Document Actions

October 2005

Energy News from INOGATE Countries

INOGATE NEWS

The preparatory meeting of the Working Group on Investment Attraction on Energy Infrastructure of Common Interest took place in Kiev, Ukraine on 20 October 2005. On the initiative of and the invitation from the European Commission, the meeting was attended by representatives from Armenia, Belarus, Georgia, Kyrgyz Republic, Moldova and Ukraine. Azerbaijan, Kazakhstan and Turkey did not participate for logistical reasons. Turkmenistan and Uzbekistan did not participate. On the basis of the Working Group's mandate, agreed at the Ministerial Conference on Energy Cooperation between the EU, Caspian Littoral States and their Neighbouring Countries held in Baku on 13 November 2004 (referred to as the "Baku Initiative"), this preparatory meeting of experts aimed at addressing the issue of investment attraction for energy projects. The objective was to exchange views on priority energy infrastructure in both the national and regional context with view to identifying specific investment opportunities to be considered for support under the new INOGATE-IFI technical assistance projects in the short-term, but also in the context of the EU co-operation with the region after 2007 in the long-term. On the basis of their discussion, the experts agreed on future orientations concerning mutual cooperation in the area of facilitating investments to regional infrastructure of common interest between the EU and the region of Eastern Europe, Caucasus and Central Asia. Following the successful site visit to the Boyarka Metrological Centre on 4 June 2005 with the participation of the European Commission’s Director General for Energy and Transport, Mr. Lamoureux, further support from the European Commission to the Centre is under now consideration. In order to view the ongoing progress as well as promote similar initiatives in other NIS countries, the European Commission would like to organised a second site visit on 21 October 2005 to the Eastern Europe Regional Natural Gas Metrological Centre in Boyarka.

Source: INOGATE Support Group, October 2005

Hydrocarbon Developments:

I. GAS PIPELINES:

NORTH-EUROPEAN GAS PIPELINE

Gazexport, Wingas sign first agreement on North European gas pipeline.

Wingas, a Gazprom-BASF joint venture, and Gazexport, the Russian oil giant's export trader, have drawn up the main conditions for natural gas supplies through the North European gas pipeline (NEG). Wingas will additionally receive 9 billion cubic meters of natural gas annually to supply German and other Western European customers for 25 years from the pipeline's launch in 2010. The agreement on NEG, a major Russian investment project in Germany, was signed September 8 by Gazprom and the German companies E.ON AG and BASF. According to the agreement, the parties intend to form the North European Gas Pipeline Company, in which Gazprom will own a 51% majority stake, and BASF and E.ON AG will each have a 24.5% stake. The pipeline will link Russia and Germany via the Baltic Sea. The total cost of the project is estimated at 4 billion euros.

Source: RIA Novosti, 12.10.2005

II. OIL PIPELINES:

BAKU-TBILISI-CEYHAN OIL PIPELINE

One-third of BTC filled so far.

The Azeri oil pumped into the Baku-Tbilisi-Ceyhan pipeline at Sangachal terminal in May will reach the Turkey’s border by the end of October. Over 3,5 m barrels of oils have been pumped into the pipeline filling so far its one-third. The total amount of oil to fill the pipeline completely is 10 m barrels. The line fill of the Turkey’s section of the Baku –Tbilisi-Ceyhan pipeline will take up to three months. The first tanker with Azeri oil on board is expected to leave the port of Ceyhan in the 1st Q of 2006.
Source: Azeri Info, 31.20.2005

Transneft to complete Baltic Pipeline System construction.

Russian pipeline monopoly Transneft plans to complete the construction of its Baltic Pipeline System (BTS) in the first half of 2006. According to the Company’s Vice President, the BTS' annual capacity was estimated at 60 million metric tons. The company's oil exports reached 187.2 million tons in the first nine months of 2005, including 60.6 million tons piped through Belarus and 25.8 million tons piped through Ukraine.

Source: RIA Novosti, 31.10.2005

ODESSA-BRODY OIL PIPELINE

European experts will explain to Ukraine in which direction the Odessa-Brody oil pipeline should be turned.

The representatives of the European Commission arrived to Kiev to participate in the meetings related to the project on the Odessa-Brody pipeline extension to Plock. The representatives of Ukrtransnafta firmly believe that the final conclusion of the European experts will be positive. Recently Ukrtransnafta has informed about the declaration of Mr.K.Kabyldin, the Director of Kazakh Company Kazmunaygas, who for the first time officially confirmed the interest of Kazakhstan to supply Caspian oil to Europe via Ukrainian trunk pipelines. According to Mr.K.Kabyldin, this route will successfully compete with the marine route of Caspian oil transportation and aimed at guaranteeing the maintenance of quality of oil during its transportation, which could be maintained by Russian Company Transneft. Today the Odessa-Brody oil pipeline is used in a reverse direction. Based on the information of Ukrtransnafta, this variant failed and appeared to be ineffective, because instead of the planned amount of 9 mln tons, only some more than 5 mln tons were transported.

Source:www.ukroil.com.ua 24.10.2005

III. OTHER ENERGY NEWS:

AZERBAIJAN

Construction of Azerbaijan part of South Caucasus gas pipeline to complete late current year.

Near 70 percent of the construction works at the Azerbaijan part (442 km) of South Caucasus gas pipeline has been completed. The pipes were laid in 440 kms distance, welded at 335 kms, line filled at 322 kms, and the works in tunnel under the Kur River completed. Tunnels in some 1500 km distance in the territory of country were built. Construction of Azerbaijan part of south Caucasus gas pipeline will be completed late current year. Gas production at the Shah Deniz deposit will start in September next year and 20 billion cubic meters of gas will be transported through this pipeline.

Source: Azeri Info 23.10.2005

BELARUS

Alexander Lukashenko: Belarus to face problems with gas supplies.

Alexander Lukashenko stated that Belarus would not face any problems with gas supplies. At the same time the President underlined that the country should be aware of the possible raise in price for gas. “Today Belarus has the cheapest gas after Russia”, the President stated. Energy minister Alexander Ageev reported to the President that Belarus plans to consume 20,5 billion cubic meters of natural gas; last year the republic consumed 19,7 billion cubic meters. According to the Minister, in 2006 the country will need some 21-21,5 billion cubic meters. “At present we hold negotiations with Russia on the amount of gas supplies. In line with the agreements between the Presidents of Belarus and Russia, “Gazprom” will retain the same gas price”, Alexander Ageev added.

Source: Belarus telegraph, 21.10.2005

KAZAKHSTAN

Kazakhstan, Georgia reach milestone agreement.

The President of Kazakhstan signed an agreement on natural gas supplies with his Georgian counterpart. "We need access to the Black Sea for our oil, various commodities, and cargo to boost trade," Nursultan Nazarbayev declared at a joint conference with the Georgian President Mikhail Saakashvili. "We also want to participate in the privatization of facilities in Georgia and in local construction, and to acquire industrial facilities here. We would like to have resorts and tourist centers on the Black Sea." The Presidents reached an important agreement on Kazakhstan's natural gas deliveries to Georgia Saakashvili, who said Kazakh gas would allow Georgia to double its consumption, did not predict any problems with Russia either. "I think Russian and Georgian interests coincide here, as Russian enterprises operating in Georgia also consume gas. Russia, Kazakhstan, and Georgia will all benefit from tackling the problem of gas supplies and developing economic cooperation," the President stated.

Source: RIA Novosit, 03.10.2005

LUKoil eyeing construction of the Caspian gas & chemical complex.

Kazakhstan Prime Minister Danial Akhmetov has met LUKoil President Vagit Alekperov in Moscow to discuss cooperation prospects. Alekperov presented LUKoil's project regarding the construction of a gas chemical complex in the Caspian region. Akhmetov considers this project to be beneficial both for Kazakhstan and LuKoil. The capacity of the complex is estimated at 14bn cubic meters of gas. Capital investments in the project will amount to USD3.6-3.8bn, Alekperov stated. LuKoil will make a definite decision on the project in 2006, Alekperov concluded.

Source: http://www.rbcnews.com 27.10.2005

CNPC, Kazakhstan reach agreement on oil deal.

China National Petroleum Corporation (CNPC), the nation's largest oil producer has reached an agreement with Kazakhstan over the fate of Canadian-registered oil firm PetroKazakhstan. In order to get the Kazakhstan Government to agree to CNPC's purchase of PetroKazakhstan, the Chinese firm has agreed to sell state-owned KazMunayGas part of the Canadian firm. "CNPC signed an agreement with KazMunaiGas last week," Liu Weijiang said. The agreement could involve selling equity stakes of PetroKazakhstan to KazMunaiGas. The Beijing-based oil conglomerate has agreed to sell a US$1.4 billion stake in PetroKazakhstan to the Kazakhstan government in a move to win support for the deal, originally scheduled to be closed by today. This reportedly amounts to a 33% stake. Shareholders of PetroKazakhstan will vote on the acquisition, and CNPC will then make an announcement. Note: China and Kazakhstan are building a 3,000-kilometer pipeline, at the cost of $3 billion, to pump crude oil to China across the Central Asian state, with the first-phase of the project to be completed by the end of this year. PetroChina, the Hong-Kong-listed subsidiary of CNPC, has said that during the first three quarters of this year, it saw a total output of 722 million barrels of oil equivalent, an increase of 5.3% year-on-year. In the first three quarters, PetroChina's average realized price of crude oil reached $47.35 per barrel, 50.08% higher than a year ago.

Source: RIA Novosti, 18.10.2004

Reduced oil production in Kazakhstan hits oil products in Uzbekistan.

Kazakhstan's 30% reduction in oil production has hit the oil product market in Uzbekistan, "At the end of August, Kazakhstan lowered its oil production by 30% and cut export by 25%. On October 11, the Kazakh authorities officially banned export of gasoline and diesel from December 31," the Uzbek Government's fuel and energy, chemicals, metals and machine building department stated in a report. "These measures have created a strained situation on the markets for oil products in countries contiguous to Uzbekistan (Tajikistan, Kyrgyzstan and Kazakhstan), where the price per liter of gasoline has risen to $1 and higher." Uzbekistan is capable of processing sufficient oil products for the country's needs. Uzbek gasoline production in the first nine months of 2005 was 1.2 million metric tons, 0.3% up year-on-year.

Source: RIA Novosti, 14.10.2004

RUSSIA

Gazprom, Pakistan sign memorandum.

Russian natural gas giant Gazprom and Pakistan's petroleum ministry have signed a memorandum cementing agreements on cooperation in the oil and gas sector. The sides agreed to prospect and develop natural gas fields in Pakistan and use natural gas as motor fuel. Under the memo, the parties will jointly operate Pakistan's underground storage facilities for natural gas, work on transnational gas pipelines, and train oil and gas experts for Pakistan. Pakistan's established natural gas reserves total 800 billion cu m, making the country the sixth largest natural gas producer in the Asia-Pacific region after Indonesia, Australia, Malaysia, China and India. In 2004, Pakistan produced and consumed 27.4 billion cu m of gas, up 8.7% on 2003. Pakistan exports and imports natural gas. The country's petroleum ministry forecasted that the demand for natural gas would rise to 44.5 billion cu m annually by 2010.

Source: RIA Novosti, 07.10.2005

Russian oil company wins Libyan tender.

Russian oil company Tatneft won a bid to explore and develop an oil deposit in Libya. Under the contract, which must be signed within 30 days, Tatneft will have access to a 2,000-square-kilometer deposit in the country's central region. International oil companies, including ExxonMobil, ChevronTexaco, Total, BP, Shell, CNPC and ONGC, and Russian companies Gazprom, LUKoil, and NGK Itera, bid on the tender, which was announced by Libya's state-owned National Oil Corporation (NOC). Tatneft, Russia's sixth largest oil producer and No. 32 in the world, extracts 512,000 barrels per day from 77 deposits, including the Romashkinskoye oilfield, one of the world's largest. Tatneft ranks No. 21 for proved reserves. Its annual oil production totals 25 million metric tons, gas, more than 700 million cubic meters.

Source: RIA Novosti, 05.10.2005

Russia may boost oil, natural gas production by 2015.

Russia may significantly increase oil production and crude exports by 2015, the Russian Minister of industry and energy announced. Russia could increase oil production to 530 million metric tons a year, and oil exports to 310 million tons by 2015. For comparison, Russia produced 458.7 million tons of oil and exported 257.4 million tons in 2004. Russia's production and export of natural gas could reach 740 billion cubic meters and over 290 billion cubic meters respectively by 2015. "The development of new fields will mostly account for the growth in gas production," the minister said, adding that the regions could increase production by 10 times by 2010 and by 15 times by 2015 on the current figures. According to the Minister, the export of Russian fuels to Asian-Pacific countries may rise by six times by 2015 and the share of Russian oil derivatives on the North American market had grown more than twice in 2005. The North European Gas Pipeline, which will be laid on the Baltic Sea floor to Germany, would directly link the Russian natural gas transportation system to European pipeline networks. The Minister also marked that Russia possessed unique energy reserves, which could cover 35-40% of current annual consumption.

Source: RIA Novosti 31.10.2005

UKRAINE

Ukrainian PM to negotiate natural gas deal with Turkmenistan.

Ukrainian Prime Minister Yuriy Yekhanurov will discuss the possibility of a long-term natural gas contract with Turkmenistan during his October 26-27 visit to the Central Asian republic. Yekhanurov's trip will follow up on the Oct. 11-13 visit by Ukrainian Fuel and Energy Minister Ivan Plachkov, who closed a deal on gas supplies for 2006 at $44 per 1,000 cu m, $14 less than last year, and secured Turkmenistan's consent to the involvement of Ukrainian companies in the development of hydrocarbon deposits along its Caspian Sea shelf. Turkmenistan had welcomed Ukraine's proposal to conclude a long-time bilateral agreement on cooperation in the oil and natural gas sector, but had stressed the need to make sure Russia's concerns were taken into consideration and proposed the three sides hold negotiations soon. Ukrainian National Security and Defense Council Secretary Anatoliy Kinakh, speaking in the Lithuanian capital of Vilnius Monday, said that Ukraine would try to diversify its oil and natural gas sources before 2007. He also said the country would propose that Russia maintain the current price of natural gas - $50 per 1,000 cu m - into next year before the planned raise in 2007.

Source: RIA Novosti, 26.10.2005

Ukraine says no to Gazprom.

Ukrainian authorities have rejected Russian gas monopoly Gazprom’s bid to rent or buy an underground gas storage facility located near Ukraine’s Western border. The facility’s capacity is 5 billion cubic meters. “Gazprom proposed that the facility should hold Russian gas only, which should not be mixed with Ukrainian gas. Gazprom also wanted to manage the pumping of gas into and out of the storage facility on its own. Currently Ukrainian national oil and gas company Naftogaz Ukraine stores Russian gas in Ukrainian storage facilities on the basis of an agreement with Gazprom. Gazprom has to keep some amount of gas in Ukraine’s storage facilities to be able to implement its export contracts. The accumulated gas is used to make up for seasonal fluctuations in consumption. Ukraine has 13 gas storage facilities with a total capacity of 32 billion cubic meters. The storage facilities are run by Naftogaz’ subsidiary Ukrtransgaz.

Source: Neftegaz, 10.10.2005