May 2005

Hydrocarbon Developments:

GAS PIPELINES:

NORTH-EUROPEAN PIPELINE PROJECT

Russia's biggest natural gas producer Gazprom plans to start building its North European pipeline by the end of 2005, Sergei Serdyukov, Deputy Head of Gazprom?s transport and storage Division stated. It?s expected that the work will start at the end of this year. ?We plan that at the end of September Gazprom?s management will decide on timeframes and a construction program for the pipeline,? Mr. Serdyukov noted. Gazprom is currently forming a unit called Gazpromzapadinvest to lead the construction project. The pipeline will take gas to Germany across the Baltic from Vyborg, a port near St. Petersburg and the Finnish border. Spurs from the main pipeline could also feed gas networks in Finland, Sweden and Great Britain. The undersea part of the pipeline is expected to cost $2 billion, and is intended to bypass transit countries such as Ukraine, the main artery through which Germany gets most of its Russian gas.

Source: Neftegaz.ru 26.05.2005

OIL PIPELINES:

• Baku-Tbilisi-Ceyhan oil pipeline opened.

On May 25 officials inaugurated the first section of 1,100-mile U.S.-backed pipeline bringing Caspian Sea oil to Western markets. Presidents of Azerbaijan, Kazakhstan, Georgia and Turkey attended the ceremony at the Sangachal oil terminal, about 25 miles south of the Azeri capital, Baku, to open the taps for the first drops of oil to enter the Baku-Tbilisi-Ceyhan pipeline. The pipeline from the Azeri capital to the Turkish Mediterranean port of Ceyhan is seen as a significant move toward reducing the West's dependence on Middle Eastern oil. Most Caspian oil exports previously have moved through Russian pipelines. The $3.2 billion project, with a capacity of 1 million barrels a day, is the first direct oil link between the landlocked Caspian, which is thought to contain the world's third largest oil and gas reserves, and the Mediterranean. The pipeline, built by a consortium led by the BP oil company, passes through Georgia en route to Turkey. Pipeline officials noted it would take up to a month and a half to fill the Azerbaijani section of the pipeline. The Georgian part will be ready after that, and then the Turkish stretch, which Turkish authorities have said should be filled by Aug. 15. It will take approximately 10 million barrels of crude to fill the entire pipeline.

Source: http://www.newsday.com/ 25.05.2005

BURGAS-ALEXANDROUPOLIS OIL PIPELINE

• Seven Companies to take part in Bourgas-Alexandroupolis oil pipeline project.

Seven Bulgarian, Russian and Greek companies have expressed interest to participate in the multi-national venture that will build the Bourgas-Alexandroupolis oil pipeline and secure the funding for it. This intention was announced by Kalin Rogachev, Head of the office of the Minister of Regional development and Public Works Valentin Tserovski, after the end of the Bulgaria-Greece-Russia meeting that was held on May 28. The joint venture will build and operate the oil pipeline. The distribution of stakes in the consortium will depend on the money each of the companies will invest. The deadline for establishing the venture is the end of 2005, and within six months each of the firms has to be ready with its proposal for holding a stake. The Governments of the three countries will review the proposals and approve the distribution of shares.

Source: http://www.sofiaecho.com/ 30.05.2005

OTHER ENERGY NEWS:

AZERBAIJAN

• Baku to host 12th Int?l Caspian Oil & Gas Exhibition.

Some 259 companies from 37 countries including ConocoPhillips, Itochu, Lukoil, Statoil, Total TPAO, Total, TransNeft, Siemens, Blue Water Shipping, National Oilwells have applied for participation in the 12th International Caspian Oil & Gas Exhibition and Conference incorporating Refining and Petrochemicals to be held at the Baku Heydar Aliyev Sport-Concert Complex from 7 to 10 June, it was announced by the State Oil Company of Azerbaijan. The number of participants is expected to reach 300. Organizers of the exhibition are Chamber of Trade and Commerce and company Caspianinvest. Main sections of the exhibition are: reservoir engineering; geophysics and geology; construction and exploitation oil and gas wells, platforms and floating rigs; designing, manufacturing and servicing the equipment for oil and gas industry; pipe-laying and providing protection systems for pipelines; refining and petrochemicals; hydrocarbons transportation; building and construction works for the energy sector; providing oil and gas storage systems; producing specialist techniques, general operational and maintenance back-up and spare parts and many others, including financial and legal services.

Source: http://www.tehrantimes.com 18.05.2005

KAZAKHSTAN

KazMunaiGaz becomes a competent partner of North Caspian project.

National company ?KazMunaiGaz? and foreign contractors of the North Caspian project have inked an accord on acquisition of the share in the capital of ?BG Group Plc? by Kazakhstan. One and a half year negotiations ended with the signing of an Agreement by the Minister of energy and mineral resources of Kazakhstan Vladimir Shkolnik and the President of "KazMunaiGaz" JSC Uzakbai Karabalin with the attendance of representative of Agip Caspian Sea R. Williams. National company ?KazMunaiGaz? purchased half of the realized share in the project (8.33%) that let Kazakhstan possess decent block of stocks at Kashagan. Contractors appropriated entire interest of BG Group (16.6%) themselves and resold half of the acquired stake on the same terms to "KazMunaiGaz". Accession of "KazMunaiGaz" is carried on a par with the rest of the participants that envisages neither privilege nor relief against other contract holders. Market value of the equity participation is determined to the amount of USD 1 billion 230 million. The agreement adopted alters an accord on production sharing on North Caspian Sea as of November 18, 1997. In conformity with it, National Company "KazMunaiGaz" becomes a legally competent partner of the project.

Source: http://www.nkkazinform.kz 04.05.2005

• Kazakhstan Plans New Sea Port for Kashagan Oil.

According to the Prime Minister of Kazakhstan, Mr. Danyal Akhmetov the Kazakh Republic is to develop its port capacity on the Caspian Sea to handle increased volumes of oil output: "The Government embraces the idea of the development of the Aktau-based seaport. Further development of the CPC [Caspian Pipeline Consortium] is getting fraught with certain complications; and therefore development of our maritime infrastructure is to be intensified. A decision needs to be made to allow the Government to have a number of infrastructure facilities constructed in this part of the shoreline within several years' time." In fact, beyond the development of the Aktau sea port, the Government has approved a proposal presented by KazMunaiGas to construct a sea port at the town of Kuryk. Kuryk is presently a small town with a population of 4,800. The site, 76 kilometers south of the country's main seaport of Aktau, is already a natural harbor. According to Uzakbai Karabalin, President of KazMunaiGas, Kazakhstan intends to link-up to the Baku-Tbilisi-Ceyhan (BTC) pipeline through this new port. Thus, once the Kuryk port completed, oil from Kazakhstan's Kashagan field would then flow from Aktau to Kuryk for shipment across the Caspian Sea to Baku and the BTC. Moreover, with the national rail company, Kazakhstan Temir Zholy, and the country's Transport Ministry are planning to construct a railway connecting Kuryk to the country's main rail infrastructure, including the planned Trans-Asian which will run from China into Europe and offer an alternative to the Trans-Siberian. This new port and the connection to the BTC solves one of Kazakhstan's major problems in exporting its oil. The Caspian Sea, being an inland sea, does not extricate Kazakhstan from its land-locked state. The extra costs implied in transporting oil via rail or the construction of new pipelines will be offset by this connection to the BTC. At present, 8 million tonnes of Kazakh oil (total yearly production is in the 40-45 million tonnes per year) transits via the Caspian. This total is predicted to reach 38 million tonnes per year by 2016. The Kuryk seaport is expected to be operational by the time the Kashagan oilfield goes into production by 2007-2008. Kuryk is also to handle dry cargo as well as oil.

Source: http://www.rigzone.com 13.05.2005

• Kazakhstan to export 1 mln of oil a day in 2005.

Oil production is one of the leading sectors of Kazakhstan's economy, and exports are projecting exports of 1 million barrels per day in 2005, - Karim Masimov, the Kazakh presidential international and economic affairs advisor announced. "By 2010, we expect oil exports to increase to 2 million, and by 2015 to 3 million barrels per day," Masimov stated at the Carnegie Foundation and Nixon Center in Washington.

Source: Interfax-Kazakhstan 15.05.2005

• Kazakhstan President approves successful implementation of the Karachaganak project.

?During the nearest ten years a gas pipeline will have been laid in West Kazakhstan to link Karachaganak oil and gas field with the city of Uralsk." Totally up to 500 mln cubic meters of gas will be extracted from the field. This amount is to allow covering all needs of the oblast. President and executives of largest foreign petroleum companies, such as BG, Lukoil and Texaco-Chevron participating in development of the field negotiated this issue today. Realization of the project will lead to reduction of 15-20% of gas price. About 6 bln USD have been invested into development of the field. About 250 mln USD have been supplied to the budget of the country. The third stage in realization of the project will start in the nearest future. In this connection it is planned to build gas procession plant.

Source: KazInform 11.05.2005

RUSSIA

• Eastern oil pipeline to be made with Russian tools.

Equipment and materials for building the pipeline system East Siberia-Pacific will be bought from Russian manufacturers. The Ministry views as groundless any doubt related to Russia's emergence on the Pacific coast for exporting Russian oil to all countries in the Asia-Pacific region without exception. At the first stage the first oil terminal in the Perevoznaya bay in the Maritime region will have a capacity of up to 30 million tones of oil annually. The second construction stage includes a linear section from the town of Skovorodino to the Perevoznaya bay, having an annual capacity up to 50 million tones. Economic Development and Trade Minister Victor Khristenko has approved the building stages of the East Siberia-Pacific pipeline system. Khristenko believes that the system will resolve the goal set way back in the 1980s - "creating a system that would encompass the entire territory of our country". The total cost of the oil pipeline system is 11.5 billion dollars.

Source: Russian Information Agency 04.05.2005

Transneft to build Northern pipeline.

Transneft has allocated 850 million rubles, or 17% of its net 2004 profits, to study the feasibility of constructing an oil pipeline on the Arctic Ocean's bottom that could export oil to the United States. State-run Transneft monopolizes all Russian trunk pipelines. Transneft Vice-President Sergei Grigoryev confirmed corporate plans, noting that the pipeline will stretch from Kharyaga in the Komi Republic to Indiga in the White Sea. The new pipeline would pump 24 million tons of oil per year and requires about $2.2 billion to complete. Grigoryev marked that he was sure that Transneft could implement this project on a par with the Eastern Siberian oil pipeline, which will cost an estimated $11.5 billion. There has been discussion of constructing an Arctic oil pipeline toward the Barents Sea coast for several years. Russian oil giants like LUKOIL, Yukos, TNK, Sibneft and Surgutneftegaz suggested building a pipeline toward Murmansk on the east shore of the Kola Bay in the Barents Sea. However, federal officials did not like the idea of building a private oil pipeline. Transneft then suggested working out a Western Siberian - Barents Sea coast pipeline route. Bureaucrats took their time in choosing between the Arctic pipeline and the Eastern Siberian pipeline and decided to build the Taishet - Pacific pipeline in late 2004. The Kharyaga - Indiga pipeline is a scaled-down version of the initial Arctic pipeline. It is much cheaper because it can be built with the Eastern Siberian pipeline. The Western Siberia - Indiga pipeline would cost some $5.6-6.2 billion. And the Murmansk pipeline would cost about $11.8 billion. The Arctic and Eastern Siberian oil pipelines could be commissioned before 2010. This route will be popular with oil tycoons. LUKOIL and Rosneft, which are developing the Timano-Pechora deposits, are interested in this route, as well as Surgutneftegaz and TNK-BP. Gazprom to build pipeline under Baltic Sea.

Source: RIA Novosti, 16.05.2005

Gazprom, OMV sign new agreement on gas delivery.

The Russian gas monopolist Gazprom and the international company OMV AG have signed a new agreement on natural gas deliveries to Western Europe via the Western-Austrian gas pipeline (WAG) for the term of 20 years, from 2007 to 2027. Until 2027, the OMV will annually transport about 4.4 billion cubic meters of gas from the Slovakian border at Baumgarten, via Austrian territory to the German border at Burghausen. The OMV possesses a pipeline system which supplies gas to a number of European countries (Austria, Germany, Italy, France, Slovenia, Croatia and Hungary) and which is connected with their gas supply systems. In compliance with the new agreement, the annual capacity of the gas delivery system will be considerably increased, from 7 to 11 billion cubic meters. The OMV investments into this project will amount to some 260 million euros. The work will start in 2005 and will be completed in 2011. The OMV concern is the biggest oil and gas enterprise in Central Europe and the first Western company which concluded a long-term contract with the USSR in 1968 for purchasing its natural gas. As of 1 January 2005, gas deliveries from Russia to Austria totaled more than 138 billion cubic meters; in 2004, about 31 billion cubic meters of Russian gas passed in transit via Austrian territory.

Source: RIA Novosti, 18.05.2005

Russia and Norway to enhance oil cooperation.

Russia's Energy Minister Viktor Khristenko and Norway's Petroleum and Energy Minister Thorhild Widvey considered development prospects for the Barents Sea shelf and participation of Norwegian companies in the development of the Shtokman field, as well as joint operation on the European market. The parties expressed interest in joint development of Russian and Norwegian fields of the Barents Sea shelf. The parties agreed that development of Russian-Norwegian cooperation in the sphere was being hampered by problems in delimitation of the Barents Sea shelf. Once the issue is settled, this would minimize political risks involved in joint projects, the Russian minister pointed out. He also raised the issue of cooperation on the European market, for Russia and Norway, being European and world leaders in oil and gas exports, had common interests in Europe. Khristenko also stressed the importance of transport projects in bilateral relations.

Source: http://www.russiajournal.com/ 18.05.2005

• Gazprom to create an oil company.

Gazprom is pondering the creation of an oil company Gazpromneftedobycha, Alexander Ananenkov, Deputy Board Chairman of Gazprom stated. "We are analyzing the creation of a company Gazpromneftedobycha (Gazpromoilproduction) that will consolidate Gazprom's oil assets," ? Mr.Ananenkov commented. Gazprom plans to produce 1.25 million tons of oil in 2005 (the figure for last year was 1 million tones). The proven recoverable oil reserves of Gazprom are 600 million tons, the deputy board chairman said. The proven balance of Gazprom's reserves is about 600 million tons. Ananenkov added that the company plans to increase its hydrocarbons reserves to 550 billion cubic meters. Last year Gazprom spent 11.9 billion rubles ($1 is 28.10 rubles), or 4 billion rubles more than the year before, on geological survey within the program of developing the raw materials base of the gas industry until 2030. The program helped to increase gas reserves by 1,304.3 billion cubic meters in 2002-2004.

Source: http://en.rian.ru 31.05.2005

TURKMENISTAN

• Niyazov invites LUKOIL to develop Turkmen shelf of Caspian Sea.

President of Turkmenistan Saparmurat Niyazov has invited Russia?s oil major LUKOIL to develop the Turkmen offshore oil deposit in the Caspian Sea. The cooperation proposal was made at the meeting between Niyazov and LUKOIL CEO Vagit Alekperov. According to Niyazov, ?the well-known company?s rich experience, its reputation of a reliable partner can become an important factor in its selection by Turkmenistan as a participant in projects related to the development of major hydrocarbon deposits, in particular, of the Caspian shelf, as well as projects of fuel transportation outside the country?. Alekperov stated during the meeting that Turkmenistan, possessing colossal energy resources, is of enormous interest to the business community of the Russian Federation and the whole world.

Source: http://itar-tass.com/ 08.05.2005

UKRAINE

• NJSC ?Naftogaz of Ukraine? and Shell Company concluded agreement on joint works in Dnipro-Donetsk basin.

NJSC ?Naftogaz of Ukraine? and Shell Exploration Company B.V. (Shell) signed the agreement on cooperation in the sphere of technical researches for further joint upstream activities within the zone of mutual interests on the territory of Dnipro-Donetsk basin. According to the Agreement, the parties the Companies will start joint researches in the zone of mutual interests with the general area over 30 000 km2. Following the latest geological survey data, the basin possesses significant researches that are to be discovered. However, extraction of hydrocarbon resources requires solving of the complicated technical issues and application of up-to-date achievements of science and techniques. NJSC ?Naftogaz of Ukraine? expressed hopes that due to Shell?s profound experience in resource development and the contemporary technologies of Shell?s Company, the parties will achieve mutually beneficial results. Note: Shell Company works actively in Ukraine since 1992. The main directions of the Shell Company are realization of lubricants, chemical products and aviation fuel.

Source: Press-Centre of NJSC ?Naftigaz of Ukraine?, 10.05.2005

• Ukraine to help develop Turkmen oil, gas fields in Caspian.

Saparmyrat Nyyazow, Turkmen President met an official delegation from Ukraine. Among Ukrainian representatives there were Oleksiy Ivchenko, Chairman of Naftogaz of Ukraine, O. Chyzhov, the newly appointed Head of Interbudmontazh [international construction and assembly] joint-stock association and Roman Halikov, Deputy Director-General of the state enterprise Ukroboronservis [Ukrainian defence industry company]. The sides discussed new Ukrainian investment projects in Turkmenistan, in particular Ukrainian participation of NJSC ?Naftogaz of Ukraine? in developing oil and gas fields on the Caspian shelf. The construction of a pipeline is one of investment projects in which Ukrainian companies will participate. Saparmyrat Turkmenbasy highly praised the work of Ukrainian specialists in Turkmenistan, in particular, the Interbudmontazh company. Ukrainian friends and partners are making a significant contribution towards the implementation of graduated programmes on fundamentally reorganizing the Turkmen economy, Nyyazow marked.

Source: BBC Monitoring, http://www.hoovers.com/ 09.05.2005

• Turkmenistani gas may bypass Russia.

Ukraine may initiate the construction of a gas pipeline to transport Turkmenistani gas to Europe bypassing Russia through the Caspian Sea, Azerbaijan and Georgia, Naftogaz of Ukraine CEO Alexey Ivchenko has declared. Russia is considering this proposal and assessing its economic and political advisability, the Chairman added. Mr.Ivchenko pointed out that a transnational consortium might be created to build a pipeline from Turkmenistan to Europe.

Source: RosBusinessConsulting, 01.05.2005

• Naftogaz of Ukraine Co. and State Oil Company of Azerbaijan plan joint enterprise.

The NJSC ?Naftogaz of Ukraine? has suggested the creation of a joint enterprise with the State Oil Company of Azerbaijan (GNKAR). Alexei Ivchenko, Chairman of the Board of Naftogaz of Ukraine has discussed with Azerbaijani President Ilkham Aliyev a possibility of creation of a joint stock company, which will purchase and transport oil by the Baku-Supsa and Odessa-Brody oil pipelines, and further to Europe. Mr.Ivchenko also had talks with GNKAR President Natik Aliyev. They agreed to create working groups, which will draft documents on the above-mentioned issues, and will prepare them for signing during the visit of Ukrainian President Viktor Yushchenko to Azerbaijan, which is scheduled for July 2005. Ivchenko discussed with Ilkham Aliyev, among other things, prospects of the signing of a general agreement by Naftogaz of Ukraine and GNKAR on long-term cooperation in the extraction of oil and gas by Ukraine at the oil fields of Azerbaijan, as well as on the purchases of oil and oil products.

Source: http://www.tehrantimes.com/, http://www.rbcnews.com 27.05.2005

UZBEKISTAN

• China, Uzbekistan to ink $600 mln oil deal.

China and Uzbekistan are expected to sign a deal for a $600 million oil joint venture during the visit of Uzbek President Islam Karimov. China, the world's second-largest oil consumer, is hungry for new sources of energy to feed its economy, which has rapidly grown into the world's seventh-largest. According to Uzbekneftegaz representative Shavkat Mazhitov, CNPC would invest the money in 23 oilfields in Uzbekistan in which would be a 50:50 joint venture. The venture would start with capital of $96 million and focus on oilfields in the region around Bukhara and Khiva. Oil production in Uzbekistan fell 7.8 percent to 6.58 million tons, or 132,000 barrels per day, in 2004.

Source: http://today.reuters.com/news 25.05.2005

• S.Korea, Uzbekistan agree on joint oil exploration.

South Korea and the Central Asian Republic of Uzbekistan agreed to increase bilateral cooperation in oil exploration and trade. The agreement was reached during the summit held between South Korean President Roh Moo-hyun and his Uzbek counterpart Islam Karimov. At the summit, Roh and Karimov agreed to implement practical cooperation in different fields. In particular, the leaders agreed on the participation of South Korean businesses in developing oil and gas fields in the Aral Sea. The two countries' foreign and industry ministers signed four two-way accords on social security for industrial workers; joint exploitation of oil, gas and other natural resources. The Heads of the Korea National Oil Corp., Korea Resources Corp. and several other South Korean companies signed seven separate agreements and memorandums of understanding for the joint development of oil, gas and other natural resources in Uzbekistan.

Source: http://www.tehrantimes.com 27.05.2005