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OilMARKET 09 / 2004
TOPIC OF THE ISSUE
KAZAKH RECIPEKAZAKH RECIPE
As Assoneft, Russia's association of independent oil producers, struggles to retain and protect market share for Russian independents, it is worth taking a look at Nelson Resources Ltd, the leading independent oil development and production company operating in neighbouring Kazakhstan.
TOPIC OF THE ISSUE
A WRONG KIND OF SANDWICHA WRONG KIND OF SANDWICH
In October 2004 Russia's independent oil producers association Assoneft celebrates its 10th anniversary. The OilMarket offers its congratulations and wishes strength and prosperity to the members of association. At the same time, for our magazine, Assoneft's historical milestone is more than just a mere well-wisher's diary date, but rather an opportunity to highlight those sorry tendencies dogging this sector of Russia's oil industry.
PERSON OF THE ISSUE
Sergey BogdanchikovSergey Bogdanchikov
President of Rosneft oil company
The discussion of Rosneft and Gazprom merger has been followed up for some time now. The topic was further heated up after the media got hold of a public letter from Rosneft's president to the President of Russia. Examining the letter without undue haste will simmer it down to the following: Rosneft, as embedded by its president, has no objection to a merger with Russia's gas giant, at a cost.
PHOTO OF THE ISSUE

The Italian Afromax class tanker Vallombrosa, moored at Pivdenny oil terminal (Ukraine, Odessa region), loaded 80,000 t of Russia's export blend Urals. This is the first load of reverse oil from OdessaBrody trunk pipeline; the reverse was launched this summer after Ukrtrans nafta, Ukraine's pipeline operator signed an agreement with TNK-BP.
TRANSPORTATION
DIRECTLY TO EUROPEDIRECTLY TO EUROPE
Oil product pipeline Kstovo YaroslavlKirishiPrimorsk being under construction from 8 October, will allow Russia both to increase export of oil products and bypass Ventspils port, channeling a significant part of exports directly to Europe.
TRANSPORTATION
THE CPC AND RUSSIA, A NEW STAGETHE CPC AND RUSSIA, A NEW STAGE
The CPC expansion plans are likely to go through by the end of the year, said Ian MacDonald, general director of the CPC on KIOGE-2004 conference in Almaty. The statement is an assessment of negotiations between the consortium and the largest shareholders, governments of Russia and Kazakhstan and shows that all sides are interested in timely and speedy expansion of the pipeline system.
TRANSPORTATION
REVERSE IN ACTIONREVERSE IN ACTION
The day of 29 September was a launch date for OdessaBrody trunk pipeline reverse project: Italy-registered Vallombrosa was loaded with 80,000 t of Russia's export blend Urals. Although the port has been loading crude before, the reverse flow direction then applied only to AvgustovkaPivdenny 52-km leg of the pipeline.
TRANSPORTATION
DEJA VUDEJA VU
Insufficient throughput capacity of CPC systems forced USKazakhRussian JV Tengizchevroil, the largest oil producer in Kazakhstan, to resume export railway shipments starting from 2005.
EVENT
KIOGE-2004: THEY DID IT AGAIN!KIOGE-2004: THEY DID IT AGAIN!
British ITE Group Plc and its Caspian and Russian subsidiaries Iteca and ITE Moscow along with IEG-GIMA (Germany) for the 12th time held very successful Kazakhstan International Oil & Gas Exhibition and Conference (KIOGE-2004), the most popular industry annual venue in the CIS and Baltic region.
INTERNATIONAL NEWS
Going AfricaGoing Africa
Ukraine's oil&gas company NAK Naftogaz Ukrainy signed PSA agreement with Libya's National Oil Corporation (NOC) on 10 October in Tripoli. Only a year has passed since NAK and NOC signed memorandum on cooperation but Ukrainian operator already reached the launch stage for its projects on oil and gas production in the country formerly closed for foreign investors. The Libyan projects are the integral part of strategy for the Ukrainian company, which aims to diversify oil&gas production assets and to participate in development of the fields outside Ukraine including Libya and Iraq among other countries. The strategy, used previously by Finland's Fortum and Austria's OMV, now global companies, would propel NAK into the global league, too.
REFINING
Jolly LitsJolly Lits
Despite of historical alliance with Russia's oil industry, nowadays Lithuanian company Mazejkiu Nafta partitioned from Russian petroleum sector not only by its territorial location but also by sheer technological advance. Having walked a thorny path and having paid a full price for EU entry ticket, the Lits were able to build upon the existing potential, expanding oil the sector along the way.
REFINING
Tackling the stereotypesTackling the stereotypes
Despite Russia's oil producers benefiting from mega-profits on crude oil sales, the gap between the performance standards of refineries incorporated in Russia's largest vertically integrated oil companies and those of the Western refining industry is constantly widening.
EXPORTS
SULPHUR TRESHOLDSULPHUR TRESHOLD
Despite growing since the end of September crude prices for the benchmark North Sea and US blends, discounts for the medium sulphur blends, including Russia's Urals, reached record-breaking levels ever both in NWE and in the Mediterranean. By mid-October, the discount on Russia's export blend to Brent benchmark topped $7.6/bl, keeping Urals out of the sacred $50/bl level.
EXPORTS
BETTING ON THE DIFFERENTIATIONBETTING ON THE DIFFERENTIATION
The task group of governmental commission on safeguard measures in foreign trade and tariff policy has developed a new concept for shaping oil products duty. Its impact on export efficiency and on domestic prices will be apparent in 2005.
NATURAL GAS
TOTALTOTAL'S RUSSIAN STRONGHOLD
The reports in media on a French company desire to acquire shares of modest Russian oil company led the market to believe that the transnationals are interested in top-ten of Russia's oil&gas producers, which even rallied the share price of some of them. Shortly afterwards it surfaced that the French target controlling stake of Novatek, the second largest gas producing company in Russia.
EXPLORATION AND PRODUCTION
KAZAKHSTAN: THE BEST DAYS ENDKAZAKHSTAN: THE BEST DAYS END
Foreign investors forced to accept Astana's new rules of the game
A mounting number of disputes between foreign investors and the Kazakh government has hampered several upstream projects over the last couple of years. These cases involve both the biggest corporate names and many minor producers, with multimillion and even multibillion claims earmarked.
EXPLORATION AND PRODUCTION
THE MPR LINES UP LICENSE-HUNTERSTHE MPR LINES UP LICENSE-HUNTERS
In October Russia's ministry of natural resources (MPR) defined new 2005 procedures for oil&gas production industry. The most important, from our point of view, is the news about approved list of the sites to be auctioned in 20042005, the comments and recommendations on the new reading of On Subsoil legislation, and development trends at Kovykta and Sakhalin3 project.
COMPANIES
LUK-RATIVE DEALLUK-RATIVE DEAL
ConocoPhillips purchase of the Russian government's 7.59% stake in Lukoil, an oil producer, is hailed as the biggest privatisation in Russian history. The appeal and price of the slice stem from a number of factors, including the volume of stocks in Russian giant's repository and company's involvement in international projects. In the same time, both the set-up of the auction and the price the state received for the stake spurred off contradictory appraisals from industry's analysts and state officials alike
COMPANIES
THE END IS NIGHTHE END IS NIGH
The well-publicised capitalisation audit of Yuganskneftegaz and the actions of Russia's federal authorities indicate that the Yukos siege is about to come to the gloomy end.
COMPANIES
SAFETY IS AFFORDABLE TODAYSAFETY IS AFFORDABLE TODAY
Soaring oil prices and swelling bank accounts of oil exporters seem to be changing Russia's oil companies set of priorities, ultimately leading to better safety of labour and environmental standards of operations.
04 / 2018