Wednesday, December 13, 2006

Gazprom issued License to Kill.

Deals, that is.

Wow, fascinating statistic from the below CNBC video: 78% of the top energy executives in Russia are ex-KGB.

And we thought the Cold War was over. Nah, it just took on a whole new meaning.

By the way, watch Mr. Shuvalov (a senior economic advisor to Russian President Vladimir Putin) being interviewed here closely. He expresses himself pretty clearly in this video.

CNBC Video: From Russia, With No Love.

Which is why I find the following interesting: When interviewed by Forbes magazine, Mr Shuvalov answered a question about ExxonMobil's status in Russia in a somewhat ambiguous way, if you ask me. Well, let's hope Rex Tillerson [ExxonMobil's CEO] is current on his pledges to the St. Petersburg ballet. [Not that they need any money over there, it just pays to hang out with the right crowd.]

Forbes: Russia's Western Strategy.


Q: I'm interested to hear you had such positive interactions here. A lot of people are troubled about Russia's role in the oil and gas sector--and that worry is increasing. From an investment perspective, Lukoil, TNK-BP, we're starting to see government influence.

A: Government influence in these companies?

Q: There's discussion that TNK-BP is going to be forced to give up the [East Siberian] Kovykta field. Lukoil is doing business with Gazprom. Within that context, following what happened in Ukraine, people are starting to worry.

A: TNK-BP and Lukoil, they have nothing to do with government influence. We welcome [Lukoil's] partnership with the American company ConocoPhillips. If [Lukoil has] other partnerships to exploit something new, not existing ones, it's OK. To be honest, it's a kind of nonsense. There is no government influence or interference in their business.

It's true we're working with Lukoil and Rosneft and Sakhalin and others--they were told by environment agencies to fulfill environment laws. But not the business as a whole. Again, for me, TNK-BP and Lukoil, they're completely private companies. I know the investors and the management of the companies pretty well.

There is a lot of speculation that the Russian investors of TNK-BP are going to sell the shares. It's not true. I spoke with [majority shareholders Victor] Vekselberg and [Mikhail] Fridman. Their position is that they are strong, long-term strategic investors. They are not giving up; they don't want to sell their shares. They think that the value of them is growing also. There were a lot of articles about possible change in investors, but it's not true.

Q: What about Lukoil? Is ConocoPhillips' stake safe?

A: [Looks surprised.] I think so. Why not?

Q: What is it you think we don't understand?

A: For you, I think in general Russia is an unpredictable partner. Whatever you get from my country, any kind of signal, you would like to interpret it in a negative way, because you don't understand what's going on, so any kind of information for you is bad, first, and then you would like to find justification for better things. But we may have mismanaged our explanation of what we aimed at the beginning, why we raised the gas prices, why we behaved like this with Sakhalin and everything else.

But again, we support the principles outlined in the G-8 strategy first, and we internally changed our plans for energy strategy. And we announced plans for growth to raise gas prices by 2011, to build new coal power stations. Everything is changing in Russia--and changing toward a positive scenario.

If our Western clients and consumers would like to get enough gas on time, they need to understand we need cash to maintain the reserves and exploit the fields. It's our commodity, and we would like real cash for that. We would like to be seen--and we will be pursuing this--that Russia is the most reliable partner for energy for the United States and other G-8 countries.

Q: Do you see how people can be panicked after all the scandals that happened in Sakhalin? Companies invested billions of dollars, they're working fine, and suddenly--

A: But not suddenly. First, they knew exactly what they did, and possible outcomes. Everything was obvious. I met with one of the top managers of the Shell company, and they're meeting [this] week with the minister of energy in Russia, and they're quite positive they will be able to resolve the issue.

Q: So do you think Shell will be able to stay?

A: No doubt about that. Shell will stay, and it is one of the biggest and best investors in Russia with a good reputation. We accept that Sakhalin is a very important project for Russians. There are difficulties, and they have to resolve them. At the end, it will be a successful story. Exxon had cost overruns, but Shell's was twice more than planned.

Q: So Exxon has no problems?

A: [Shakes head.]


The squeeze starts:


AP: Gazprom Nears Deal to Join Shell Project.


Earlier Tuesday, Oleg Mitvol, of the state environmental watchdog Rosprirodnadzor, said Sakhalin-2 had caused environmental damages worth $10 billion, news agencies reported.

He said a final evaluation of the damages would be completed by fall next year and that by March he would be ready to sue the company in Russia and in the Arbitration Institute of the Stockholm Chamber of Commerce, which settles such disputes.

Mitvol and other Russian officials say that the Shell-led consortium developing the energy project has silted rivers and felled trees illegally.

Representatives for the consortium, Sakhalin Energy, were not immediately available to comment.

Mitvol also said he planned to begin an inspection of the Sakhalin-1 project, which is 30 percent-owned by Exxon Mobil Corp.


Oh, and Lord Browne [BP's CEO]. I suggest an appearance as Santa at the St. Peterburg's Childrens hospital, and a whole lot of Elmo TMXs.


Further quotes from AP article above:

If control of Sakhalin-2 does eventually go to Gazprom it could set a precedent for BP PLC's Russian joint venture: Prosecutors have threatened to revoke TNK-BP's license for the giant Kovykta gas field in Russia's Far East for alleged underproduction.