Foreign Correspondence

[Amaunet]

Why is Russia being so cooperative and backing the UN resolution regarding Iraq? One trade probably is the US backing of Russia’s WTO bid. Another trade could be the possibility that the international conference for the reconstruction of Iraq might include Russia, France and Germany reclaiming some or all of the oil contracts lost before the war.
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But this could be the big one, the deal that has made Putin somewhat of a compliant adversary lately. The U.S. Export-Import Bank may help finance a $15 billion project to develop the Shtokman field in Russia. U.S. officials have been pursuing long-term agreements with Russia that would bolster its exports to America. This text is followed by China’s countermove.

-Am

U.S. looks to Russia as supplier of natural gas

Friday, June 11, 2004
MOSCOW As the United States grapples with the specter of a shortfall in its natural gas supply, U.S. officials are pursuing long-term agreements with Russia that would bolster its exports to America.

The officials - including Spencer Abraham, the U.S. energy secretary, and Kyle McSlarrow, the deputy secretary - have participated in a series of meetings here over the last several weeks with some of the biggest Russian gas producers, including Gazprom, the natural gas monopoly; Yukos, the giant oil company; and Transneft, the oil pipeline monopoly.

Gazprom - which is the best placed of the three to win any contract - is eager to sign a deal to develop the giant Shtokman gas field, a move that would accelerate its projects to liquefy gas in the Arctic and possibly reel in an American oil company as a partner.

The U.S. government is so serious about pursuing natural gas deals with Russia that the U.S. Export-Import Bank may help finance a $15 billion project to develop the Shtokman field.

"The subject of investment has been discussed, including in the context of proposals which U.S. ExImbank may put forward," Ivan Materov, deputy minister of industry and energy, said this week. Materov also said that Russia was interested in having large U.S. energy companies participate in the project.

McSlarrow said projects involving liquefied natural gas, commonly known as LNG, have emerged as one way to stave off an anticipated shortfall in the North American natural gas supply.

"Under everybody's scenario, LNG imports will have to increase," McSlarrow said at a news conference this week. "I think Russia realizes that it ought to be a major player when it comes to LNG."

The Shtokman deposit, located on the shelf of the Barents Sea beyond the Arctic Circle, has an estimated 3.2 trillion cubic meters of gas and 31 million tons of gas condensate.

The license to develop it belongs to Gazprom and a subsidiary of the state-owned oil company Rosneft.

Potential partners for Gazprom mentioned in Russian news reports include Norsk Hydro, ConocoPhilips, ChevronTexaco, Exxon Mobil and Shell.

But industry analysts said they were skeptical about LNG projects involving Gazprom and U.S. companies, given delays that have plagued other energy projects in Russia.

"There is clearly interest in the U.S. on Russian energy exports to the West, whether gas or oil," said Stephen O'Sullivan, an analyst at UFG in Moscow. "There is a lot of talk, but not practical support, for projects like an oil pipeline to Murmansk to go ahead," he said, referring to the region from which Russia would be able to ship oil across the Atlantic to the United States.

But even as foreign companies salivate over the prospect of business with Gazprom, a minority shareholder is raising questions about a trading deal that he claims not only hurts Gazprom's bottom line but appears to benefit an obscure shell company.

Hermitage Capital Management, the largest foreign investment fund in Russia, has alleged that Gazprom cut a trade deal that benefits an unknown third party and is costing shareholders potential profits, thereby undervaluing the share price.

The fund wants its head of research, Vadim Kleiner, to win a seat on Gazprom's board at the company's annual meeting at the end of this month. Specifically, Hermitage is upset about a gas supply contract that allows Eural Trans Gas, an obscure company, whose chairman is Cedric Brown, the former head of British Gas, to handle most of the gas business between two of Gazprom's most lucrative markets: Ukraine and Turkmenistan.

Established less than two years ago, Eural Trans Gas has built up a highly lucrative business, helped partly by Gazprom, which not only yielded its Ukrainian gas market and a part of the markets of Poland and Slovakia to the little-known trading company, but also financed Eural Trans Gas through its own corporate bank, Gazprombank.

At the same time, Eural Trans Gas has been allowed to keep most of its trading revenues while paying a relatively smaller transit fee to Gazprom, Hermitage says.

The latest deal with Eural Trans Gas resembles one struck with a company known as Itera. The relationship between Gazprom and Itera was the subject of an inquiry by the U.S. Federal Bureau of Investigation several years ago, as the agency looked into allegations of asset stripping. Gazprom had also been transferring assets such as gas fields and sales markets to Itera, although its relationship with Gazprom has deteriorated.

Under Alexei Miller, whom President Vladimir Putin installed at Gazprom in 2001 to carry out changes, the energy giant was supposed to regain control of such unusual trading arrangements.

"Gazprom gave up a majority of its market share in Ukraine in the 1990s to Itera," Browder said.

"Despite expectations in 2002 that Gazprom would recover this business, Eural Trans Gas has stepped into Itera's shoes."

A spokeswoman for Gazprom did not respond to requests for comment.

The New York Times



http://www.iht.com/articles/524507.html

China may soon sign deal with Russian offshore energy project, official says


Canadian Press


Friday, June 11, 2004



MOSCOW (AP) - Chinese companies and the operator of a major oil and gas project off Russia's Pacific coast may soon sign a gas agreement, the Interfax news agency quoted a Chinese official as saying.

Jiang Weixing, head of the Chinese State Development and Reform Committee said in a meeting with Sakhalin Governor Ivan Malakhov that his country wants to participate in and receive gas from the Sakhalin-2 project.

Along with Weixing's delegation, representatives from Sinopec International Petroleum Exploration & Production Co., a unit of state-owned China Petrochemical, arrived Thursday to familiarize themselves with the $10-billion-US project.

Sakhalin Energy Investment Co., a joint venture set up by Royal Dutch/Shell Group, Mitsui and Mitsubishi Corp., is developing the Piltun-Astokhskoye field and the Lunskoye field in the Sea of Okhotsk off the east coast of Russia's Sakhalin Island.

Together the fields contain estimated recoverable reserves of 1.1 billion barrels of oil and 20 trillion cubic feet of gas. Shipment to international markets is expected by the end of 2007.

To satisfy soaring domestic demand for energy, China is trying hard to secure new energy sources, particularly in Russia, but it faces stiff competition from energy- hungry Japan.

Sakhalin Energy has already signed contracts to supply 3.4 million metric tons (3.75 million tons) of liquefied natural gas to Japan.

"The Chinese market is the best for Sakhalin gas," Weixing was quoted as saying.

© Copyright 2004 The Canadian Press



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