Russia 090423 Basic Political Developments

Activity in the Oil and Gas sector (including regulatory)

Russia sees no need for oil cuts as shortage looming

http://www.guardian.co.uk/business/feedarticle/8468182
Reuters, Wednesday April 22 2009
* Effect of oil output cuts to be short-lived

* Oil shortage looms in medium term

* Sees progress on South Stream gas pipeline project

* Surgut's purchase of MOL stake not hostile bid

By Vladimir Soldatkin
MOSCOW, April 22 (Reuters) - Russia believes global oil output cuts will have a short-lived effect and made no sense given a looming global supply shortage in the medium term, Energy Minister Sergei Shmatko said on Wednesday.

"According to various estimates, there will be a serious shortage of oil supply, maybe in one, maybe in two-three years," Shmatko told reporters.

"It will coincide with the end of the global economic crisis and will lead to serious instability, including in the pricing of oil," he said. "A simple cut in production can, in our view, have only a short-lived impact."

Russia repeatedly hinted it could join OPEC's oil output cuts when oil fell close to $30 per barrel last year, thus exposing the state budget and the Kremlin's social obligations to major risks.

Russian officials have even said the country has started to reduce exports, but OPEC ministers have said the pledges were unconvincing and regretted Russia did not provide real support.

Talk among Russian officials about output cuts have faded after oil prices stabilised at around $50 per barrel, slightly above the revised budget needs of $41 per barrel.

Russian oil output has shown extreme resilience to the crisis as it has even slightly risen over the past year, contrasting with a deep collapse in other sectors.

The gas industry has suffered from a slump in demand in Europe and at home. Russian gas export monopoly Gazprom was forced to cut output by a quarter while fully halting gas imports from Turkmenistan after a pipeline blast

Gazprom has said it sees gas demand depressed for at least five years but Shmatko said Russia was committed to finishing its new gas pipeline to Europe, South Stream, on time by 2015.

He said Russia would sign deals with Austria and Slovenia at government level, and with Greece, Bulgaria and Serbia at company level in the next few months.

"And that will be it. After that, a fully fledged format of political and economic agreements will be created to allow an immediate start of the project implementation," he said.

RIVAL PROJECT

South Stream is a competitor to the Nabucco pipeline from Central Asia and the Caspian to southern Europe.

The European Union supports Nabucco as a means to ease dependence on Russia, but the project has stalled as it lacks enough gas to justify costly construction.

Shmatko denied media speculation Russian oil firm Surgut had bought a large stake in Hungarian energy group MOL at a large premium on Kremlin orders to fight Hungary's plans to participate in Nabucco.

"No-one is planning hostile takeovers ... By buying 21 percent of the company, Surgut won't be able to fight the plans of MOL to co-operate with Nabucco," said Shmatko.

He adding Surgut paid a premium because it badly needs refining assets.

He also said Nabucco was poised to sell gas to Europe at a higher price than Russia due to its poor resource base and longer pipeline routes.

He said Russia and Azerbaijan would hold new talks about gas supplies in May, a move which could further undermine Nabucco's resource base if Baku agreed to sell most of its gas to Gazprom.

Shmatko also said he hoped Turkmenistan would soon repair the pipeline and restart gas exports to Russia, although he said Gazprom would need to change the terms of its deal to import gas from Turkmenistan. He did not elaborate. (Writing by Dmitry Zhdannikov, editing by Robin Paxton)

Russian gas demand rebounding

http://businessneweurope.eu/users/subs.php

Alfa, Russia

Wednesday, April 22, 2009

According to today's Vedomosti, March was an unexpectedly good month for the Russian gas industry in terms of gas consumption. In the face of the massive decline we've seen starting from November last year, March 2009 saw gas consumption restored a bit, but primarily thanks to non-industrial consumers and abnormally cold weather.

Overall gas consumption in March, according to the article, amounted to some 35.5 bcm, 0.8% less than in the same period last year. Industrial and utilities consumption in March continued to decline, by 2.6% and 5.2%, respectively.

Households consumed 14% more y-o-y, but, as already mentioned, this was primarily due to weather conditions. The bad news for Gazprom was that export sales declined by 1.5 times y-o-y in 1Q, while production declined by 24%.

Data from the Central Dispatch Unit show that overall Russian gas consumption dropped by about 10% y-o-y in each of the four months leading up to March. After adjusting for weather, March data do not show much, if any, improvement.

Our concern over whether or not underlying demand can rebound in the coming months is a key factor in our Underweight recommendation on Gazprom and Novatek. We recommend gaining exposure to the Russian oil & gas sector via LUKoil.

Russia and China sign agreement allowing Rosneft to access $15bn loan; POSITIVE Bloomberg is reporting that Russia and China have signed an intergovernmental agreement, which will allow Rosneft to access the previously announced $15bn loan from a Chinese state bank. The first $5bn will be available this year, and should remove any concerns about the ability of Rosneft to service and refinance its debt obligations. Among Russian peers, this company has the most efficient capital structure.

Ronald P. Smith

Novatek's management board gets shares

http://businessneweurope.eu/users/subs.php

Alfa, Russia

Wednesday, April 22, 2009

Novatek put out two press releases yesterday. The first announced a restructuring of how its 100% stake in PurNovaGas is held - it has been transferred from the holding company to a wholly-owned subsidiary for management efficiency issues. The second announced a list of names of members of the management committee who now have direct equity stakes in the company, with the total shares mentioned totaling 39.6m shares, or 1.3% of shares outstanding.

The list covers all but a couple of the members of the management board, and all of those receiving shares previously held no stake in the company, according to the press release, indicating that this is almost certainly a part of the company's retention/incentive plan. In mid-February, the company announced it would buy back up to 3% of the company for use in an incentive program, so this is likely a part of that. The 1.3% stake is worth some $115m at current prices. We treat this news as POSITIVE as it better aligns management incentives with that of minorities.

Ronald P. Smith

Sibneftegaz Starts Gas Production at Northern Pyreynoye Field

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHY4DhD7XATg

By Stephen Bierman

April 23 (Bloomberg) -- OAO Sibneftegaz, the OAO Gazprombank-led venture with OAO Acron and OOO Itera, started commercial production from the Pyreynoye deposit in the northern Russian region of Yamal Nenets.

The venture expects output to reach 2 billion cubic meters of natural gas a year, Sibneftegaz, based in Novy Urengoi, said in an e-mailed statement today.

To contact the reporter on this story: Stephen Bierman in Moscow [e-mail].

Last Updated: April 23, 2009 01:59 EDT