January 2005

Hydrocarbon Developments:

OIL PIPELINES:

BURGAS-ALEXANDROUPOLIS OIL PIPELINE PROJECT

• Russia, Greece and Bulgaria to sign Memorandum on building oil pipeline.

Russia, Greece and Bulgaria will sign the intergovernmental memorandum on building the Burgas-Alexandropoulis oil pipeline, Deputy Minister of Energy of Greece Georgios Salagoudis declared. "The memorandum is likely to be signed on March 15, 2005," Mr. Salagoudis stated after the end of the tripartite meeting with the participation of the Head of the fuel and energy complex Department of Russia's Ministry of Industry and Energy Anatoly Yanovsky, Head of the political office of the Minister of Regional Development and Public Works of Bulgaria Kalin Rogachev and representatives of companies. Several important agreements were reached in the course of the consultations held in Moscow the other day. First of all, it is the establishment of an initiative group of companies to form an international company to carry out the project. Such companies-initiators as TNK-BP, PIK TISE and Stroitransgaz were represented from the Russian side, and Hellenic Petroleum, Latsis Group consortium, and Prometheus Gas S.A. - from the Greek side. Note: the total length of the oil pipeline will be about 300 km, pipeline diameter ? 1,000 millimeters, the number of pumping stations ? 2,3. The cost of the Burgas-Alexandropoulis oil pipeline project is estimated at approximately $700 million, and the feasibility study of the project exists in two variants. The first variant envisages construction of an oil pipeline with a capacity of 35 million tons of oil a year, and the second variant - up to 50 million tons annually.

Source: RIA Novosti, 28.01.2005

ODESSA-BRODY OIL PIPELINE

Russian oil to flow along the Odessa-Brody pipeline.
Ukrainian President Viktor Yushchenko believes that the agreement on the reverse of the Odessa-Brody oil pipeline meets Ukraine's interests, but these interests could change. The Ukrainian President noted that the construction of the oil pipeline between Odessa and Brody has been "a unique project for the past few years." Mr. Yushchenko stressed:?if tomorrow our interests change and the need appears to return to the initial project, we shall use it as it was initially designed."

Source: 25.01.05 Russian Information Agency

• Ukrainian President leader supports operation of Odessa-Brody pipeline to transport Caspian oil to the West.

President of Ukraine Viktor Yushchenko supports exploitation of Odessa-Brody oil pipeline to transport Caspian oil to the West. Mr.Yushchenko announced this in Krakow, Poland, having called construction of the oil pipeline ?one of the most successful energy projects of Ukraine during the last 14 years.? As reported earlier, on the 4 of February 2004 the Government of Ukraine with Viktor Yanukovitch in the head passed a decree which recognized this direction most profitable. On the 5th of July they passed one more governmental resolution, which provided oil pumping from Brody to Odessa.

Source: Ukrinform, Kazinform, 27.01.2005

OTHER ENERGY NEWS:

AZERBAIJAN

• Azerbaijan boosts hydrocarbon production.

Azerbaijan exported 2,559,120 tons of its crude oil along the Baku-Novorossiisk oil pipeline throughout the entire January-December 2004 period. 166,344 tons of oil were exported along that route in December 2004. Azerbaijan pays $15.67 to the Russian side for every ton of its oil being pumped through the Baku-Novorossiisk oil pipeline. All in all, Azerbaijan's state oil company produced 8,976,400 tons of oil over the January-December 2004 period, a 0.6-percent increase on 2003 levels. Azerbaijan also produced more than five billion and six million cubic meters of natural gas throughout the same time period (a 3.1-percent increase on similar 2003 levels).

Source: 05.01.2005 RIA Novosti

BELARUS

• Belarus, Gazprom sign gas supplies contract for 2005.

Belarus and Russia's largest gas company Gazprom signed a contract on gas shipments for 2005. The contract envisions guaranteed deliveries of 19.1 billion cubic meters of gas next year, in addition to extra 1.4 billion cubic meters of gas, if the throughput capacity of the gas transportation network permits.

Source: Interfax 31.12.2004 GEORGIA

• BP to provide $80 mln in grants to Georgia in 2005-2010.

BP, the operator of the Baku-Tbilisi-Ceyhan project, plans to provide Georgia with $80 million in grants in 2005-2010 for social and economic projects, BP-Georgia General manager Rif Diggins announced. After the pipeline starts operating in the second half of 2005, the company plans to provide the Georgian Government with a grant of $11 million and starting in 2006 it will provide $4 million per year. In parallel, BP will carry out other grant programs in Georgia, one of which involves providing $10 million to finance education and health programs over a two-three year period.

Source: Interfax, 20.01.2005

LATVIA

• Latvijas Gaze to invest 120 mln lati in 2005-2010.

Latvian gas distribution company Latvijas Gaze plans to invest 120 million lati in development in 2005- 2010, the company President Adrians Davis declared. According to Mr. Davis, these funds would be used to increase the reliability of gas supply infrastructure, increase the capacity of the Incukalns underground gas storage facility, and also to build new pipelines. Over the next year Latvijas Gaze plans to decide on increasing the capacity of the Incukalns underground gas storage facility from 2.3 billion cubic meters at present to 5 billion - 6.2 bcm. About 50 million lati would be spent on this. The second project in terms of investment is to build gas pipelines in Latvia. The company plans to build about 200 km of pipelines per year. The Latvijas Gaze budget for 2005, which was approved the other days, includes investment of 24.88 million lati, which is a little less than planned investment this year. The company justified its request to the Latvian regulator to increase gas tariffs next year by the large investment planned by the company in increasing the reliability of the gas supply infrastructure and also in gasification.

Source: Interfax 16.01.2005

KAZAKHSTAN

• EMPS Corporation Announces Signing of Letters of Intent.

EMPS Corporation announced that through its operating subsidiary in Kazakhstan, Caspian Services Group Ltd, the Company has entered into Letters of Intent with Saipem SpA to provide five shallow draft vessels in support of offshore pipeline construction activities ongoing in the vast Kashagan oilfield in the North Caspian Sea. One of the vessels will be supplied from the Company's existing fleet. The remaining four will be new additions to the Company's fleet, either through acquisition or leasing. At least two of the vessels will be newly commissioned. All vessels will be mobilized to the Caspian Sea in November 2005 for the initial contract period of two years. Further, these agreements underscore the fact that EMPS Corporation is recognized internationally as a leading provider of high quality workboats to the Caspian region." In addition to its vessel fleet, the Company has subsidiaries that provide other oilfield services, such as lodging and desalinated water in the port of Bautino and geophysical and seismic services to both offshore and on-shore oil and gas concessionaires. The Company maintains corporate offices in Salt Lake City, Utah, Almaty (Kazakhstan) and Aktau, (Kazakhstan).

Source: http://quotes.freerealtime.com/ 14.01.2005

• DJ Lukoil, Petrokazakhstan JV Win Crt Case In Kazakhstan.

Russian oil major Lukoil Holdings (LKOH.RS) announced that on the 7th of January its Kazakhstan-based joint venture Turgai Petroleum won a court case against a refining monopoly PetroKazakhstan Oil Products, or PKOP (syrg.kz). Turgai is a 50-50 joint venture with Canada's Petrokazakhstan (PKZ), producing oil at the Kumkol field in the southwest of Kazakhstan. According to Lukoil, PKOP is a local monopolist in refining and it constantly refused to pay Turgai a normal market price or sometimes any money for its crude which Turgai supplied to the refinery. Lukoil said that the Economic Court of Kazakhstan ordered PKOP to conclude a normal market agreement with Turgai according to which PKOP is obliged to pay Turgai for the crude it receives for processing. However, the company didn't specify whether the court ordered PKOP to reimburse all or any of the $100 million Turgai claims акщь PKOP for its crude.

Company Web site: http://www.lukoil.ru 14.01.2005

• Saipem has been awarded new contracts for the charter of onshore and offshore drilling rigs, for a total value in excess of US $285 million.

Saipem has been awarded the contract to perform drilling activities in Block D of the Kashagan field in the Caspian Sea. The contract, awarded by Agip KCO (operator of the North Caspian Sea Production Sharing Agreement ? PSA) following an international tender, comprises drilling activities to be carried out utilising two drilling rigs owned by the client. Installation activity is scheduled to be completed by December, 2005 and April, 2006 respectively. Operational activities are expected to last approximately five years from the commencement of rigs utilization. Furthermore, Saipem has been awarded new contracts, the duration of which ranges between 3 and 36 months, for the charter of 8 onshore rigs in Saudi Arabia, Algeria, Venezuela and Peru.

Source: http://www.rigzone.com/ 19.01.2005

• Caspian Holdings Confirms High-Quality Oil Output from Zhengeldy Field.

Caspian Holdings confirmed high quality oil production from its Zhengeldy field in Kazakhstan. The construction of the processing and export storage facility, 30 kilometres from the Zhengeldy field, has been started. The facility at the Makatmunaigas site will incorporate a processing step to reduce the salt content to ensure the oil export quality standards. The facility is expected to cost 300,000 USD and should be complete by the end of May 2005, it said. "Construction of the storage facility in the Eastern Makat will allow us to move from domestic to export sales in the beginning of the third quarter 2005,"- the Chairman Michael Masterman marked. The high quality of the oil being produced means it can command strong export prices, the Chairman added.

Source:c http://www.rigzone.com/ 26.01.2005

MOLDOVA

• Azpetrol to pump $250 mln into Moldovan infrastructure.

Azerbaijan's Azpetrol will launch its expansion into the Eastern Europe by investing $250 million in an international river port, oil refinery and network of filling stations in Moldova, Thomas Moser, the company's Vice President, stated. Mr. Moser noted that the company would invest $250 million in five years, providing some of the money itself but raising most of it from international financial organizations and banks. The money would be spent on a petroleum terminal ($10 million), dry cargo and passenger terminals ($15 million), a refinery capable of processing 2 million tonnes of crude per year ($170 million - $200 million) and a network of 50 filling stations ($35 million). Initially, Azpetrol will import petroleum products to Moldova from Azerbaijan and the Caspian's eastern seaboard but, once the refinery has been built, it would import crude oil only. The project would be delivered in line with an investment deal signed with the Moldovan Government on December 29, 2004. Among other companies, the Azpetrol group includes Azertrans, A&D, AzEN, EUPEC Azerbaijan and SOPS,. The group has around 4,000 employees.

Source: Interfax 19.01.2005

RUSSIA

• Russian oil exports will become cheaper by $18 per ton from February 1.

From the first of February, 2005, the Russian oil export duty is to be $83 per ton, Deputy Chief of the Finance Ministry's Customs Duty Department Alexander Sakovich announced. At present, the oil export duty, effective since December 1, 2004, equals $101 per ton. The export duty is revised every two months using a special formula and based on the bimonthly monitoring of the Russian oil prices throughout the world. The new duty has been calculated based on the price monitoring during November and December 2004. Based on the November and December 2004 monitoring data, the average price of Russian oil (Urals) in the world stood at $36.3576 per barrel, according to Sakovich. Mr. Sakovich reminded that the interdepartmental commission on protective measures in foreign trade allowed the Ministry of Economic Development on December 28, 2004 to adjust the export duty based on the result of the bimonthly monitoring. As of the commission's session, the estimated duty totaled $83.2 per ton based on incomplete monitoring data. Under the current law, the Russian Government's resolution on introduction of a new oil export duty should be published at least 10 days before the duty comes into force, the Finance Ministry official recalled.

Source: 11.01.2005 RIA Novosti

• Eastern oil pipeline route gets approval.

Russian Prime Minister Mikhail Fradkov issued a Decree on the last day of 2004 approving the final route of the unified East Siberia-Pacific Ocean oil pipeline. It will run through the town of Taishet, Irkutsk region, the town of Skovorodino, Amur region, and the Perevoznaya bay, Maritime Territory. The approved route does not envisage a branch to China. The pipe will be built at the expense of receipts from pumping oil through Transneft's system. The pumping tariff will be $47 per tonne and once the loans to be taken for the construction of the pipe have been repaid it may be reduced twofold. The project will be implemented in several phases. The construction of the Taishet-Skovorodino section will be the first phase. The construction of an oil terminal in the sea port of Nakhodka, where oil produced at Skovorodino will be delivered by rail, will coincide in time with the first phase. The second phase envisages the construction of the Skovorodino-Perevoznaya section. It will be launched when oil producers start the commercial development of oil fields in the East Siberia and Yakutia. The raw materials resource base is 24 million metric tonnes of oil in West Siberia and 56 million metric tonnes in the fields in the East Siberia and the Republic of Sakha (Yakutia). However, these are largely undeveloped reserves. The Nature Ministry, the Industry and Energy Ministry and the Economic Development and Trade Ministry are expected to approve the phases before May 1, 2005. The pipeline's overall capacity may reach 80 million tonnes of oil a year, and the project will require close to $16 billion in investment. The project is to be completed in 2008.

Soource: RIA Novosti, 11.01.2005

• Pipeline consortium seeks Russia's OK on expansion.

ChevronTexaco Corp., the second-biggest U.S. oil company, and its partners are urging Russia to let their oil-pipeline venture expand capacity, as a part of their plan to export more from Kazakhstan and Russia to the Black Sea. The Caspian Pipeline Consortium, or CPC, in which ChevronTexaco owns 15 percent, plans to increase oil exports 42 percent to 640,000 barrels a day this year as compared with the last year, the pipeline venture said in a recent e-mailed statement. The partners, which include Exxon Mobil Corp. and Royal Dutch-Shell Group of Companies, have already spent $2.7 billion to build the link. "CPC is already operating above its mechanical design capacity as far as Caspian original oil is concerned," CPC General Director Ian MacDonald marked. CPC, which ships oil from fields in Kazakhstan to a Russian terminal near Novorossiisk on the Black Sea, is seeking permission from Russia and Kazakhstan to more than double shipments to 1.34 million barrels a day by 2008, about six years earlier than planned. Kazakh President Nursultan Nazarbayev proposed that his Russian counterpart, Vladimir Putin, make a decision, which will let the pipeline expand capacity.

Source: http://www.chron.com 18.01.2005

• Putin, Nazarbayev sign gas development deal.

Russian President Vladimir Putin and Kazakhstan President Nursultan Nazarbayev signed an agreement delimiting the 7,500-kilometer (4,600-mile) Russian-Kazakh border between the two states and allowing joint development of the Central Asian Republic's second-largest natural gas field. "We have managed to resolve an essential issue -- that of the state border between our two countries," Putin declared. The agreement signed by the two sides stipulates that the two countries have an equal claim on the once-disputed Imashevsk gas and condensate field in the Pre-Caspian basin near the Caspian Sea and their common border. The field holds some of the largest proven natural gas reserves in the region and its development is the key to ensuring the growth of Kazakhstan's natural gas exports. "We have established the principles of a strategic partnership with Russia, particularly in the economic field," Nazarbayev marked. Analysts expect the Imashevsk field to be jointly developed by the Russian gas giant Gazprom and Kazakhstan's state oil company KazMunaiGaz. Border delimitation agreements are a sensitive issue in the region, as the countries on the Caspian Sea battle for access to oil and gas reserves lying beneath its waters. Iran in particular is unhappy with its share of the Caspian and together with Turkmenistan is pushing for an agreement that would see Russia and other Caspian states partially cede their share.

Source: Neftegaz.ru, 15.01.2005

TURKMENISTAN

Trans-Afghanistan pipeline study to be examined in February.

The committee in charge of the construction of a $3.3-billion Trans-Afghanistan gas pipeline will discuss the project's feasibility study. The committee will also look at ways of financing the pipeline project, the creation of a pipeline consortium and drafting of pipeline-related agreements. The Asian Development Bank had already made documents related to the feasibility study available to the energy ministers of the four countries involved who sit on the committee. The ABD financed the feasibility study performed by Britain's Penspen. The study was drafted in keeping with an agreement signed by the four governments in 2002. Work on the 1,680-kilometer, 56-inch pipeline, which should carry 33 billion cubic meters (bcm) of gas per year at a pressure of 100 atmospheres, is due to begin in 2006, once legal formalities for the project have been completed.

Source: Interfax 18.01.2005

UKRAINE

• Ukraine signed the Agreement with Turkmenistan on natural gas supplies for the year of 2005.

On January 3, 2005 the Agreement on additional volumes and conditions of supplies of Turkmen gas for the year of 2005 was signed in Ashgabat. The Agreement was signed by the President of Turkmenistan S. Niyazov and the Chairman of the Board of NJSC "Naftogaz of Ukraine" Y. Boyko. The Agreement envisages supplies of Turkmen gas in the volume of 36 bln cub m in 2005. The main volumes (31,5 bln cub m) will be purchased by "Naftogaz of Ukraine" for the price of $58 over 1,000 cub m on the Turkmenistan-Ukraine border. The payments for the gas will be carried out according to the formula: 50% - by cash ($913 mln); 50% - by goods and equipment supplies ($913). The additional 4,5 bln cub m will be transported for the account of payment for the work and services rendered by Ukrainian companies in investment projects on the territory of Turkmenistan. In the year of 2004 Ukraine received only 1,8 bln cub m of gas for the account of realization of investment projects. In 2005 these supplies will be increased by 2,5 times more.

Source: Interfax-Ukraine 04.01.2005

• Putin looks forward to Russian-Ukrainian gas partnership.

Ever closer contacts will link Russia to Ukraine in the gas sphere, expects Russia side. Last year's Russian gas exports to Western Europe via Ukraine exceeded 100 billion cubic meters. "This year, we are planning to export 112 billion. Ukraine earned $1.5 billion on gas transits. We hope to extend this partnership in the future. The new Ukrainian President, in his turn, thinks his country and Russia ought to join hands for political efforts as a European energy market is emerging. "Russia is unique due to its unique energy potential. Ukraine is unique with unprecedented transport possibilities. All that works for Western consumers, in the final analysis. Proceeding from that, Russia and Ukraine ought to work together for the European energy market to take shape," ? Mr. Yushchenko stressed. The two countries' Governments will be instructed to advance draft initiatives on how to step up partnership, President Putin informed.

Source: RIA Novosti 24.01.2005

• Tremendous scope exists for Pak-Ukraine cooperation.

Amanullah Khan Jadoon, Federal Minister for Petroleum and Natural Resources of Pakistan, declared that tremendous scope for Pak-Ukraine Cooperation in oil, gas and pipeline projects exists and both countries could benefit from each others experiences for mutual advantage. During the meeting with Ukrainian Ambassador Dr. Igor Polikha the parties discussed the opportunities for Ukrainian investment in the oil, gas, pipeline projects besides participation in the privatization of state owned units. Jadoon noted that the Government has deregulated the petroleum sector and privatization of state owned oil and gas units were in process. The Minister briefed the Ukrainian envoy about the ongoing and upcoming development activities in Pakistan's oil and gas sectors and salient features of incentives being offered to the investors in offshore and onshore exploration. Both the sides agreed the frequent exchange of delegations between the two countries would open up new avenues for multi dimensional cooperation particularly in the oil, gas and mineral fields for the mutual advantage.

Source: http://www.hoovers.com/ 26.01.2005

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