the buyers' point of view, but it did not name any names or volumes. Its presentation showed that its production rate in Q2 09 at the giant Troll field was down by a quarter on Q1 – from 199.5 kboe/d to 148.1 kboe/d. The Oseberg field also showed a similar reduction, from 58.6 kboe/d to 39.7 kboe/d. The Sleipner and Ormen Lange fields on the other hand were almost unchanged at 112 kboe/d and 100 kboe/d respectively. But from Q2 08 to Q2 09, its output rose slightly.

Plenty of gas, little demand

The global gas market has been hit by a 'triple whammy' -- recession, the growth of unconventional gas output in the United States, and a surge in LNG production -- according to Simon Blakey, Senior Director for consultancy Cambridge Energy Research Associates, speaking at the World Forum on Regulation in Athens October 20. Europe is contractually oversupplied by a cumulative total of 70 billion cubic meters of natural gas in the period 2009-2011, he said.

Jacques de Jong, a senior fellow of the Clingendael International Energy Programme, estimated that in the short-term Europe had seen its expected demand for natural gas reduced by 90 Bcm up to 2013, compared with estimates made one year ago. This he concluded meant that "Europe cannot offer demand security."

The impact of lower demand and the growth in LNG output can already be seen in prices for spot LNG cargoes, which are now about half those of oil-indexed pipeline gas on the European continent, speakers at the Athens conference said.

However, LNG's price impact was being limited by infrastructural constraints. Walter Boltz, Chairman of the Austrian energy regulator E-Control said contractual congestion between hubs in the European market was persistent, leading to wide variations in prices. Several important pipelines, such as the Hungary-Austria gasline and a pipeline delivering Norwegian gas from Emden in northern Germany are fully booked even though on many days the physical flows show they are half used.

Hubs closer to LNG landing points were seeing downward pressure on prices, whilst those further removed were not. Those without transport flexibility were suffering from high prices, he said. This was the result of both a lack of transmission infrastructure and because much existing infrastructure was "contractually congested" In other words, the capacity is booked and no third-party gas can flow, even if the physical reality is very different. Despite the new powers granted to regulators under the EU's third energy package, he described enforcement as "still weak" and said that he expected price differentials between European hubs to persist.

Glut of LNG cargoes seen next year

With OECD gas demand in the doldrums and unlikely to recover significantly in the next year, expectations are rising of a glut of LNG cargoes on the market in 2010. LNG output is expected to surge as new liquefaction capacity in Indonesia, Russia, Qatar and Yemen ramps up to full capacity. LNG plants have to run near full capacity.

According to Wilson Crook, who manages US major ExxonMobil's global regulatory affairs for gas, liquefaction plants have the flexibility to rein in output by about 5%, "but not much more". Referring to ExxonMobil's joint-venture operations in Qatar, which have scaled LNG production up to an unprecedented level, he said, "that gas is going to flow." Crook suggested that LNG suppliers might see marginal economics, but would still have to produce. That gas "will have to be stuffed into a market somewhere," he said.

European demand security also came under fire from Gazprom Export's head of contract structure and price formation, Sergey Komlev He noted that EU energy policies had earmarked natural gas "for maximum displacement" and that up to 116 Bcm of natural gas demand could be replaced through energy efficiency initiatives and the introduction of renewable energy sources. He argued that such policies were neither rational nor economic.

Natural gas is cheaper than renewables, more effective in reliably meeting peak demand in the power sector and could through the displacement of half of Europe's hard coal output provide a reduction in greenhouse gas emissions of 185 million mt/year by 2030, Komlev said. It would also avoid the huge investment costs implied by a rush into carbon capture and storage.

Komlev argued that European concerns over relying on Russia for so much of its natural gas were "highly exaggerated." This, he said, was because Europe was using Russia as a classic "external enemy" in order to resolve its own internal divisions, rather than recognizing Russia and Europe's interdependence. The EU, he argued, was throwing away the chance to use natural gas as a means to address climate change.

The lack of competition in European gas markets, and the dearth of liquidity, was a barrier to a transition from oil to gas indexation for natural gas pricing, said Komlev. He argued that oil indexation had resulted from the market being insufficiently efficient to produce reliable market signals. The European market is still dominated by oligopolistic groups and was therefore not ready to switch, Komlev said.

He also argued that oil indexation has great advantages even if meant that current prices were different from spot prices. One advantage is that the seller cannot so easily manipulate the price, if it depends on fuel oil prices on barges in northwest Europe. The situation was the opposite two years ago, he said. "Until we see development in continental markets sufficient to produce reliable market signals there will be no change in the principles of pricing [natural gas] in Europe, Komlev stated.

Gas import businesses should be wary of procuring gas through 100% oil-indexed long-term contracts, Olaf Schneider, director of gas supply at German gas importer and supplier VNG, said October 13 at the Erdgas 2009 conference in Berlin.

"The current difference between spot gas and oil-indexed gas is dramatic for us. Oil-indexed gas is almost double the price of gas bought on the spot market," Schneider said. "Those companies who have signed long-term oil-indexed gas contract really have a big problem at the moment," he added. According to Platts' Northwest European oil-indexed gas indicator, November gas at the UK's National Balancing Point October 12 was valued Eur5.31/MWh below oil-indexed gas of the same month. Schneider recommended that utilities, and specifically German stadtwerke, design contracts that "intelligently combine" different supply mechanisms.

In the long run, however, Schneider did not see the practice of linking gas prices to those of crude oil as obsolete, saying that the current oversupply of gas seen by the market and the related collapse in prices was only temporary. He said that an end to the financial crisis would bring a recovery in the market. "In the long run, spot and oil-indexed gas prices will come closer again," he said.

Schneider was certain that there would always be a "correlation" between the pricing of oil and gas, but said that ultimately the customers would determine how strong this correlation would be in future. "Customers will decide the contents of their contracts. They will decide whether they want their gas indexed against, for example, the TTF or gasoil," he said.

Russia opens up Yamal to foreign major

Russia has opened the door for international majors to help develop the vast natural gas resources of the remote Yamal Peninsula, with a development plan for the challenging region expected to be finalized in the first quarter of 2010.

Prime Minister Vladimir Putin invited the heads of at least 11 majors to attend a meeting September 24 in Salekhard in the Yamal-Nenets autonomous region and outlined the country's plans to tap the area's "challenging reserves".

Russia sees Yamal as a key region to compensate for falling natural gas production from the country's existing gas fields, and for increasing its role in LNG production. A total of 11 gas and 15 gas and oil onshore and offshore fields have been discovered in Yamal, with 2P reserves estimated at 16 trillion cubic meters.

However, exploiting the region's resources would most likely require foreign expertise and technology.

Among those companies invited were France's Total, Norway's StatoilHydro, Anglo-Dutch major Shell, Japan's Mitsui and Mitsubishi, ExxonMobil, ConocoPhillips, Germany's E.ON, France-based GDF Suez, South Korea's Kogas and Malaysia's Petronas.
"We are ready to expand cooperation. That's why we have invited you to Salekhard," Putin told the company heads.

We want you to see that we are working openly and transparently. The key condition is that the cooperation must be stable and long-term. We will find a way to secure the interests of our partners…as well as Russia's interests."

Putin said Russia would welcome foreign partners to bring not only money but also new technology, both of which are scarce in Russia. Economy Minister Elvira Nabiullina, speaking at the same event, said Russia expects foreign majors to help establish gas field development technology, build complex infrastructure, including ice-breaking tankers, secure new gas markets and bring in project financing.

In order to stimulate activity in Yamal, Putin also said Russia could provide tax incentives. "I believe it is possible to create favorable taxation [for the area]," he said. Russia already has introduced a temporary exemption from mineral extraction tax for some territories, as well as zero export duty for crude from East Siberia, to stimulate the development of new territories.

The difficulties of the region were emphasized at the meeting, broadcast on Russian television, but the IOCs said they were confident of being able to help Russia develop Yamal.

"We believe that difficulties can be overcome through a constructive partnership between Russian and international companies," Shell CEO Peter Voser said. Based on its experience at the Sakhalin 2 project, where Shell partners with Gazprom, the company "is ready to undertake a study on the viability" of LNG projects in Yamal, Voser said.

While most of the companies' representatives confined their remarks to the need for cooperation and the desirability of expanding their activity in Russia with partnerships, ConocoPhillips CEO James Mulva called for a new approach to gas marketing.

"Regarding the gas price, we need to use more innovative approaches in marketing that gas on international markets, in comparison with other projects," he said. "We must develop as soon as possible a formula, a term contract for the industry to understand how companies will invest their money," he said. "It is also very important to know not only what the incentives [for the project] will be, but also how the project will be managed."

Gazprom plans to launch the first gas field in Yamal, Bovanenkovo, in late 2012. This is the biggest gas field in the region, with reserves estimated at 4.9 tcm.

Gazprom has said that output would grow from an initial 15 Bcm/year to 115 Bcm/year and then to 140 Bcm/year at later stages.

Gazprom has said previously that the Yamal fields combined would be producing 75-115 Bcm/year in 2015, 135-175 Bcm/year in 2020, 200-250 Bcm/year in 2025 and 310-360 Bcm/year in 2030.

Gazprom is also considering the construction of an LNG plant based on the Tambei group of fields at Yamal. Gazprom's Zapadno- and Severo-Tambeiskoye and Novatek's Yuzhno-Tambeiskoye fields hold combined reserves of 2.3 tcm of gas and could be used to feed a liquefaction facility.

Novatek CEO Leonid Mikhelson said the development of just Yuzhno-Tambeiskoye would secure production of 25 Bcm/year over at least 25 years.

Gazprom also plans to include offshore fields in the Yamal LNG project at later stages of its development.

Gazprom, meanwhile, expects to finish building the first vital link between the peninsula and the rest of Russia next January.

A new rail bridge will enable trains to run from Obskaya to Bovanenkovo, replacing the summer-only maritime service to the port of Kharasavei. The railroad "will become one of the key elements of the strategic national project to develop fields in the Yamal Peninsula," Gazprom said.

After the first 525-km section is commissioned, the line is to be extended to Karskaya in September 2010.

Separately, Putin also said Russian companies have received invitations to acquire refineries in Europe and that they would like to take advantage of asset swaps with foreign investors as a way of promoting mutual trust.

"There were offers to our companies to acquire refineries nearby in Europe," he said. "This is a good offer, and of course our companies will take advantage of it." Putin said asset swapping was the "most correct" way to enhance mutual trust between investors.

Total, Europe's biggest refiner, earlier this month announced its interest in selling some of its European refining assets.

According to reports, Total has approached Russian companies inviting them to acquire these assets.

Total already sold last month a 45% stake in the Vlissingen refinery in the Netherlands to Lukoil.

 


מחירי סחורות
מדדי נפט וזהב
EIA today in energy