About The Portal To Russia ----- How To Subscribe ----- Email Dr. Palms

 

Know Whom you are dealing with
You may wish to decide whether you feel comfortable about our credibility, before you read our opinions and advice
Credentials 
The many faces of Dr. Palms
 References -   Testimonials - History  
AwardsAwards
IBM - ATT - Microsoft - Magellan - Time Warner - Europe Online - NYNEX

 


RECENT DEVELOPMENTS IN RUSSIA OIL INDUSTRY

From: Jennifer DeLay

RUSSIAN OIL INDUSTRY STEADIES, SEEKS FOREIGN MONEY:

The Russian oil industry is showing signs of a recovery after years of decline, but remains deeply divided over the role of foreign investment, a conference here heard on Thursday. Viktor Ott, first deputy minister of fuel and energy, said that oil production has fallen by 45% since 1990. But in the last two years, the decline has almost halted, and in 1996 some areas saw increased production while others saw stable output. "I will not over-emphasize it, but I consider this the start of a general stabilization," Ott said. "Now it's important to maintain this trend." He pointed out that Russia has some 13% of global oil reserves and 36% of gas reserves, and currently produces 15% of all oil and 51% of all gas produced worldwide.

Ott believes participation of Western partners is vital to developing the industry, and noted that joint venture oil production has gone from 10.7 million tons in 1995 to 15.2 million last year, and a projected 17.1 million this year - almost 6% of total output. And to encourage this, he said Russia is trying to create an attractive economic and tax climate and is trying to support the most promising projects with specific help. "We must remember the current tax and fiscal regime is not very attractive, it's our major hurdle," he said.

Part of the solution to this problem is reform of the law on Production Sharing Agreements (PSA). But such reform faces huge opposition from sections of the State Duma, the lower house of parliament, with the communist and agrarian factions particularly opposed. Artur Chilingarov, the Duma's deputy chairman, told the conference that some members of the Duma regarded PSA as an attempt to pillage Russia's resources, and damaging to the country.

But some regional authorities are actively courting western finance and pressing ahead with production sharing. The governor of Sakhalin island in the Russian Far East, Igor Farkhutdinov, said that work is under way on a number of huge field development projects, two of which, Sakhalin 1 and Sakhalin 2, are the first projects to be developed in Russia under PSA legislation. "A lot depends on whether they succeed," said Farkhutdinov. "Only if they do so will the whole system take off and we will start on a new track."

By contrast, Vladimir Butov, Governor of the Nenets autonomous region in northern European Russia, appeared much keener to promote development on his territory by Russian companies. "Foreign investors must know that we are developing fields successfully with Russian companies. We think they represent the future," he said.

Thane Gustafson of Cambridge Energy Research Associates said that a clear wave of optimism about Russia is now building in the West. He put this down to the reelection of President Yeltsin, the end of the war in Chechnya, the fact that the transfer of property, power and rent after the end of the Soviet Union appears to be ending, and the election of pragmatic leaders at gubernatorial level. And he said that macroeconomic stabilization, leading to low inflation and sound money, was a huge victory for which Prime Minister Chernomyrdin deserves credit. And he added that reform in the banking sector and stabilization and protection of property rights were all helping to make Russia attractive to foreign investors. (Reuters, Mar 13.)

SIBNEFT'S OMSK REFINERY TURNS OUT FIRST LOW-SULFUR DIESEL:

Sibneft's Omsk Oil Refinery this March launched a trial consignment of 10,000 tons of low-sulfur diesel fuel that was exported to the Baltic nations to test demand. But the refinery is unlikely to put the product, which contains just 0.05% sulphur into full-scale production, because of the high costs of doing so, an official told Interfax's Petroleum Information Agency. The diesel fuel was refined down to European standards using a hydrocracker. Omsk is also pretty far from the main consumers of European-standard fuel in Western Europe and the Baltics. So it is focusing on fuel with 0.2% sulfur content for local consumers. That fuel can also be exported to be desulfurized at a European refinery. It costs roughly US$12-14 to bring the sulfur content of a ton diesel fuel down from 0.2% to 0.05%, the maximum established by European nations in the fall of 1996. The Omsk refinery is one of the biggest of its kind in Western Siberia and processed 15.7 million tons of crude in 1996. (Interfax, March 21.)

TYUMEN OIL TO TAKE OVER MANAGEMENT OF RYAZAN REFINERY:

Russia's state-owned Tyumen Oil Company intends to take over managerial control of its troubled Ryazan refinery subsidiary, a spokesman said on Monday. He said the decision, if accepted by Ryazan shareholders, would be a step towards full vertical integration and ensuring feedstock to the plant. "The Tyumen Oil Company has begun to operate like a vertically-integrated company -- combining a production (Nizhnevartovskneftegaz), refining (Ryazan Refinery) and marketing (through company enterprises)," the spokesman said. The Tyumen board also decided from April 1 to hand over a 30% share in Tyumen's Nizhnevartovskneftegaz oil producing company to the Ryazan refinery, so as to centralize trade and financial flows within the company, he said. Russian oil firms are trying to increase direct managerial control over their subsidiaries to consolidate their position as vertically-integrated enterprises. The spokesman said the refinery decision was taken at a Tyumen Oil Company board meeting on Friday and would be put to Ryazan shareholders on May 15. Tyumen Oil Company produced 21.3 million tons (426,000 barrels per day, or bpd) of oil in 1996, down slightly from 22.6 million (452,000) in 1995. The Ryazan refinery has an annual capacity of 18 million tons (360,000 bpd), but saw refining operations skid sharply last year to 82,600 bpd from 148,300 bpd in 1995. The government owns 99.98% of shares in the Tyumen Oil Company, whose board chairman is former Fuel and Energy Minister Yuri Shafranik. The remaining 0.02% of shares were sold at the end of 1995 in a special auction. Tyumen Oil Company's total market capitalization is 7.911 billion rubles. Its main crude oil production unit is Nizhnevartovskneftegaz. (Reuters, Mar 17.)

LENINGRAD REGION AGAINST FINNISH TERMINAL PROJECT:

Leningrad region officials are determined to have the Baltic Pipeline System end at a terminal in Primorsk near Vyborg, and not in Finland, Leningrad Region Governor Vadim Gustov told a news conference on Friday. The Primorsk oil and gas terminal, with a projected capacity of 45 million tons annually, is intended to become a major Russian port in the Gulf of Finland. "For as long as the region's government remains in place, the presentation of the Kirishi-Porvoo project proposed by Finland's Neste company will not take place," Gustov said. Neste representatives said earlier that the port in the Finnish town of Porvoo could be used as the final point of the Baltic Pipeline System. Neste representatives in late February received permission from Russian Minister for Foreign Economic Relations Oleg Davydov to present the project, Gustov said. If the Finnish project is implemented, the construction of the Russian port in Primorsk may turn out to be unprofitable. The pipeline, with an annual capacity of up to 24 million tons, proposed to start from the town of Kirishi, will supply oil to Finland in the event of its construction northward, he said. In this case, Russia's financial losses will amount to about US$1.5 billion annually, Gustov said. Russian Prime Minister Viktor Chernomyrdin on March 20 signed an order to begin the port's construction in Primorsk, he said. The function of state client has been passed from the Russian Transport Ministry to the Leningrad regional government. "If the federal authorities fail to stand up to pressure exerted on them by our 'Baltic' neighbors concerned over Russia's intention to recover its economic position in the Baltic region, the [Leningrad] region's government retains the right to defend the interests of the region and Russia as a port power on its own," Gustov said. (Interfax, March 21.)

POLITICS BEHIND CZECH PLAN TO BUY NORWEGIAN GAS, SAYS GAZPROM:

Politics, not economics, are behind Czech President Vaclav Havel's recent announcement that the Czech Republic may buy Norwegian gas instead of Russian, Russian gas giant Gazprom has said. In a statement sent to Interfax's Petroleum Information Agency, Gazprom said decisions like these directly affect Gazprom's core interests on the European gas market. While respecting the Czech Republic's right to choose a gas supplier, Gazprom cannot agree with Czech government representatives who say greater reliability of supplies compensates for the high price of Norwegian gas. "We view this statement as hostile and not corresponding with reality," the statement reads. The Russian leadership has stressed several times that cooperation in gas is a firm foundation for trade relations between the Czech Republic and Russia and could act as the driving force in bringing economic ties between the two countries back up to the necessary level and give momentum to their development in the long term. The statement says Gazprom closely follows events in the Czech Republic, and, as the country's main gas supplier, will do everything possible to expand cooperation further. Meanwhile, Russian Ambassador to the Czech Republic Nikolai Ryabov said earlier in an interview with Russian television company NTV that the Czech Republic's entry into NATO could hit trade with Russia, especially gas supplies. Gazprom is currently the Czech Republic's only gas supplier, pumping over 7 billion cubic meters of gas a year. (Interfax, March 21.)

NATO DISPLAYS FURTHER INTEREST IN LITHUANIAN ENERGY SECTOR:

The West is urging Lithuania to maintain good economic relations with Russia, to construct new oil industry installations and attract investments to benefit and provide jobs to Russia and the West. The announcement came last week in London from representatives of the Institute for International Political Development (ID). Present were the Lithuanian economics vice-minister Victors Valentukevicius and the Butinges Nafta oil terminal's director general Vladislovas Gedvilas. The IIPD receives its research assignments from NATO and has been provided with materials about the Butinges Nafta oil terminal and the Mazeikiu Nafta oil refinery in western Lithuania. The IIPD would like detailed information about the Lithuanian oil sector. They are interested in the Ignalina atomic power plant and other conventional Lithuanian power plants. (Baltic News Service, Mar 26 '97.)

LATVIAN PRESIDENT AGREES TO DISCUSS ALTERNATIVE POWER SUPPLY:

Latvian President Guntis Ulmanis has agreed to discuss alternative sources of energy supply in a bid to end the monopoly situation of Russia. Ulmanis, Economics Minister Guntars Krasts and Foreign Minister Valdis Birkavs met March 19 with representatives of the Danish national oil and gas company, DONG, to discuss the issue. The company's research on opportunities to create a united gas supply network of the Baltic Sea countries was also discussed. The uniform network would ensure the Baltic Sea countries access to different gas extraction regions and form an alternative to supplies of the Russian Gazprom concern. Latvia could contribute to the project its underground containers in Incukalns and Dobele. (Baltic News Service, Mar 26 '97.)

RUSSIA SUPPLIES 3.7% LESS OIL TO BELARUS IN JANUARY-NOVEMBER 1996:

Supplies of Russian oil to Belarus dropped 3.7% in the first 11 months of last year compared with the same period of the previous year, a Belarussian official said. Belarussian refineries took 11 million tons of Russian crude in January-November 1996, an official from state oil and products supplier Belnefteprodukt told Interfax's Petroleum Information Agency (PIA). Naftan got 6.1 million tons and 4.9 million tons went to Mozyr Oil Refinery. The official said Belnefteprodukt gave the Russian Ministry of Fuel and Energy and oil pipeline operator Transneft a timetable for delivery of 700,000-750,000 tons a month to Naftan and 400,000-450,000 tons to Mozyr. Belarus should get 11 million-12 million tons of Russian oil in 1997 if it keeps to the current procedure for regulating and distributing petroleum products. It will need about 1.1 million-1.2 million tons of crude a month in the first quarter. Nikolai Polyavchenko, advisor to Belnefteprodukt's president, told the PIA that Belarus needs 90,000-100,000 tons of gasoline, 150,000-160,000 tons of diesel fuel, 10,000-15,000 tons of furnace oil and 800,000-900,000 tons of heating oil in winter. The concern has its own stocks of around 20,000 tons of gasoline, 40,000-45,000 tons of diesel and 80,000 tons of fuel oil a month. It plans to buy at free prices a monthly 30,000 tons of gasoline, 30,000-40,000 tons of diesel, 5,000 tons of burning kerosene, 10,000 tons of furnace oil and 60,000 tons of heating oil. (Interfax, March 21.)

UKRAINE TO REPLACE NUCLEAR, OIL AND GAS CHIEFS:

President Leonid Kuchma will issue decrees sacking the heads of Ukraine's top nuclear and energy bodies, his top security aide told a news briefing on Wednesday, but experts said it would do little to help the troubled sector. Volodymyr Horbulin, secretary of Kuchma's policy-making Security and Defense Council, told journalists Kuchma had not yet officially ordered the move but made clear that this was imminent.

Horbulin said the decision to remove Viktor Chebrov, who heads the Derzhkomatom nuclear body, and Bohdan Babiy of the oil and gas sector, had been taken at a Council meeting at the weekend. "The president has not signed these decisions yet, but there will be decrees. Absolutely. There will be changes in the government and these will affect the head of the Derzhkomatom and the head of the State Oil and Gas Committee," Horbulin said.

But some experts were not impressed by the news. "Don't overestimate Babiy's importance. He has minor influence on the gas-trading scheme. Everything was and is decided above him. He is just a pawn," one gas trader said.

"Babiy has been used as a scapegoat. He was the fourth head of the committee -- so what? Instead of carrying out radical reforms in the energy sector they have just been changing the bosses," an oil and gas committee source said.

Among problems mentioned by Horbulin were unpaid bills to Ukraine's five nuclear power plants, nuclear fuel shortages, and a monopolized system where the government picks gas suppliers. "We should create a situation of no monopolies (in gas trading) -- especially at the regional level," Horbulin said, referring to a scheme where up to a dozen gas distributors have the right to sell gas from neighboring Russia to consumers.

Premier Pavlo Lazarenko, linked by critics to United Energy Systems of Ukraine (UESU), the biggest gas distributor, has defended the scheme, saying it eased energy debts to Russia. But experts say traders have created new debts to Russia's RAO Gazprom monopoly, despite recent optimism about current payments which accompanied the rescheduling of a US$3.5 billion debt for supplies between 1993 and 1995.

"Despite official statements about the absence of debts for Russian gas supplies, debts do exist in fact, though the state does not take responsibility for them," the Ukrainian Center for Economic and Political Studies said in a report this week. The report said that traders had built up debts to Gazprom of US$272 million -- including US$174 million by UESU and US$55 million by Intergaz -- since the scheme was introduced in 1995. Parliament's energy commission also blamed the scheme for debt problems this month, saying it had fuelled a payments crisis which left US $2.2 billion in salaries unpaid.

Last week Kuchma also expressed concern at such problems, saying in his annual "state of the nation" address before parliament that foreign debts ended up as domestic ones. (By Rostislav Khotin, Reuters, Mar 26 '97.)

OIL INVESTMENTS AND REFORM GIVE AZERBAIJANI ECONOMY A BOOST:

Azerbaijan's economy is beginning to benefit from reforms and investment in big oil projects and related sectors, foreign economic analysts say. "Azerbaijan's economic performance has been impressive. It has been one of the most successful among former Soviet republics and can even be compared with that of Baltic countries," Tofik Yaprak, resident representative of the International Monetary Fund in Azerbaijan said.

The former Soviet republic has rolled up impressive economic numbers over the past 18 months. February year-on-year inflation was just 3.7%. Gross domestic product (GDP) rose 1.6% in 1996 and the Economy Ministry projects 1997 growth at 6.0%. The country's manat currency has risen from a low of 4,700 to the dollar in August 1996 to 4,060 now and is still climbing.

"Economic recovery here has come very quickly. This is a country that had 1,800% inflation in 1994, and in 1996 it was down to 6.7%. Whereas in other republics recovery has come two or three years after reforms began, they have been able to achieve it here in just one year," Yaprak said this week. The recovery is from a very low base, as Azerbaijan suffered more than other republics after the Soviet Union broke up. By 1996, after eight years of decline, the economy had shrunk to its size in 1963. But the signs of growth are now clear.

Analysts say part of the success can be attributed to foreign investment in Azerbaijan's promising oil sector. Foreign companies have signed contracts worth more than US$15 billion with the Azerbaijani government to help develop offshore reserves. Foreign investment in 1996 rose six-fold over 1995 to US$342 million. The Economy Ministry says most foreign capital went into the oil sector, which accounted for a substantial part of GDP.

Oil investments are beginning to have a noticeable spin-off effect on other sectors as well, with a boom in the small enterprise and service sectors. Workmen are busy day and night putting up new hotels and office complexes and sandblasting decades of black grime off Baku's once-elegant classical white stone buildings, built when the city was the haunt of petroleum barons like the Nobels and the Rothschilds.

Sparkling new service and retail outlets, storefronts, restaurants, and supermarkets are everywhere. "What we see is the effect hope about oil money is having on everything else in the economy," said one Western economic analyst.

Some say talk of a Kuwait-style oil boom has created unrealistic expectations among Azeris that the country will automatically become rich. They point out that Azerbaijan, with eight million people, has far smaller reserves of crude per capita than Kuwait or other big Middle east oil-producing states. Geologists at state oil company SOCAR estimate reserves at around two billion tons. "The notion that everyone is going to live like Arab sheikhs who idle around and drive Rolls-Royces is just a fantasy. But there is the opportunity for the economy to have a very solid base," said the analyst.

State-sector wages officially average just US$25-30 per month, although earnings in the new private sector are estimated to be several times higher. The government has generally been able to avoid the big backlog of unpaid wages that has affected many other former Soviet republics.

Yaprak said the IMF still wanted to see progress in cutting bureaucratic interference in the economy, banking reforms and better tax collection. But he said IMF lending for 1997 would continue because of reforms already taking place. Large-scale privatization has just got under way and privatization vouchers are being distributed to the population. Voucher auctions to transfer large enterprises to private hands will begin later this month. (By Lawrence Sheets, Reuters, Mar 21.)

KIEV, BAKU DECLARE INTENTION TO COOPERATE ON OIL, GAS PROJECTS . . .

A recent visit by the Azerbaijani leader to Ukraine shows that Kiev and Baku will place a special emphasiz on oil in bilateral negotiations. In addition to other documents aimed at strengthening ties, Azerbaijani President Heidar Aliyev and his Ukrainian counterpart Leonid Kuchma signed a memorandum on cooperation in the oil and gas industry in Kiev on March 24. Following the signing, Aliyev told the press he had invited Ukraine to join Caspian oil projects.

Observers say the Ukrainian-Azerbaijani accords will serve to reinforce the agreements already worked out between Kiev and Tbilisi on the transportation of Caspian oil across the Black Sea from Georgia to Ukraine. Kiev sees Tbilisi -- and Baku -- as the best alternative to Russia, on which it currently depends for a large part of its oil and gas supply.

In turn, Ukraine has offered Azerbaijan an alternate route to the European market. Interfax reported that Ukrainian officials have drafted a memorandum of understanding covering to transportation of Azerbaijani oil to Europe via Ukrainian territory. Ukrainian Prime Minister Pavlo Lazarenko told Aliyev on March 25 that signing of the memorandum would give Azerbaijan easier access to potential European customers.

Preliminary plans call for Azerbaijani oil to be sent from Baku to Georgia's Black Sea coast by pipeline and rail and then across the Black Sea to the Ukrainian port of Odessa by tanker. Oil could later be sent through the Caucasus via the planned Baku-Supsa pipeline, scheduled to be completed in late 1998. Georgia and Ukraine have already opened a ferry link across the Black Sea as the first step in implementing the plans.

Once in Ukraine, the Azerbaijani oil would be sent through the oil terminal in Odessa. The terminal, which is now being built, will be able to handle 40 million tons of crude per year, Interfax said. From Odessa, the oil would flow northward to Brody, through a pipeline currently under construction, and link up with the Druzhba pipeline, which offers a connection to Europe.

Completing the facilities necessary to send oil from Azerbaijan to Ukraine will require money that Baku and Kiev cannot field on their own. Kuchma therefore suggested that Azerbaijan, Georgia and Ukraine apply for a loan from the European Bank for Reconstruction and Development (EBRD) to finance the transportation of Caspian oil to Europe.

Since the facilities for transporting oil through Georgia are still in progress, it will take some time for Azerbaijan to begin sending large quantities of crude to Ukraine. Nevertheless, Kiev has already begun discussions with Baku on the purchase of 700,000-800,000 tons of Azerbaijani oil. The Ukrainian government will also open a trade mission and an office of the state oil and gas company in Baku soon, Lazarenko said. (With reports from Reuters and Interfax; first printed in New Europe, p. 42, Mar 30-Apr 5 '97.)

.. . . AS ALIYEV ACCUSES MOSCOW OF INTERFERENCE:

Since Russia is currently the major supplier of oil and gas to Ukraine and is also keenly interested in maintaining a hold on former Soviet states, it is likely to be angered by Azerbaijani President Heidar Aliyev's move to work more closely with Ukraine on energy projects. Aliyev is well aware of Russian interests in the matter and while in Kiev speculated that Russia would try to hinder Ukrainian efforts to participate in the transport of Caspian oil across the Black Sea. At a March 25 news conference with his Ukrainian counterpart Leonid Kuchma, Aliyev said that "Russia will try but will not be able to prevent Ukraine from taking part in the Transcaucasus oil corridor project."

He also stated that Moscow had also tried "in every possible way" to prevent the 1994 signing of a US$7.5 billion deal with an international consortium for the development of the Azeri, Chirag and Guneshli oilfields in the Azerbaijani sector of the Caspian Sea. Moreover, he said, Azerbaijan was still waiting for "Russia to carry out its promise" to have the northern Baku-Grozny-Novorossiisk pipeline ready to transport Azerbaijani oil from these fields.

Russian government officials, however, dismissed Aliyev's concerns. Alexander Semyonov, counsellor at the Russian Embassy in Baku, said Moscow had been surprised by Aliyev's statement that the project to ship Azerbaijani oil to Ukraine via the Black Sea port of Supsa would go ahead despite attempts by Russia to prevent it. Semyonov said that the Azerbaijani president's words were at odds with Russia's official policy of strengthening friendly relations with former Soviet republics. He also asserted that Moscow had never tried to hinder the actions of Baku and had acted in line with a cooperation agreement signed between the two governments.

Nevertheless, Ukraine remains committed to its goal of diversifying its sources of oil and gas. Kuchma was quoted by Interfax as saying that it was not in Moscow's interests to put pressure on former Soviet neighbors because Russian oil output was "declining daily, and Russia will soon need other sources of oil." (With reports from Reuters and Interfax; first printed in New Europe, p. 42, Mar 30-Apr 5 '97.)

BAKU CONSIDERING ESTABLISHMENT OF FUEL AND ENERGY MINISTRY:

Reports from the Azerbaijani press indicate that Baku has launched on a debate over the future of the country's oil and gas industry and may be considering setting up an energy ministry to replace the State Oil Company of Azerbaijan (SOCAR), which currently controls oil and gas extraction. President Heidar Aliyev began considering last month a proposal from his cabinet to eliminate the company and replace it with a fuel and energy ministry. The cabinet also suggested cutting SOCAR staff by 50%. Moreover, there are hints of dissatisfaction inside SOCAR as well as in the government. ANS and Millat noted that SOCAR President Natik Aliyev criticised joint ventures and foreign companies involved in onshore projects for their unproductive work at the company's annual board meeting. He also said the top managers of the Baku oil refinery had been dismissed for making unauthorized independent sales of oil products and because of financial irregularities in the facility's records. His remarks came just two weeks after the chief of SOCAR's foreign economic relations department was dismissed. (With information from the Azerbaijani press compiled by the US Embassy in Baku and distributed by BISNIS; first printed in New Europe, p. 42, Mar 30-Apr 5 '97. See below for more on BISNIS.)

AZERBAIJAN HAS LION'S SHARE OF CASPIAN BLOCKS, SOCAR OFFICIAL:

Khoshbakht Yusifzade, vice president of production for the State Oil Company of Azerbaijan (SOCAR), recently told ANS that 25 of the 32 oil and gas fields in the Caspian Sea as well as 145 of the 386 prospective structures were located in the Azerbaijani sector of the sea. ANS noted that Azerbaijan has yet to begin developing 112 of these prospective structures, which are believed to contain 3 billion tons of crude oil and 3 trillion cubic meters of natural gas. (With information from the Azerbaijani press compiled by the US Embassy in Baku and distributed by BISNIS; first printed in New Europe, p. 42, Mar 30-Apr 5 '97. See below for more on BISNIS.)

AZERBAIJANI MP SAYS AIOC PROFITS COULD FINANCE FUTURE PROJECTS:

Following the Milli Mejlis' ratification of the contract for the Ashrafi-Dan Uludzu field in February, opposition parliament deputy Ali Kerimov told Avrasiya he believed that this project and future efforts could be financed fully through profits earned from the US$7.5 billion "deal-of-the-century" project to develop the Azeri, Chirag and Guneshli fields. Kerimov said he saw no need for Baku to rush to involve more foreign investors in hydrocarbon projects, adding that the Ashrafi-Dan Uludzu deal was unlikely to earn Azerbaijan any political dividends since the partners in the new consortium were already involved in other oil projects in the country. Ashrafi and Dan Uludzu will be developed by a group of companies including Amoco and Unocal of the United States, Unocal's Strategic partner Delta Nimir of Saudi Arabia, Itochu of Japan and the State Oil Company of Azerbaijan (SOCAR). (With information from the Azerbaijani press compiled by the US Embassy in Baku and distributed by BISNIS; first printed in New Europe, p. 42, Mar 30-Apr 5 '97. See below for more on BISNIS.)

EXXON, SOCAR IN NEGOTIATIONS FOR D-3, D-9/38 CASPIAN BLOCKS:

The Azerbaijani news agency Turan recently reported that the US oil major Exxon is continuing negotiations with the State Oil Company of Azerbaijan (SOCAR) for rights to develop the D-3 and D-9/38 offshore structures located in the Caspian Sea 120 km south of Baku. Turan said the negotiations could result in the formation of a sixth oil consortium, though Exxon has said it is willing to be SOCAR's sole partner in the project. The US company says it will carry SOCAR's entire share of investment in the project, and a contract may be signed as early as June. (With information from the Azerbaijani press compiled by the US Embassy in Baku and distributed by BISNIS; first printed in New Europe, p. 42, Mar 30-Apr 5 '97. See below for more on BISNIS.)

UNOCAL, DELTA HOLD TALKS WITH SOCAR FOR TWO ONSHORE FIELDS:

The US oil company Unocal and its strategic partner Delta Nimir of Saudi Arabia began preliminary discussions last month with the State Oil Company of Azerbaijan (SOCAR) on a production-sharing agreement for the Kursangi and Karabagli onshore fields. Unocal is seeking a 50% share in the consortium to be set up to develop the fields and also wants to serve as operator of the project, according to Azerbaijani press reports. The British company Ramco had previously been in negotiations with SOCAR for the deposits but refused to take part in the new talks. Azerbaijani press reports indicate that at least US$20 million will be needed to conduct a seismic survey and appraisal drilling. Unocal and Delta will launch full-scale development work on Kursangi and Karabagli if the results of the appraisal are positive. (With information from the Azerbaijani press compiled by the US Embassy in Baku and distributed by BISNIS; first printed in New Europe, p. 42, Mar 30-Apr 5 '97. See below for more on BISNIS.)

TURKMEN NATURAL GAS OUTPUT FALLS 6% MONTH-ON-MONTH IN FEBRUARY:

Turkmenistan's State Statistics Committee announced on March 24 that production of natural gas had reached 3.59 billion cubic meters, down 6% on January levels. This marked a reversal of the monthly production increase posted in January, when output reached 3.81 billion cubic meters or 37.8% more than in December. Crude oil output also declined month-on-month; February output of 296,200 tons was 10.2% down on January levels. Production of some oil products also declined in February, with 92,100 tons of diesel produced -- 5.1% less than in January -- and 134,400 tons of fuel oil -- 4.2% less. Gasoline output, however, rose 1.8% on January levels to reach 39,500 tons. (With report from Reuters, first printed in New Europe, p. 41, Mar 30-Apr 5 '97.)

TURKMEN GOV'T SHAKEUP RESULTS IN FIRING OF TOP OIL AND GAS TRADER:

On March 17, Turkmen President Saparmurad Niyazov, who has launched upon a government shakeup designed to weed out corruption, dismissed Khodzhmukhamed Orazov from his post as chairman of the state oil and gas trading corporation. However, Orazov, who had also served as chairman of the Turkmenrosgaz consortium that is taking part in a project to build a pipeline from Turkmenistan to Pakistan via Afghanistan, will continue to hold government office; a US embassy report noted that he will now serve as mayor of the Bakharden district in Mari province. Berdimurad Redzhepov, formerly the head of the state commodities exchange, will replace Orazov as head of the oil and gas trading corporation. (With information from US Embassy report distributed by BISNIS; first printed in New Europe, p. 41, Mar 30-Apr 5 '97.)

GAZPROM IS STILL INTERESTED IN CONTRIBUTING TO KARACHAGANAK:

Gazprom head Rem Vyakhirev told the press on March 24 he thought that an "uncontrolled process is underway" in the project to develop the massive Karachaganak oil and gas-condensate field in Kazakstan. "Work at the field is practically at a standstill and the field's new infrastructure is not paying for itself," Vyakhirev said a Moscow news conference held following the signing of a cooperation agreement between Gazprom and Russia's Orenburg region, in the southern Urals. Gazprom was one of the original members of the consortium set up to develop the field but withdrew when its Western partners British Gas and Agip of Italy, refused to recognize the Russian gas monopoly's pre-1992 investments in Karachaganak. Its stake has been set aside for transfer to the Russian oil giant LUKoil, but Vyakhirev said Gazprom was still interested in contributing to the project, adding that the company's agreement with the Orenburg region could serve as a basis for cooperation. "Orenburg has modern technologies, and there is no need to build a new refining complex at the field," which is located in Kazakstan's Urals region near the Russian border, he said. Vyakhirev noted, however, that British Gas and Agip had not made any proposals to cooperate with Kazakstan. Gazprom's involvement in Karachaganak has been a source of contention since 1992. The Russian company had invested 4.5 billion rubles in 1991 prices (800 billion rubles in 1993 prices) in development of the field by 1992, but British Gas and Agip were awarded the exclusive rights to hold talks and sign a contract with the Kazak government for Karachaganak in a 1992 tender. Over 1993 and 1994, Gazprom held talks with the new consortium and regained the right to take part in the project; and agreement between Gazprom and Kazakstan's Ministry of the Oil Gas Industry was signed in December 1994. The agreement made provisions for Gazprom to have a share in the field equal to that of British Gas and Agip, and an intergovernmental agreement on Russian participation in the project was signed in February 1995. The latest entry into the Karachaganak consortium is the US oil company Texaco, which was a 20% share in the field by Kazakstan. The field, which was discovered in 1979, contains total reserves of more than 1.3 trillion cubic meters of free gas, 1.2 billion tons of gas condensate, 340 million tons of oil and 240 billion cubic meters of dissolved gas. (With report from Interfax, first printed in New Europe, p. 41, Mar 30-Apr 5 '97.)

DIRECTOR OF LUKOILKYRGYZSTAN KILLED BY GUNMAN IN BISHKEK:

Interfax reports that Yusup Kalbayev, head of LUKoilKyrgyzstan and deputy director of the state-run Chuigazmunaizat company, was shot in Bishkek on the morning of March 21. Local law enforcement officials reported that Kalbayev was killed by gunman, and a source in the administration of Kyrgyz President Askar Akayev noted that the murder took place just one day after he was appointed the general director of Bishkek's joint venture with the Russian company LUKoil. Chuigazmunaizat was given authorization by Akayev last month to act a as state-operated company responsible for the purchase of petroleum products from private and commercial structures for national needs, including fuel supplies to farms during sowing and harvesting seasons. (With report from Interfax, first printed in New Europe, p. 41, Mar 30-Apr 5 '97.)

KAZAK-IRANIAN OIL SWAPS STALLED

Questions about the quality of Kazak oil shipments have caused yet another stall in the implementation of an often-delayed swap deal struck last year between Almaty and Tehran. Anatoly Lobayev, Kazakstan's deputy oil and gas minister, stated on March 24 that the oil swap deal between Kazakstan and Iran had been stalled by disputes over the quality of crude shipments. Kazak and Iranian officials met recently in Tehran to discuss the problem but failed to reach any agreement. Talks are continuing, and Lobayev says he is hopeful that a solution can be found.

According to the Kazak official, the biggest stumbling block is the high concentration of mercaptans -- undesirable, foul-smelling suphur compounds -- in Kazak oil. The swap deal worked out last year between Almaty and Tehran calls for two to six million tons of Kazak crude per year to be sent across the Caspian by tanker to the port of Neka in northern Iran. Trial shipments began in January, but only 70,000 tons have been sent to date. Even these small shipments have been halted because of the mercaptans problem.

Lobayev said Iran had demanded that all mercaptans be removed from oil shipments. But he said that Kazakstan would have to build an entirely new refinery to do this. He also stated that the Kazak side was refining its oil to a "sufficient degree" and said Tehran should accept oil of quality equal to that which it is sending to the Persian Gulf on Almaty's behalf. Moreover, he pointed out that the Tehran oil refinery, which is supposed to process Kazak oil, is too old to deal with it properly.

The swap deal, which was negotiated last May and signed in June, provides for oil from western Kazak fields to be sent to Iran by tanker for refining at facilities in Tehran and Tabriz and distribution in northern Iran. Tehran, in turn, has agreed to sell an equivalent amount of oil at its Persian Gulf export terminals or European storage facilities on Almaty's behalf. The 10-year deal calls for initial shipments of 40,000 barrels per day -- two million tons per year -- eventually increasing to 120,000 barrels per day -- six million tons per year. (With reports from Reuters and Interfax; first printed in New Europe, p. 41, Mar 30-Apr 5.)


This is a free report

More current oil industry news is provided to clients to whom Palms & Company provides advisory services. Generally client information is placed on the web pages about 60 days after our clients

receive it.


Go to TOP of this page

RETURN to Palms' Lobby RETURN TO HOME PAGE




CAN YOU REALLY RELY UPON PALMS & COMPANY?
You are One of the  World population counter. Who can. (World Population Counter)

 


Attention Brokers, Agents , Intermediaries , Mandates of Principals/Buyers

Go to TOP of this page

RETURN TO HOME PAGE


Go to TOP of this page

Palms & Company, Inc. Founded 1934
Palms Bayshore Building, Penthouse Suite #408 West Wing 
6421 Lake Washington Boulevard North East
State of Washington, United States of America, 98033-6876
Phone: 1-425-828-6774 & 1-425-827-5528
Branches: 41 World-wide 
email: Marketing@PeterPalms.com
Consulting telephone: click HERE 
Created Nov 2002  Last Revision: 6/23/2004 
Copyright 1995-1996, Palms and Company, Inc., All rights reserved
 
Webmaster - Web maintenance - Revenue Generation Responsibility