09 October 2001
Week 40

Issue 153

Published by

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Immediate Market Intelligence

Contents

Commentary *

Pipelines & Transport *

Investment *

Performance *

Policy *

Projects & Companies *

From the Russian Press *

Conferences

Commentary

Is Russia gearing up to join OPEC?

By Ben Aris

Is Russia about to join OPEC? The short answer is "no", but cooperation between the two sides has increased, and Russian energy policy has been sharpened as Russia’s interests begin to coincide with those of OPEC.

The recent sharp fall in oil prices has focused the minds of both the Kremlin and Russia’s leading oil barons. And in a new twist to relations with OPEC, Russia’s Energy Minister Igor Yusufov followed his promises to OPEC leaders regarding Russian moves to curb oil exports with a call for members of the cartel to increase their involvement in Russian oil production. Russia will work more closely with OPEC, Yusufov said at OPEC’s most recent meeting in Vienna, if members of the cartel invest more in Russia.

His statements should be taken with a large pinch of salt. Russian oil barons have been too busy pushing foreign investors out of the local oil business to make any effort to invite them in. Indeed, Yusufov’s remarks have more to do with being friendly to OPEC in the current climate of "unity against terrorism" than with underscoring any actual change in Russian policy.

Meanwhile, the Russians have pledged, in classic Soviet style, to set up a new "consultative body" -- a talking shop for OPEC, Russian government officials and businessmen -- to meet and discuss how all involved might cooperate to maintain prices. "The question of price is very important for us. I think we can come up with some restrictions in order to keep prices [high] and gain maximum profits," said Yusufov. But he pointedly stopped short of saying that Russia would cut production if OPEC did.

Russia is becoming more and more of a problem for OPEC as its share of the world’s supply is increasing quickly. Production levels have fallen from the 1991 level of 10 million barrels a day but have risen 20% on the low figures of 1998 to reach 7 million bpd this year, and Russia is exporting around half of total output.

For much of the last decade, the Russians have simply pumped as much oil as possible and enjoyed windfall profits from high international prices. That is changing now as the Kremlin’s long-term strategy is not just to produce and hope for high prices. It is also keen to boost overall production and increase its share of the world’s oil supplies, as this is the only effective way to break the country’s dependence on raw material prices -- and vulnerability to fluctuations in those prices. The logic is that it is better to have a larger share of a lower-price market than a small share of a high-price market.

This policy works independently of anything that OPEC does and indeed is designed so that Russia can actively ignore OPEC if it wishes. From an economic-theory point of view, this is the fundamental flaw of cartels: They can cut production to maintain prices, but an independent producer can step in to increase output and reap higher profits as a result. The trick for Russia is to keep OPEC guessing for as long as possible.

Against this -- as the Russian oil bosses are bound to realize, if they haven’t already -- is the fact that partial cooperation with the cartel will serve to maximize profits. Russia is therefore likely to go some way down OPEC’s road since having a larger share of higher prices is the most attractive option of all.

This increase in cooperation with OPEC is part of a larger transformation that Russia’s relations with the rest of the world are going through. The events of September 11 have accelerated the process of Russia’s integration into the world economy and international institutions by allowing Russian politicians to overcome the psychological hurdles posed by closer dealings with the West. For example, President Vladimir Putin said something heretofore unthinkable at a meeting in Brussels last week, saying that he could see Russia as part of NATO. In return, the European Union and the United States both hinted that the bar to Russia’s early entry into the World Trade Organization WTO might be lowered. Washington also said it might be prepared to label Russia a "market economy," the lack of which designation has previously been a barb used by the U.S. steel lobby against Russian steel exporters.

The rapid fall of oil prices to near the US$20 per-barrel mark has been a wonderful catalyst for forcing Russian businessmen to consider the question of what is in their long-term interests. Indeed, it has been enough of a catalyst to convince these businessmen to get together and make a decision to act.

And action has been hinted at. According to the Russian Economic Development and Trade Ministry, decent prices may lead oil output to rise slightly next year to 346 million metric tons, with non-CIS exports of 141 million metric tons, a 1.8% and 3.1% increase, respectively, over expected results for 2001, according to official figures.

However, the Russian investment bank Troika Dialog estimates that production will reach 345 million metric tons this year, and non-CIS exports have already hit 145 million tons. This means the Economic Development and Trade Ministry is forecasting a decline in exports in the fourth quarter of next year.

It is not known if the government is actually intending to keep oil exports flat until prices recover, although it seems increasingly clear that this option is being considered. Upon his arrival at the OPEC meeting in Vienna, Yusufov promised that Russia would do just this, but the government does have limited control over the domestic oil companies.

At the same time, Russian oil production is soaring as company investments begin to feed through. As the fourth quarter starts, production is up in the oil sector by an overall year-on-year factor of 7.4%, ahead of the previously forecast 6%. The highest growth in output was posted by Slavneft (21%), largely due to acquisitions, whereas the biggest gains in pure production were turned in by Sibneft (18.7%), Yukos (17.2%), Rosneft (10.8%) and Tyumenneft (TNK, with 10.1% -- or 18.6% if you include Chernogorneft, which TNK acquired this year). Domestic consumption will soak up some of this as winter approaches, but with local demand rising at the rate of about 6% this year, production increases are running ahead.

Pipelines & Transport

Turkish businessman says Armenia is a good route for Caspian oil, gas exports

Kaan Soyak, the Turkish co-chairman of the Turkish-Armenian Business Development Council, told the Turkish Daily News last week that he saw no reason to exclude Armenia totally from plans for the construction of oil and gas export pipelines.

Indeed, Soyak said, it would be advantageous for energy companies working in the Caspian Sea basin and other areas to consider proposals for building oil and gas pipelines across Armenia.

For example, he said, companies working at Azerbaijani gas fields could export their output through a pipeline crossing Armenian territory. This would be an economical option, he said, since Armenia is the only country in the region that has enough underground storage space to allow for uninterrupted flows of gas through an export pipeline.

Moreover, he said, a pipeline through Armenia could easily be connected to that transport networks that carry Central Asian gas. Soyak did not explain this statement, but he was presumably referring to the fact that Armenia receives gas from Russia, which also serves as a transit country for Kazakstani and Turkmenistani gas.

Most international energy companies are convinced that Iran offers the cheapest possible export options for Caspian oil and gas, he noted. Nevertheless, the U.S. government’s recent decision to renew the Iran-Libya Sanctions Act (ILSA) makes investment in Iranian transport routes problematic, he said. As such, he said, energy companies should consider proposals for pipelines across Armenia in order to maximize their options.

The Armenian diaspora would probably be willing to help finance these pipeline projects, he said. Moreover, he remarked, construction of such pipelines would have no adverse effect on other transport projects such as the Baku-Tbilisi-Ceyhan (BTC) oil pipeline.

Turkey -- and Azerbaijan -- have for years sought to exclude Armenia from participation in the Caspian oil game. Major investors in oil and gas projects, meanwhile, have also shown little interest in proposals for the construction of pipelines across Armenian territory.

Azerbaijani president’s elite guards will protect Shah-Deniz pipeline

According to a report from the Turan news agency, Azerbaijani President Heidar Aliyev’s elite personal guards are to be charged with ensuring the security of the gas pipeline that will be built to carry gas from the Shah-Deniz deposit across Azerbaijan and Georgia to Turkey.

The Azerbaijani army will transfer a large number of soldiers to the elite guard unit for this purpose, Turan said, citing an official source in Baku.

Georgian and Azerbaijani officials have on occasion suggested that the North Atlantic Treaty Organization (NATO) establish a special force to protect Caspian oil and gas pipelines, especially the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. However, press sources noted last week that intelligence officials from Azerbaijan and other Turcophone states had agreed at a meeting in Kyrgyzstan in September to take responsibility for ensuring the BTC line’s security.

The Georgian government will be informed of all measures taken on this front since the BTC pipeline will cross Georgian territory, they said.

BP will lead the effort to build a conduit for Shah-Deniz gas; the pipeline will be built in parallel with the BTC pipeline along the Baku-Tbilisi-Erzurum route. The cost of constructing the Shah-Deniz gas pipeline is expected to reach about US$1 billion. When finished, the pipe will be able to carry an initial 2 billion cubic meters of gas per year, with throughput eventually rising to 16 bcm per year.

Azerbaijan and Georgia signed an agreement on transit fees for the Baku-Tbilisi-Erzurum pipeline earlier this month.

U.S. diplomat says Kazakstan wants to participate in BTC project

According to Larry Napper, the U.S. ambassador to Kazakstan, officials in Astana and Washington are discussing plans for Kazakstani participation in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline project.

Kazakstan’s government is interested in seeing locally produced oil exported along the BTC route, Napper stated last week. Kazakstani oil would be loaded onto tankers at the port of Aktau and shipped across the Caspian Sea to Baku for loading into the BTC line, he said.

This would in effect create an Aktau-Baku-Ceyhan, or ABC, export route for Caspian oil, he said. He did not divulge details of the talk between U.S. and Kazakstani officials but did note that several international oil companies working in Kazakstan had expressed willingness to export part of their output via the ABC route.

The U.S. government is eager to see Kazakstan play a role in the BTC project on the grounds that Kazakstani oil is needed to ensure that the pipe is filled to capacity. Industry experts have said that the pipeline will not be profitable unless it carries at least 1 million barrels of crude per day. Azerbaijan asserts that its oil deposits hold enough to fill the pipeline, but Western experts are doubtful since several of the international consortia working in that country’s sector of the Caspian have not succeeding in finding oil.

Kazakstan, meanwhile, has been reluctant to heed U.S. pressure to make BTC its main oil export route. Officials in Astana have said they will not rule out any export option -- including Iranian swap arrangements, which have garnered criticism in Washington.

Meanwhile, the only existing high-capacity export routes for Kazakstani oil pass through Russia. The Soviet-built Atyrau-Orsk-Samara pipeline can carry about 15 million metric tons of crude per year, and the Caspian Pipeline Consortium (CPC) expects to open the Tengiz-Novorossiisk pipeline later this month. The CPC line will initially be able to carry 28 million metric tons of crude oil per year, with capacity eventually rising to 67 million metric tons per year.

Investment

Lithuania approves program for privatization of Lietuvos Dujos

Lithuania’s government said on October 1 that it had approved plans for the privatization of Lietuvos Dujos, the national gas utility.

According to press reports, the program calls for Vilnius to retain a 24% stake in the company and sell two 34% share packages to a strategic investor (i.e., a foreign company) and a natural gas supplier (i.e., Russia’s Gazprom). The remaining 8% of equity in Lietuvos Dujos is held by various private investors, the press sources noted.

Vilnius had said previously that it hoped to see a 34% stake in (and control of) Lietuvos Dujos pass to a Western strategic investor, while Gazprom would take 25%, gas consumers and local supply middlemen would take 9% and the government would retain 17%. This plan came under fire from Gazprom, which said that its stake in Lietuvos Dujos ought to be at least as large as that slated for sale to a Western investor. The Russian company is Lithuania's only gas supplier and as such it should not treated as a mere portfolio investor, Gazprom’s CEO Aleksei Miller remarked last month.

No word was available as of press time on Gazprom’s response to the plan approved on October 1, but it seems clear that the new privatization program is more likely to win the Russian company’s approval. Lithuania’s Finance Minister Dalia Grybauskaite noted last week that the plan had been drawn up with help from the World Bank. The bank wants to ensure that the government and the Western investor together will hold more than 50% of shares in Lietuvos Dujos, Grybauskaite stated.

The Lithuanian government has been slow to decide exactly how much of its stake in the gas utility to unload; the sale is already months behind schedule. Vilnius has said consistently, though, that it would unload at least 34% of equity in the company. France's BNP Paribas, which is acting as advisor for the privatization of Lietuvos Dujos, had suggested previously that Vilnius offer a 51-85% stake in the gas utility to investors. Lithuanian Economy Ministry officials, meanwhile, have said that additional equity in the company may be sold via the local bourse.

Despite the delays and disagreements, Gazprom has not been the only company to express interest in Lietuvos Dujos. Both Ruhrgas of Germany and Gaz de France (GdF) have indicated that they will bid for the strategic stake. Ruhrgas, which owns 5% of Gazprom as well as stakes in the gas companies of nearby Estonia and Latvia, is viewed as the likely winner of the tender.

In the meantime, the international energy company Itera has suggested that it be awarded a stake in Lietuvos Dujos instead of Gazprom. (Itera is widely believed to have strong ties to Gazprom's management.) Lithuania’s government said last week, however, that it would not accept a bid from Itera since the tender conditions specify that potential investors in Lietuvos Dujos must have at least 10 years of experience in managing gas distribution systems.

Lithuania’s President Valdas Adamkus said last month that he hoped the privatization campaign would not run into any further delays. He also remarked that he did not want talks with potential investors in Lietuvos Dujos to turn into a repeat of the long-running and ultimately unsuccessful negotiations between Mazeikiu Nafta, Lithuania's national oil concern, and LUKoil, Russia's largest oil company. The privatization contest should be conducted in as transparent and competitive a manner as possible, he added.

Kazakoil to launch Eurobond issue before year-end

Nurlan Balgimbayev, president of Kazakstan’s state oil company, said last Wednesday that Kazakoil planned to launch its first issue of Eurobonds in the near future.

Before the end of the year, Balgimbayev said, Kazakoil will begin placing up to US$100 million worth of Eurobonds. The proceeds of the issue will be used to finance oil and gas development work in Kazakstan and also in China and Russia, he said.

He did not state the term of the bonds or comment further on the company’s plans. ABN-AMRO of the Netherlands has agreed to act as lead-manager for the Eurobond issue.

The timing of the issue has apparently been difficult to fix. In June of this year, for example, Kazakoil said it hoped to launch the securities issue in the fall of 2001. In August, however, Zhaksylyk Zhangaziyev, Kazakoil’s vice president for prospecting and extraction, said that sales of the Eurobonds would begin in April or May of 2002.

Kazakoil will not be the first Kazakstani company to sell Eurobonds. Kaztransoil, the state oil pipeline operator that was incorporated within the Transport Neft i Gaz (TNG) concern earlier this year, placed US$150 million worth of five-year Eurobonds in early July.

Performance

Kazakstani government reports on oil, condensate output in January-August

Kazakstan’s government said last week that a total of 23.4 million metric tons of crude oil and gas condensate had been extracted in the first eight months of 2001, up from 19.4 million metric tons in the same period of last year.

The figures were made public several days before Nurlan Kapparov told the press that 22.4 million metric tons of oil and condensate had been produced in the January-August period. The reason for the discrepancy was not immediately clear.

The government also noted last week that some 2.9 million metric tons of oil and condensate had been extracted in the month of August alone, down from the July figure of 3.1 million metric tons but up from 2.4 million metric tons in August of 2000.

Kazakstan produced a total of 30.6 million metric tons of crude oil and gas condensate in the year 2000. Kapparov said last week that yearly output was likely to rise to 33.5 million metric tons in 2001.

TCO says its costs will drop once CPC pipeline begins operating

Tom Winterton, general director of the U.S.-led joint venture that is developing the supergiant Tengiz field in Kazakstan, said last week that TengizChevrOil (TCO) would see its costs drop once the Caspian Pipeline Consortium (CPC) oil line to Novorossiisk began operating.

The CPC line is easily the cheapest export route for output from Tengiz, Winterton told the New York Times. TCO will be able to save about US$25 for every metric ton of Tengiz oil it transports via this pipeline, he said. And since the Tengiz field is expected to yield about 12 million metric tons of oil this year, he said, the savings will be substantial.

The U.S. company Chevron is leading the TCO venture set up to develop Tengiz and has a 50% share in the project. ExxonMobil has a 25% stake, the Kazakstani government has 20% and Russia's LUKoil has the remaining 5%. ExxonMobil and LUKoil are relative newcomers to the project, but Chevron and Kazakstan have been working at Tengiz since 1992.

The field is one of the biggest in the world and may require up to US$20 billion in investment.

Policy

Head of Russian Federal Energy Commission says gas tariffs will be raised soon

Georgia Kutovoi, the head of Russia’s Federal Energy Commission, said last Friday that the Kremlin wanted to raise natural gas tariffs in order to make up for the cost of subsidizing natural gas deliveries to customers in Chechnya.

Russian producers receive no payment for gas delivered to the restive republic, Kutuvoi noted.

He did not specify how much money had been lost in this manner. He did say, however, that the government wanted to see gas prices rise by 20% for business consumers and by 25% for residential consumers.

The Federal Energy Commission supports the Kremlin’s position and will make a final decision on the tariff increase very soon, he said. He did not name a date.

The Reuters news agency, citing analysts, remarked that a rise in gas prices might place upward pressure on Russia’s inflation index, especially since tariffs are due to rise again next year. Moscow originally set a target of 18% inflation for the year 2001, but analysts said before Kutovoi’s announcement last week that the index was likely to hit 19% this year.

The Economic Development and Trade Ministry downplayed these forecasts last week, though, saying that that the inflation index would likely fall between 18.3% and 19.0% even if gas tariffs rose.

Serbia arranges to import extra gas from Russia in Q4

Jovan Vulic, the general manager of Serbia’s national oil company, said last Friday that Naftna Industrija Srbije (NIS) had arranged to import extra Russian gas in the fourth quarter of 2001.

NIS had originally planned to receive 450 million cubic meters of Russian gas between October and December, Vulic said, but a new agreement signed with Gazeksport, the export arm of the Russian gas monopoly, calls for the delivery of 750 million cubic meters.

He did not divulge the financial terms of the new deal. He did indicate, however, that NIS had decided to import more Russian gas in order to ensure adequate supplies for its residential and business customers.

Vulic stressed, however, that NIS would not deliver any of the extra gas to delinquent customers. Clients who do not pay their bills will not receive fuel, he declared.

He went on to say that NIS had decided to cut its gas prices by 8% from 9 dinars per cubic meter to 8.74 dinars per cubic meter. The company wants to encourage the use of gas for heating since the country’s power plants have difficulty turning out enough power to meet demand during the winter months, he explained.

Serbia’s government had arranged earlier to import 1.5 billion cubic meters of Russian gas in 2001. That deal allowed Belgrade to pay its gas bill partly in kind, by providing Russia with US$115 million worth of various goods and services, and partly in cash. The goods and services will be supplied to Russia by a consortium of local companies that NIS set up in July of this year.

Gazprom has been delivering gas to Serbia under barter deals since 1994, when a long-term supply agreement was signed. However, the Serbian side has not been able to pay its bill for Russian gas in full or on time despite the relatively easy payment terms, and Reuters noted last week that Belgrade currently owes Gazprom US$261 million. Russian officials said in June of this year, during President Vladimir Putin’s visit to Belgrade, that Serbia would have to phase out the barter arrangements and start paying for its cash in cash within four years.

Kalyuzhny says terrorist attacks on U.S. won’t affect Caspian investments

Russia's Deputy Foreign Minister Viktor Kalyuzhny, who is serving as President Vladimir Putin's top advisor for Caspian Sea energy issues, said last Wednesday that he did not expect interest in Caspian oil and gas projects to flag in the wake of the September 11 terrorist attacks on New York and Washington.

Investment in such projects will continue and will not be affected by these incidents, he told reporters on the sidelines of the KIOGE-2001 oil industry conference in Almaty. The investment climate in the Caspian region depends more on the results of exploration work than on issues related to international terrorism and security, he remarked.

Reuters reported that several oil company executives present at the conference had sounded a similar note, saying that the main issue for investors interested in Caspian projects was economics and not politics. Specifically, they said, the question is not so much one of whether the Afghan conflict might overflow into Central Asia and the Caspian basin but rather one of whether world oil prices would remain high enough to support development work in the Caspian basin.

The news agency quoted Guy Hollingsworth, president of Chevron Eurasia, as saying that his company did not expect world oil prices to fall low enough to affect investment in the supergiant Tengiz oil field. It also quoted David Reardon, a Moscow-based senior representative of BP, as saying that his company did not expect the terrorist attacks to affect his company’s investments in Kazakstan over the short or long term since BP’s work plans were based on very conservative oil price expectations.

The London-based Center for Global Energy Studies (CGES) said several years ago that the average cost of producing one barrel of oil in Azerbaijan ran to about US$12 in the Caspian basin. Costs are even higher if transport expenses are factored into the equation since the Caspian basin is quite far away from most oil transport and marketing hubs. In Saudi Arabia, by contrast, the cost of producing one barrel of oil and transporting it to market in Rotterdam amounts to a mere US$2.

New ambassador says U.S. is still interested in Turkmenistani projects

Laura Kennedy, the new U.S. ambassador to Turkmenistan, said last week that Washington remained eager to discuss prospects for cooperation with Turkmenistan in the oil and gas sector.

Even though efforts to conclude an agreement on the construction of the Trans-Caspian Gas Pipeline (TCGP) have stalled, Kennedy said, Washington is committed to working with Ashgabat.

Stephen Mann, the U.S. administration's top advisor for Caspian energy resources, will visit Ashgabat soon for discussions on TCGP and other projects, she said. She did not specify the date of the visit.

Turkmenistan possesses the world’s third largest gas reserves and is also home to substantial oil deposits. However, it has been slow to attract foreign investment. Analysts say Turkmenistan has fallen behind largely because of the autocratic and unpredictable policy course followed by the country’s President Saparmurad Niyazov.

Projects & Companies

Shell complains about ministry’s revocation of Verkhne-Salymskoye oil field

Royal Dutch/Shell complained last week that the Russian Natural Resources Ministry’s decision to withdraw the Salym Petroleum Development NV (SPD) joint venture’s license for an oil field in the Khanty-Mansi autonomous district was unjust.

The ministry said it had revoked the license because SPD had not carried out any development work since it won the right to work at the Verkhne-Salymskoye field eight years ago. Shell representatives said, however, that the project had been on hold for more than five years because of disagreements with the Russian side over the exact wording of a production-sharing agreement (PSA).

The ministry’s decision is baseless, they said, since Shell and its partners cannot possibly begin pumping oil without any guarantees and without a contract in place. Nevertheless, the Natural Resources Ministry has said it is prepared to withdraw SPD’s license for the other fields in the Salym group, Zapadno-Salymskoye and Vadeliskoye, unless the joint venture begins development work there immediately.

The ministry’s move has also garnered criticism from local government officials. Aleksandr Filipenko, the Khanty-Mansi district’s governor, complained last week that the ministry had revoked SPD’s rights to the deposits without consulting him. He also charged that the license withdrawal violated Russian law.

A representative of Sibneft, meanwhile, indicated that the his company was ready to bid for rights to Verkhne-Salymskoye if SPD did not regain its rights to the oil field.

SPD is a joint venture set up on a parity basis by Shell Salym Development BV and Evikhon, a private oil company based in Russia and partly owned by foreign investors. Evikhon originally held the licenses for the Verkhno-Salymskoye, Zapadno-Salymskoye and Vadeliskoye, but Shell won rights to them in a tender conducted by Khanty-Mansi district authorities in September of 1993. The joint venture received its license for the fields from representatives of the Khanty-Mansi district and the Russian Natural Resources Ministry in November of 1998.

The Salym fields are believed to hold about 700 million barrels of crude oil. The cost of developing the concession may amount to US$10 billion.

JAOC starts drilling at Atashgyakh field

The Japan Azerbaijan Oil Company (JAOC) announced that drilling was to begin at the offshore Atashgyakh field on October 5.

The well is the first of two planned for the field, each of which will be drilled to a depth of around 5,000 meters. The well is scheduled for completion within 100 days and will cost around US$40 million.

The Atashgyakh field is part of the Yanan-Tava production-sharing agreement (PSA) contract area, which lies about 120 km southeast of Baku. There are two other structures within the contract area: Yanan-Tava and Mugandeniz. The Atashgyakh field is estimated to contain around 700 million barrels of oil

During 1999, JAOC invested US$22 million in the contract, and during 2000 it invested US$35 million and acquired 510 square km of 3D seismic data. The consortium’s investment in the project is expected to reach US$43 million in 2001, while US$42 million has been budgeted for 2002.

The JAOC consortium was formed in early 1999 with Japan Petroleum Exploration Corp (Japex) taking the role of operator with a 22.5% share in the PSA. Indonesia Petroleum Ltd (Inpex) holds 12.5%, Itochu holds 7.5% and Teikoku Oil holds 7.5%, while the State Oil Company of Azerbaijan (SOCAR) holds the remaining 50%.

Chevron pledges to drill second test well at Abzheron

Chevron will fulfill its obligations under a production-sharing agreement (PSA) signed with the State Oil Company of Azerbaijan (SOCAR) to drill a second test well at Abzheron, an offshore block in the Caspian Sea.

A spokesman at Chevron Azerbaijan's Baku office said last week that the U.S. company was obligated to drill a second well and had never refused to do so.

Chevron Azerbaijan has yet to select a site for the second well. Nevertheless, the spokesman’s comments served to defuse media speculation that Chevron was considering a plan to pay compensation to SOCAR in order to free itself from the agreement. Earlier in the week, Valekh Aleskerov, the head of SOCAR’s foreign investment department, said that under the terms of its contract, Chevron did not have the right to negotiate a release from the Abzheron PSA.

The U.S company plugged the ABX-1 test well at the field in July of this year after it failed to find sufficient quantities of either oil or gas. The well had been spudded in December of 2000 using the Istiglal rig, one of three available for drilling in Azerbaijani waters, and reached a depth of 6,500 meters.

Aleskerov reasoned that Chevron had failed to find commercial quantities of hydrocarbons because it had drilled the well on the edge of the field. "If it had been drilled in the center, our geologists are sure there would have been a discovery," he said. SOCAR's geologists believe that the field may contain several billion cubic meters of hydrocarbon reserves.

According to the Chevron spokesman, it will be several years before the U.S. company is prepared to drill the second test well since it is awaiting the completion of a new drilling rig currently being constructed by Denmark's Maersk Contractors. The contract for the new semi-submersible rig was awarded last February by ExxonMobil at a cost of $250 million. It will take three years to build. Chevron, ExxonMobil and SOCAR have signed a rig utilization agreement (RUA) for its shared use.

Chevron signed its PSA for the Abzheron block in 1997. It is operator of the project and holds a 30% interest in the project. TotalFinaElf of France holds 20%, while SOCAR holds 50%.

Earlier this year, Chevron expressed an interest in joining the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline sponsor group, which is backing the construction of a 1 million barrel per day pipeline that would run from the southern Caspian to Turkey's Mediterranean port of Ceyhan. Chevron is also the operator of Kazakstan's giant Tengiz oilfield, which has estimated reserves of around 9 billion barrels, and holds a 15% stake in the Caspian Pipeline Consortium (CPC), which is due to bring its 1,580-km, 560,000 bpd capacity pipeline into operation by the end of October. The CPC pipeline runs from Tengiz across southern Russia to the Black Sea port of Novorossiisk.

From the Russian Press

RUSSIAN OIL PRICES REPORTED DOWN ON OCTOBER 3

World oil prices again plummeted yesterday. Russian Urals oil went for less than US$19 per barrel and Siberian Light for less than US$20 per barrel.

KOMMERSANT, October 4

ENERGY MINISTRY DRAFTS PLANS FOR OPEC MEMBERS TO INVEST IN RUSSIA

The Russian Energy Ministry has drafted a project, providing for OPEC members to invest in Russian industry in exchange for curtailed Russian oil exports. Under the project, about US$50 billion is to be invested in energy-intensive production over a period of five years, which will entail bigger domestic fuel and energy inputs and contain Russian exports.

KOMMERSANT, October 3

PUTIN REPORTS ON ENERGY-SECTOR COOPERATION AT RUSSIAN-EU SUMMIT . . .

President Vladimir Putin of Russia will make a report at the Russian-European Union summit meeting on Russian interaction with the EU in the energy sector. Experts forecast growing interdependence of Russia and the EU in the energy sector over the next 20 years. Raw material and primarily gas consumption will rise in Europe, whereas Russia will need large-scale investments to develop new sources of energy.

VREMYA NOVOSTEI, October 3

. . . MENTIONS SEVERAL SPECIFIC PROJECTS

A special joint statement on energy-sector dialogue made at the Russian-European Union summit meeting, which was attended by Russian President Vladimir Putin, refers to several concrete projects. Among other things, the Europeans were offered the joint development of the Shtokmanovskoye deposit, the Northern Trans-European and Yamal-Europe gas pipeline construction projects via Belarus and Poland, the Kobrin-Wielkie Kapuszany gas pipeline construction project and also the integration of the Druzhba oil pipeline with the Adria networks.

VEDOMOSTI, October 4

ENERGY MINISTRY REPORTS ON RUSSIAN FUEL AND ENERGY SECTOR’S NEED FOR INVESTMENT

According to the Russian Energy Ministry, US$500 billion must be invested in the Russian fuel and power sector in order to ensure 5% economic growth in Russia until 2020. A US$150 billion investment will be needed by 2010. At least one third of this sum will have to be borrowed abroad.

VEDOMOSTI, October 1

GARIPOV LEAVES ENERGY MINISTRY POST

The Russian government has relieved Valery Garipov of the office of deputy energy minister in connection with his retirement.

RUSSIAN GOVERNMENT PRESS CENTER, October 2

KHRISTENKO SAYS RUSSIA WILL CUT OIL EXPORT QUOTAS IN Q4

Russian Deputy Premier Viktor Khristenko has announced that Russian oil exports will be cut by 1 million metric tons in the fourth quarter of 2001 compared to the third quarter. Russia thus plans to keep its word given to OPEC to pursue a joint oil price stabilization policy. The cut also has to do with technical possibilities: In winter storms, the ports will be unable to operate the same as they did in summer. Under the fourth-quarter budget approved by the government commission for access to major oil pipelines, which is headed by Khristenko, Russia will extract 90 million metric tons of oil in the remaining three months of 2001 and export 33.8 million metric tons of oil.

VREMYA NOVOSTEI, October 1, 2001

IRAQ INVITES RUSSIA TO INVEST IN OIL-SECTOR PROJECTS

Iraq has offered 72 oil extraction and industrial construction contracts worth a total of US$40 billion to Russia. Seventeen projects are in the field of oil and gas extraction, six in power generation, another six in petrochemistry, 15 in industrial development, 14 in transport and communications and 11 in farming and irrigation. Russia has been chosen for having blocked tougher sanctions against Iraq. Every project in Iraq will be implemented under the Oil-for-Food program.

KOMMERSANT, October 1, 2001

RUSSIA REPORTS OIL OUTPUT UP IN JANUARY-SEPTEMBER PERIOD

Russian oil output totalled 257.2 million metric tons in the first nine months of 2001, up 7.4% from the same period of last year. Third-quarter oil output was up 8.4% to 89.357 million metric tons.

NEFTEGAZOVAYA VERTIKAL, October 3

UDMURTIA TO SET UP STATE-OWNED OIL HOLDING

Udmurtia is to create a state holding consisting of oil companies in which the republic holds controlling blocks of shares. The holding will unite the Udmurt National Oil Company, Udmurtgeologiya, Udmurtnefteprodukt and Udmurttorf. The new body is expected to attract 120-150 million rubles in additional revenue to the regional budget. Udmurtia will not be able to construct an oil refinery in the near future. It will only be possible with the participation of external investors. To set up an oil refinery with a capacity at least 1 million metric tons of oil yearly, the republic will need US$30-40 million.

PRIME-TASS news agency; September 28, 2001

KHANTY-MANSI DISTRICT HOPES TO SEE OIL OUTPUT RISE IN 2002-2004 PERIOD

The Khanty-Mansi autonomous district government has considered a regional development forecast for the 2002-2004 period, under which local oil output is to be boosted by 10 million metric tons. This task will require a 151 billion ruble investment.

URALS INFORMATION BUREAU, October 1

NATURAL RESOURCES MINISTRY WITHDRAWS LICENSE FOR VERKHNE-SALYMSKOYE FIELD . . .

The Russian Natural Resources Ministry has decided to withdraw a license for the Verkhne-Salymskoye deposit, which forms part of a group of three deposits in the Khanty-Mansi autonomous district, from a leading world company, Royal Dutch/Shell. The company has failed to start serious work on the deposit over the past eight years while seeking to secure the right to export 100% of output. The ministry is ready to consider withdrawing licenses for the two remaining deposits unless the company starts work on them immediately. About US$10 billion was expected to be invested in the project. A production-sharing agreement (PSA) on this group of deposits has yet to be signed.

VEDOMOSTI, October 1, 2001

. . . KHANTY-MANSI GOVERNOR PROTESTS MINISTRY’S MOVE

Governor Aleksandr Filipenko of the Khanty-Mansi autonomous district said that the Russian Natural Resources Ministry's decision to withdraw a license from the Salym Petroleum Development company, in which Royal Dutch/Shell has a stake, was not coordinated with him and infringes upon legislation.

VEDOMOSTI, October 3

RUSSIAN BUDGET ALLOCATES FUNDS FOR EXPLORATION WORK NEAR TALAKANSKOYE FIELD

Russia will allocate 50 million rubles from the federal budget to explore promising areas to the southwest of the Talakanskoye deposit. Yakutgeofizika is prospecting for hydrocarbons in this area.

YAKUTIYA, October 3

PIPELINE COMMISSION SAYS OIL EXPORTS WILL BE RESTRICTED FURTHER

The Russian government commission for access to major oil and gas pipelines intends to restrict oil exports further and halve export quotas for businesses with federal tax debts. Exports may be cut by 20% in October, though the list of defaulters hass yet to be endorsed. Oil companies believe that the commission moves are unlawful as the Tax Code amendments enacted past spring provide for unrestricted access to pipelines.

VEDOMOSTI, October 4

TRANSNEFT REPORTS NET PROFITS UP IN H1

In the first half of this year, Transneft's net profit grew by 70.3% to 6.4 billion rubles in accordance with international accounting standards as compared with the same time last year. Pre-tax profits stood at 14.08 billion rubles. Spending on principal activities increased by 5.9% to 20.3 billion rubles. Long- term credits issued by the company decreased by 2.1% to 33.5 billion rubles, while short-term credits grew by 65.4% to 9.9 billion rubles.

VEDOMOSTI, October 2, 2001

REPORT ON OIL EXPORTS NOT HANDLED BY TRANSNEFT IN JANUARY-AUGUST PERIOD

In the first nine months of 2001, 3.385 million metric tons of oil was exported beyond the CIS in circumvention of Transneft's networks, an 18.2% rise from the same period of last year. Russia exported 457,600 metric tons of oil beyond the CIS in September, including 413,500 metric tons through sea terminals and 44,000 metric tons by rail.

KOMMERSANT, October 3

RUSSIA BACKS BURGAS-ALEXANDROUPOLIS OIL PIPELINE PROJECT

Russia is in favor of that Burgas-Alexandrupolis (Bulgaria-Greece) oil pipeline construction project, which will enable Russian and Caspian oil companies to avoid restricted oil exports from the Turkish Bosphorus and Dardanelles Straits.

VREMYA NOVOSTEI, October 3

RUSSIA CAN EXPORT MORE OIL IF ADDITIONAL TRANSPORT ROUTES BECOME AVAILABLE

Russia may boost its oil exports if new transportation routes are created, says Transneft Vice President Sergei Grigoryev. According to Grigoryev, local export facilities, including pipelines, ports and railways are currently operating at virtually full capacity. Grigoryev believes that under the circumstances a maximum of 150 million metric tons of oil can be exported per year.

AVTOTRANSINFO, September 28

FEDERAL SECURITIES COMMISSION REGISTERS REPORT ON LUKOIL SHARE ISSUE

The Russian Federal Securities Commission has registered a report on the issue of 77,211,864 preferred convertible registered LUKoil shares, each with a face value of 0.025 rubles.

NEFTEGAZOVAYA VERTIKAL, September 28

LUKOIL-PERM TO INVEST IN DEVELOPMENT OF SALES NETWORK

The LUKoil-Perm company will invest about US$40 million in developing a sales network in the Perm region over the next five years. The company plans to have 100 filling stations in the region and build or fully renovate several oil tank farms of its own.

REGION INFORM PERM, September 28

PERMTEX BEGINS OPERATING PUMPING STATION, 35-KM OIL PIPELINE

The Russian-American company Permtex has put a pumping station and a 35-km pipeline from the Ozerny deposit into trial operation. The new pipeline is connected with the major Gezh-Kamenny Log oil pipeline. The two projects, which cost over US$5 million, were financed primarily with a loan from the European Bank for Reconstruction and Development (EBRD). Permtex plans to extract 346,000 metric tons of oil from six deposits developed in the Krasnaya Vishera and Solikamsk districts of the Perm region this year. The joint venture will have invested 863.5 million rubles and may earn 1.15 billion rubles in sales proceeds this year.

ROSSIYA REGIONY PERM, October 3

YUKOS BOARD PREPARES TO CONSIDER INTERIM DIVIDEND PAYMENTS FOR 2001 . . .

The Yukos board of directors will consider interim dividend payment for 2001 at its meeting on October 18.

Yukos PRESS SERVICE, October 4

. . . AS SHAREHOLDERS BEGIN SECOND PHASE OF STOCK CONSOLIDATION PROGRAM

According to the Yukos press service, shareholders held at 17 of the holding's subsidiaries decided at special meetings in September to exchange their ordinary and preferred shares for those with a higher face value. Yukos has thus embarked on the second phase of subsidiary consolidation.

VEDOMOSTI, October 3

YUKOS OUTPACES LUKOIL IN CAPITALIZATION THROUGH RTS . . .

On October 4, Yukos outpaced LUKoil in capitalization through the Russian Trading System (RTS). Surgutneftegaz, which ranks third in output in Russia, remained in the lead. Experts say that the market expects high interim dividends from Yukos, the size of which is to be made public on October 18.

VEDOMOSTI, October 5

. . . PLANS TO INVEST US$250 MILLION IN ASSOCIATED GAS PROGRAM BY 2004

By 2004, Yukos intends to invest US$250 million in its associated gas utilization program, which is expected to generate US$45-50 million worth of profits annually. The program gives priority to 15 oil and gas condensate deposits of Tomskneft and Yuganskneftegaz, which will annually use more than 2 billion cubic meters of associated gas.

RUSENERGY.COM, October 3

GAZPROM, ROSNEFT TO COOPERATE ON KHANTY-MANSI DEVELOPMENT PROJECTS

On October 4, Gazprom's CEO Aleksei Miller and Rosneft's President Sergei Bogdanchikov signed an agreement to pool the two companies' efforts in developing five major deposits in the Yamal-Nenets autonomous district and on the Barents Sea shelf. The newly signed agreement provides for joint development of the Kharampurskoye oil and gas condensate deposit (with 153.7 million metric tons in oil reserves and 750.7 billion cubic meters of natural gas reserves), the Vyngayakhinskoye gas and oil deposit (92.6 million metric tons of oil and 106.5 bcm of gas), the Yetypurovskoye gas and oil deposit (31.7 million metric tons of oil and 299.5 bcm of gas), the Prirazlomnoye oil deposit (76.4 million metric tons of oil) and the Shtokmanovskoye gas condensate deposit (27 million metric tons of oil and 3,205.3 bcm of gas). Two subsidiaries of the companies -- Rosshelf and Rosneft-Purneftegaz -- will form a joint venture on a parity basis to translate the agreement into reality. Production-sharing agreements (PSAs) may be concluded on the Kharampurskoye, Prirazlomnoye and Shtokmanovskoye deposits.

RUSENERGY.COM, October 3, 2001

SAKHALINMORNEFTEGAZ REPORTS ON OIL OUTPUT IN JANUARY-SEPTEMBER PERIOD

Rosneft-Sakhalinmorneftegaz extracted 1.118 million metric tons of oil in the first nine months of 2001, 12,285 metric tons more than in the same period of last year, and 1.284 million cubic meters of gas, 9 million cubic meters more than last year.

SAKHALINSKIYE NOVOSTI, October 4

SAKHALIN-I GROUP TO INSTALL ORLAN DRILLING PLATFORM AT CHAIVO FIELD IN 2003

The first Orlan drilling platform will be installed at the Chaivo deposit of the Sakhalin-I project in 2003. Until then the platform will be upgraded at one of the enterprises of the Russian Far East.

SAKHALINSKIYE NOVOSTI, October 4

ONGC-VIDESH WILL PROVIDE 40% OF INVESTMENTS IN SAKHALIN-I PROJECT

Investment by ONGC-Videsh Ltd, India's state oil company, in the Sakhalin-I oil and gas project will account for 40% of overall financing provided by the consortium, even though the Indians have a 20% equity stake in the project, the company's Managing Director Atup Chandra said during his meeting with Governor Igor Farkhutdinov of the Sakhalin region. According to Chandra, the Indians plan to invest between US$1.5 billion and US$2 billion in the first phase of the project by 2005, when oil extraction is expected to begin.

SAKHALINSKIYE NOVOSTI, September 28

SAKHALINMORNEFTEGAZ TO TRANSFER ONGC-VIDESH PAYMENT TO ROSNEFT . . .

Sakhalinmorneftegaz shareholders have decided to hand the 3.5 billion rubles received from a deal with ONGC-Videsh of India over to their parent company Rosneft. The latter sold a 20% stake in the Sakhalin-I project to ONGC-Videsh for US$225 million past summer. Rosneft had controlled 8.5% of that package and its subsidiary Sakhalinmorneftegaz the remaining 11.5%. The two Russian companies were expected to share the money thus raised in proportion to the sold stakes in the project. Rosneft, however, opted for getting the entire sales proceeds and sought the approval of Sakhalinmorneftegaz shareholders. Minority shareholders in the Sakhalin-based company had tried to interfere and secured an injunction against the shareholders meeting, which was nevertheless ignored by Rosneft.

VEDOMOSTI, October 3, 2001

. . . ALONG WITH 300 MILLION RUBLES WORTH OF ASSETS

Sakhalinmorneftegaz shareholders have decided to transfer 300 million rubles worth of assets to the parent company Rosneft, which will then lease those assets to Sakhalinmorneftegaz.

VEDOMOSTI, October 3

SURGUTNEFTEGAZ SELLS 14.9% STAKE IN NAFTA-MOSKVA

Surgutneftegaz has sold a 14.9% stake in the Nafta-Moskva oil trader and plans to terminate its cooperation with this company. Surgutneftegaz intends to export its oil on its own and has formed a special department with this aim. Last year Surgutneftegaz stopped using Nafta-Moskva services in oil exports to Germany and began to make direct oil supplies to the Sunimex company. The final desertion of Nafta-Moskva spells grave losses for the latter because Surgutneftegaz's oil supplies accounted for at least three quarters of Nafta-Moskva's exports. Nafta-Moskva, a leading oil exporter through the Novorossiisk port and the Druzhba oil pipeline to Germany, has an annual income estimated at US$30-50 million.

VEDOMOSTI, October 4, 2001

TATNEFT REPORTS OIL PRODUCTION LEVELS UP IN JANUARY-SEPTEMBER

Tatneft extracted 18.407 million metric tons of oil in the first nine months of 2001, compared to 17.459 million metric tons in the same period of last year. A total of 21.061 million metric tons of oil was extracted in Tatarstan over the nine-month period, a 3% rise from the corresponding figure for 2000.

KAMA-PRESS, October 2

TNK BOARD URGES SHAREHOLDERS TO REVOKE DECISION ON COMPANY REORGANIZATION

The Tyumenneft (TNK) board of directors will recommend that shareholders vote at a special meeting to revoke the decision made on reorganization of the company through incorporation of subsidiaries. According to a TNK representative, the incorporation would require a huge complex of assets in the subsidiaries to be re-registered, which would protract the reorganization period.

KOMMERSANT, October 2

SIBNEFT REPORTS OIL OUTPUT UP IN JANUARY-SEPTEMBER . . .

Sibneft extracted 14.89 million metric tons of oil in the first nine months of 2001, 18.7% more than last year.

KOMMERSANT, October 4

. . . SHAREHOLDERS WILL DISCUSS INCORPORATION OF TERRA TRADER ON DECEMBER 1

Sibneft will convene a general shareholders meeting on December 1 to discuss the incorporation of the Terra trader, which operates on the domestic market. Sibneft shares bought by the issuer on the open market will be used to acquire the trader.

NEFTEGAZOVAYA VERTIKAL, October 5

SLAVNEFT PLANNING TO CONCLUDE PSA DEAL WITH SUDAN:

Slavneft intends to sign an agreement with the government of Sudan on the development of oil deposits under a production-sharing agreement (PSA), said the company's Vice President Andrei Shtorkh. Sudan's Masa Group for Investment will be the project operator. According to Shtorkh, trial drilling will be launched on January 1, 2002.

Slavneft PRESS SERVICE, October 4

SLAVNEFT BOARD ABANDONS SHARE CONSOLIDATION PLAN . . .

The Slavneft board of directors has decided to abandon the idea of adopting a uniform company share. Experts say that the process of adopting the uniform company share would protract the company's privatization campaign. The share consolidation would also have diminished the state-controlled stake from 74.95% to 64.5%, while the stake controlled by Tyumenneft (TNK), whose affiliates have stakes in Slavneft subsidiaries, would have risen to 33%. The Russian government has already decided to sell a portion of the state block of shares in 2002.

VEDOMOSTI, October 1

. . . COMPANY NO LONGER HOLDS MAJORITY STAKE IN ITS MAIN PRODUCTION UNIT

It has become known that Slavneft's stake in its leading extracting subdivision Megionneftegaz shrank from 55.76% to 45.5% in July. Shares were sold to the Nadezhnost (Stability) company and transferred to ING Bank as a nominal holding.

VEDOMOSTI, October 1

SEVERNAYA NEFT TO BUILD SMALL REFINERY IN USINSK DISTRICT

Severnaya Neft plans to build a small oil refinery in the Usinsk district of the Komi republic. The refinery will make diesel fuel for company needs.

KOMIINFORM, October 4

SAKHANEFTEGAZ TO EXPORT ITS SECOND BATCH OF OIL THROUGH TIKSI TERMINAL

Sakhaneftegaz will export its second batch of oil through the Tiksi terminal. The batch of 19,200 metric tons of oil has been bought by Vitol of Switzerland. Sakhaneftegaz used the proceeds from the first batch of oil, sold at US$26.8 per barrel, to repay its wage arrears.

SAKHALINSKIYE NOVOSTI, October 3

JAPANESE COMPANIES PLANNING TO LAY GAS PIPELINE IN SAKHA

A four-company Japanese consortium will take part in financing the laying of the third gas pipeline from Kysyl-Syr to Yakutsk in Sakha. Sakhaneftegaz signed a feasibility study contract with Sumitomo Corp, Nippon Steel Industries, Sumitomo Steel Industries and Mitsubishi Corp in late September. The Japanese government will finance the feasibility study. The new gas pipeline will stretch for a total of 384 km.

RUSENERGY.COM, October 3

NEW GAS PIPELINE FROM AMURSK TO ELBAN INDUSTRIAL CENTER BEGINS OPERATING . . .

A 47-km gas pipeline has been made operative in the Russian Far East between Amursk outside Komsomolsk-na-Amurye and the Elban industrial center.

RIA NOVOSTI, October 2

. . . DESIGN WORK UNDERWAY ON GAS LINE FROM OKTYABRSKY TO KHABAROVSK

According to the Khabarovsk territorial administration, another gas pipeline that will stretch approximately 423 km from the Oktyabrsky settlement outside Komsomolsk-na-Amurye to Khabarovsk is currently being designed. The new pipeline is expected to pump gas from Sakhalin to the southern parts of the Russian Far East.

RIA NOVOSTI, October 2

REPORT ON RUSSIAN GAS OUTPUT IN JANUARY-SEPTEMBER PERIOD

Russia extracted 420.909 billion cubic meters of natural gas between January and September of 2001, a 7.6 bcm (2%) drop from the corresponding figure for last year. A total of 43.3 bcm of gas was extracted in September. Gazprom accounted for 370.98 bcm of overall gas output in the first nine months and 37.967 bcm of September output.

RIA NOVOSTI, October 4

RUSSIA HALVES NATURAL GAS EXPORT DUTIES

The natural gas export duty has been halved to 5% of the customs value but no less than 2.5 euros per metric ton under a resolution signed by Russian Prime Minister Mikhail Kasyanov. Meanwhile, the 10% gas export duty was initially expected to be applied until the excise duty rebate for stripped petroleum gas expires at the end of 2001.

RUSSIAN GOVERNMENT PRESS CENTER, October 4, 2001

REPORT ON FEDERAL ENERGY COMMISSION’S PLANS TO REGULATE GAS TARIFFS

The Russian Federal Energy Commission intends to regulate liquefied and associated gas tariffs within the framework of plans to found a United Tariff Agency. Analysts believe that domestic market sales of liquefied gas, which currently goes for 1,050 rubles per metric ton, brings between US$200 million and US$300 million incomes to its manufacturers. The associated gas market is estimated at US$120 million. Sibur, a major liquefied gas market operator, buys approximately 80% of associated gas.

VEDOMOSTI, October 1

GAZPROM, GAZUNIE HOPE TO EXPAND COOPERATION

Gazprom and its Dutch partner, the Gazunie company, are considering further prospects for cooperation, including joint deliveries of Russian gas to European markets. Gazunie is the first Dutch company to sign a gas supply contract with Gazprom.

CASPIAN NEWS AGENCY, October 1

ALL BRANCHES OF GAZPROMBANK INVOLVED IN TRANSACTIONS WITH GAZPROM SHARES:

Every branch of Gazprombank has begun to offer Gazprom share buy-and-sell transactions. Though the market price is about 13.4 rubles per share, a Moscow-based branch yesterday bought Gazprom shares at 12.1 rubles per share and sold them at 12.5 rubles per share.

VEDOMOSTI, October 3

GAZPROM, KHANTY-MANSI DISTRICT SIGN COOPERATION ACCORD

Gazprom CEO Aleksei Miller has signed a cooperation agreement with Governor Aleksandr Filipenko of the Khanty-Mansi autonomous district for a period up to 2006 and another cooperation agreement for 2002. Gazprom is considering the possibility of taking part in the development of the Vostochno-Tugrovskoye and Verkhne-Kondinskoye gas deposits in the district.

CASPIAN NEWS AGENCY, October 1

CAPACITY OF UNDERGROUND GAS STORAGE IN NOVGOROD REGION TO BE DOUBLED

The Neva underground gas storage facility in the Novgorod region will double its capacity, announced its boss Aleksei Bondarenko. The biggest facility in northwestern Russia will buy four more compressors of American-French make for about US$14 million. This will enable the third phase to begin operations and receive up to 3.5 billion cubic meters of gas.

SEVERINFORM, October 1

GAZPROM TO ACTIVATE FIRST GAS TREATMENT INSTALLATION AT ZAPOLYARNOYE SOON

Gazprom will make the first of three comprehensive gas treatment installations, each with an annual capacity of 35 billion cubic meters of gas, operative at the Zapolyarnoye gas deposit in October of 2001. The deposit is expected to yield 20 bcm of gas by the end of this year, with the projected yield of 100 bcm to be reached in 2003.

RUSENERGY.COM, October 3

YAKUTGAZPROM PLANNING TO SINK TEST WELL IN SUNTAR AREA

Yakutgazprom intends to begin drilling an exploratory well in the Suntar area, which has reserves estimated at 200 billion cubic meters of gas, by the end of 2001.

YAKUTIYA, October 3

ROSPAN CREDITORS WITH TIES TO TNK APPOINT SECOND RECEIVER

Creditors of Urengoi-based Rospan International, associated with Tyumenneft (TNK), decided at their meeting to appoint Valery Avalyan as the company's second receiver at the request of Rospan's receiver Mikhail Rubtsov in order to make receivership more efficient. The meeting also asked the creditors committee to submit the terms of an amicable settlement and its procedure within the next 30 days. Creditors close to Itera, Rospan's major shareholder, simultaneously convened an alternative creditors meeting, which elected still another receiver. According to Itera, the meeting attended exclusively by TNK representatives has no legal force because structures associated with Itera control more than 55% of Rospan's credit indebtedness. For its part, TNK believes that more than half of the above credit indebtedness is under its control.

KOMMERSANT, September 29, 2001

ITERA SELLS SOME OF ROSPAN’S DEBTS TO YUKOS

Itera has sold a portion of Rospan's credit indebtedness to Yukos. Yukos and Itera have thus joined forces in their struggle against Tyumenneft (TNK) for control over Rospan. Itera has a controlling stake in Rospan, whereas TNK has by now acquired about half Rospan's credit debts. In exchange for its backing, Yukos hopes to get at least a blocking stake in Rospan.

VEDOMOSTI, October 1

NORTHGAS COMPLETES FIRST PHASE OF WORK AT NORTH URENGOI

The Northgas company, founded by Urengoigazprom and the British company Farco Group, has completed the first phase of the North Urengoi oil and gas condensate deposit development project. The deposit is expected to yield 4.5 billion cubic meters of gas and about 900,000 metric tons of gas condensate in 2002.

NEFTEGAZOVAYA VERTIKAL, October 3

VOSTOKGAZPROM TO TRANSFER BARNAUL MUNICIPAL TRANSPORT SYSTEM TO GAS

Vostokgazprom will be involved in transferring Barnaul municipal transport to natural gas in the Altai territory, a project presupposing the building of gasoline filling stations. The company has also expressed its readiness to commission the laying of a gas pipeline to the Belokurikha spa town.

AMITEL, October 3

REPORT ON OIL SUPPLIES TO RUSSIAN REFINERIES

Oil supplies to Russian refineries went up to 134.769 million metric tons in the first nine months of 2001, a 5.6% rise from the same period of last year.

RIA NOVOSTI, October 5

REPORT ON LUKOIL’S INVESTMENTS IN ROMANIA

LUKoil has invested more than US$75 million in Romania in the last two years, according to company sources. LUKoil launched its activity in Romania back in 1998, when it acquired a majority stake in the Petrotel refinery in Ploiesti. LUKoil gasoline filling stations built in Romania have all the facilities offered by modern oil stations, ensuring both the selling of oil products and various services supply to clients. Each station includes a general store where you can buy car components and groceries.

Central Europe Daily Bulletin

KIRISHI REFINERY TO PHASE IN RAIL LOADING FACILITY FOR HEAVY FUELS

The Kirishinefteorgsintez refinery will phase in a facility for loading black products, such as oil and fuel oil, into railway tank cars. The facility, with a handling capacity of over seven million metric tons of products per year, was provided by the French firm FMC. The cost of construction is estimated at US$15 million. The loading process is fully automated. Along with the new facility, the company will continue using its old loading lines, intended for light oil products and aromatic hydrocarbons.

DELOVOI PITERBURG, October 3, 2001

FIRST PHASE OF WORK ON NEW FACILITY AT YAROSLAVL OIL REFINERY FINISHED

The first phase of a polyethylene container making and oil bottling complex construction project has been completed at the Slavneft-Yaroslavl oil refinery. Italian equipment has been imported for the new production line, which is expected to begin operations in May of 2002 and be capable of making annually over 40,000 metric tons of products.

Slavneft PRESS SERVICE, September 28

SIBNEFT PLANNING TO BID FOR NORSI-OIL STAKE

Sibneft's First Vice President Aleksandr Korsik has announced that his company will bid in the Norsi-Oil auction and is also considering the possibility of buying oil refining facilities abroad. Furthermore, Sibneft may attend a tender for the state-controlled stake in Slavneft, if it is put on sale, and another tender for the right to use the Verkhne-Salym oil deposit, if Salym Petroleum Development loses its license for that deposit.

VEDOMOSTI, October 4

NORSI REFINERY REPORTS ON H1 PERFORMANCE

The Nizhegorodnefteorgsintez (Norsi) refinery reported performance data for the first half of 2001. Profits stood at 19.9 million rubles, compared to losses of 693 million rubles in the same period of 2000. Sales proceeds were calculated at 890 million rubles, a 37.8% year-on-year increase. Production costs went up by 20% to 692 million rubles. Debit arrears surged by 84% and amounted to 879 million rubles, while credit arrears grew by 21% to stand at 3.1 billion rubles.

SKRIN news agency; October 3, 2001

ST PETERSBURG-BASED COMPANY WANTS TO BUILD ITS OWN OIL REFINERY

The St Petersburg-based Ekros company, which is engaged in making laboratory equipment, will invest US$7 million of its own resources to build an oil refinery in Dzerzhinsk in the Nizhny-Novgorod region, said General Director Oleg Arapov. The refinery will have a capacity of 40,000 metric tons of oil per year and is expected to be recouped within five years. The Kudma company has been registered to implement the project, with Ekros controlling a 55% stake and the rest held individually. Ekros intends to test new methods of treating high- viscosity (heavy) oil and getting light petroleum products from it at its new refinery.

DELOVOI PITERBURG, October 3, 2001

SHAREHOLDERS IN ANGARSK REFINERY APPROVE STOCK CONSOLIDATION PLAN

At a special meeting, shareholders in the Angarsk Petrochemical Company (ANKhK) decided to consolidate the company's shares by exchanging 307,062,989 ordinary shares, each with a face value of 1 ruble, for one ordinary share with a face value of 307,062,989 rubles and 136,472,491 preferred shares, each with a face value of 1 rubles, for one preferred share with a face value of 136,472,491 rubles.

SKRIN EMITENT, October 1

NEW OIL-MIXING LINE INSTALLED AT NEFTEMASLOZAVOD

A new oil-mixing line has been installed at Neftemaslozavod, a subsidiary of Onako, enabling it to improve oil quality and cut production costs. The new line cost 1.7 million rubles.

SKRIN EMITENT, October 2

NEFTEMASLOZAVOD TO MODERNIZE ITS LITOL-24 LUBRICANT PRODUCTION LINE

Neftemaslozavod, controlled by Onako, intends to modernize its Litol-24 lubricant production line in light of the targeted 80% boost in its output in 2002 compared to 2000.

NEFTEGAZOVAYA VERTIKAL, October 2

FEDERAL ENERGY COMMISSION LIFTS PRICING RESTRICTIONS ON URALTRANSNEFTEPRODUKT

The Federal Energy Commission has liberated the rates for the services of Uraltransnefteprodukt, a Transnefteprodukt subsidiary whose pipelines are used to pump petroleum products made by oil refineries in Ufa, Salavatnefteorgsintez and the Omsk oil refinery. From November, the shipper will be free to fix petroleum product pumping rates within 68% of petroleum product rail transportation rates on similar routes.

VEDOMOSTI, October 5

FUEL OIL PRODUCERS MUST COMPLY WITH QUOTA FOR DELIVERIES TO UES

Russian Energy Minister Igor Yusufov has announced that targets will be fixed for fuel oil supplies to the domestic market. Of Russia's monthly 4 million metric ton fuel oil output, 1.1 million metric tons will be reserved for United Energy Systems (UES), 2.1 million metric tons will go to the free market and be bought by housing and utilities businesses and the remaining 800,000 metric tons may be kept by companies for exports. The fuel oil export duty rate has recently gone up from US$20 to US$32 per metric ton. Analysts believe that the fixed targets may lead to Russian oil refinery glutting and hence send fuel oil prices down.

VEDOMOSTI, October 3, 2001

SMALL COMPANIES BEAT LUKOIL, YUKOS, TATNEFT IN MOSGORTRANS FUEL SUPPLY TENDER

Eight little-known companies have won a tender for the right to supply 1 billion rubles worth of fuel to Mosgortrans. The tender was attended by 25 companies, including Tatneft, LUKoil and Yukos subsidiaries. The eight winners are all intermediaries with no resources of their own that nevertheless offered 11.6-16.46% discounts on basic prices.

VEDOMOSTI, October 1

GAZPROM MANAGER SAYS SIBUR’S PRESIDENT SHOULD RESIGN

Gazprom's first deputy CEO Pyotr Rodionov has suggested that Sibur President Yakov Goldovsky tender his resignation. Rodionov has also spoken of plans to have the Sibur board of directors re-elected.

VEDOMOSTI, October 3

LUKOIL SUBSIDIARY BUYS 12 FILLING STATIONS IN ESTONIA

LUKoil-Eesti, a LUKoil subsidiary in Estonia, has bought 12 Oil Stop filling stations in that Baltic state. According to the company, it intends to continue expanding its Estonian filling station network by buying existing and building new stations and also developing a gasoline filling station network in Estonia.

VEDOMOSTI, October 4, 2001

ITERA-LATVIJA WILL SEEK LICENSES FOR RUSSIAN GAS DEPOSITS

Itera-Latvija, the Latvian subsidiary of the Itera group, intends to obtain licenses for Russian gas deposits, said the company's President Juris Savickis. According to Savickis, the company will appropriate about US$300 million of its own and Itera's resources for this project.

RUSENERGY.COM, October 3

YUKOS MAY ASSUME CONTROL OF MAZEIKIU NAFTA IN 2004

Yukos may establish full control over Mazeikiu Nafta in 2004 if the American company Williams, the current master of the Lithuanian concern, opts to withdraw. This possibility had been stipulated by draft contracts between the two partner-companies submitted to the Lithuanian government.

VEDOMOSTI, October 5

LIETUVOS DUJOS SALE PLAN APPROVED BY LITHUANIAN GOVERNMENT

The government has given its approval to a plan for the privatization of the state-owned utility Lietuvos Dujos (Lithuanian Gas), which will offer the strategic investor and the gas supplier equal 34% stakes while the government retains 24%. The remaining 8% is already privately owned. The plan takes into account the wishes of Russia's Gazprom that the gas supplier be given at least the same share as the strategic investor. The main competitors as investors are Ruhrgas and Gaz de France. Finance Minister Dalia Grybauskaite said that the plan was coordinated with the World Bank, whose main request was that the strategic investor and government hold a majority of the shares.

Central Europe Daily Bulletin

GAZPROM PLANNING TO PARTICIPATE IN LIETUVOS DUJOS PRIVATIZATION . . .

Gazprom has decided to take part in the Lietuvos Dujos gas complex privatization campaign on Lithuania government terms, reported the company's press service. Although Gazprom had earlier insisted on a deal that would allow it and its partner to hold at least a controlling stake in the complex, it can now count on no more than 34%.

VEDOMOSTI, October 3

. . . RUSSIAN COMPANY, LOCAL PARTNERS TO TAKE 34% OF LIETUVOS DUJOS

Gazprom and its partners in Lithuanian gas supplies may count on a 34% stake in the privatized Lietuvos Dujos company. The Lithuanian government has made the final decision on the company privatization scheme. A Western strategic investor will get another 34% stake.

VEDOMOSTI, October 2

TNK PLANNING TO CLOSE ITS OFFICE IN BELARUS

Tyumenneft (TNK) intends to close its office in Belarus, where the company is unable to either treat oil or sell petroleum products. TNK does not exclude the possibility of founding a TNK-Belneft subsidiary or pooling efforts with Slavneft to conquer the Belarussian market.

URALS INFORMATION BUREAU, October 1

RUSSIA, UKRAINE SIGN AGREEMENT ON PAYMENT OF GAS DEBTS . . .

On October 4, the Russian and Ukrainian prime ministers signed an agreement to restructure the Ukrainian debt for Russian natural gas supplies, making a number of mutual concessions. The newly signed agreement grants Ukraine a 12-year deferment in repaying its US$1.4 billion debt. The Ukrainian government has secured a permission to re-export a portion of Russian gas supplies and in turn accepted some of the liabilities of local commercial structures, thus raising the aggregate coordinated debt by another US$300 million. Ukraine will repay the bulk of its gas debt at a rate of LIBOR plus 1%. Naftohaz Ukrayiny will issue corporate bonds to pay the debt.

VEDOMOSTI, October 5, 2001

. . . MOSCOW WILL RESTRUCTURE UKRAINIAN GAS DEBTS OVER 12-YEAR PERIOD

Russia will restructure Ukrainian debts for gas supplies for a period of 12 years, Russian Prime Minister Mikhail Kasyanov said after talks with his Ukrainian counterpart Anatoly Kinakh. The debt restructuring agreement is expected to be signed within the next few days.

RUSENERGY.COM, October 1

UKRAINIAN-RUSSIAN DEAL SAYS UKRAINE’S GAS EXPORT DUTY RATE WILL BE SET ANNUALLY

Under an agreement reached between the Ukrainian and Russian governments, the Ukrainian natural gas export duty rate will be fixed annually proceeding from intergovernmental protocols, market prices and West European natural gas market studies, announced Ukrainian Prime Minister Anatoly Kinakh.

UKRAYINSKI NOVYNY, October 1

RUSSIA TO LIFT BAN ON RE-EXPORT OF GAS FROM UKRAINE

Russia has agreed to lift a ban on the re-export of Russian gas from Ukraine and will accept a long-term debt restructuring plan. Naftohaz Ukrayiny will issue securities to the tune of the owed sum unsecured with state guarantees. Under a new agreement reached between the Ukrainian and Russian prime ministers, the initial eight-year debt restructuring period has been extended to 12 years. In addition, Ukraine will abolish its export duty of US$140 per 1,000 cubic meters of gas, which was imposed under pressure from Russia.

VEDOMOSTI, October 2

NAFTOHAZ UKRAYINY APPROVES PLAN TO DEVELOP VOSTOCHNO-KAZANTIPSKE GAS FIELD

Naftohaz Ukrayiny has approved a business plan and a feasibility study to put the offshore Vostochno-Kazantipske natural gas deposit in the Sea of Azov 20 km away from the Kerch Peninsula to commercial development by mid-2002. Five wells are expected to be drilled at the deposit to enable the early 500 million cubic meters of gas to be extracted by the end of 2002. To this end, 180 million hryvnyas is to be invested. The deposit's reserves have been estimated at 4 billion cubic meters of gas.

UKRAYINSKI NOVYNY, October 3

DEVELOPMENT OF SEVERO-KAZANTIPSKE GAS FIELD TO BEGIN BY YEAR-END

The Severo-Kazantipske gas deposit will begin to prepare for commercial development in the second half of 2001. The Ukrainian deposit's reserves have been estimated at 20 billion cubic meters of gas. Once put to commercial development, the deposit will make it possible to boost Ukrainian offshore gas yield in the Sea of Azov to 1 bcm per year.

UKRAYINSKI NOVYNY, October 3

UKRAINE SEES GAS OUTPUT RISING AFTER TWO NEW FIELDS COME ON LINE

According to the Ukrainian Fuel and Energy Ministry, local gas output will grow by 1.2 billion cubic meters when the new Vostochno-Kazantipske and Zapadno-Kazantipske deposits begin operations in the Crimea in the near future. Ukraine will thus extract 19.3 bcm of gas and will be able to export 1.2 billion by the end of this year. Ukraine intends to extract 25 bcm of gas by 2004 and export 7 bcm of gas to Hungary, Slovakia and Poland by this time.

VEDOMOSTI, October 2

REPORT ON UKRAINIAN REFINERY ACTIVITY IN SEPTEMBER 1-26 PERIOD

In the September 1-26 period, Ukrainian oil-processing plants received 1.599 million metric tons of crude oil from suppliers, and processed 1.517 million metric tons of oil. The processing by plant was as follows: Ukrtatnafta (Kremenchuk) -- 512,400 metric tons; Kherson -- 172,700 metric tons; LUKoil-Odessa -- 179,300 metric tons; LINOS (Lysychansk) -- 436,300 metric tons; Naftokhimik Prykarpattya (Ivano-Frankivsk region) -- 83,600 metric tons; and Halychyna (Lviv region) -- 133,200 metric tons. Over September 24-28, gasoline prices across Ukraine fell by 2-4% on the average. Analysts believe that gasoline prices will continue to fall, especially in Ukraine's eastern and central areas.

KIEVSKIYE VEDOMOSTI, October 1, 2001, p. 7

STATE PROPERTY FUND SAYS UKRAINE SHOULD SELL 25% STAKE IN HALYCHYNA REFINERY

The Ukrainian State Property Fund has proposed to the Cabinet of Ministers to sell a 25% stake in Halychyna oil-processing plant (located in the Lviv region), rather than leaving it in state property. Currently, 19.55% in Halychyna belongs to Nadia Plus Ltd (based in Kyiv), 20.52% to Evropa II Ltd (Kyiv), and 32.855% is controlled by Interregional Stock Union (Kyiv). Norcroft Management Ltd (UK) owns 11% in the stake belonging to the Interregional Stock Union.

KIEVSKIYE VEDOMOSTI, October 2, 2001, p. 7

CHERNOMYRDIN SAYS VAT ON RUSSIAN FUEL EXPORTS TO UKRAINE SHOULD BE ELIMINATED

Russia's ambassador to Ukraine Viktor Chernomyrdin has submitted a proposal that VAT on Russian fuel exports to Ukraine be abolished for the Russian government’s consideration. The VAT currently paid by Ukrainian consumers to the Russian budget makes Russian fuel 20% more expensive in Ukraine.

UKRAYINSKI NOVYNY, October 3

RUSSIA, MOLDOVA, ROMANIA TO DISCUSS GAS PIPELINE PROJECT SOON

Representatives of the Russian, Romanian and Moldovan gas sectors will hold a tripartite meeting in the first half of October to make the final decision on construction of the new Drochia-Ungheni-Iasi gas pipeline. Specialists have estimated the project's cost at approximately US$38 million.

KOMMERSANT MOLDOVY, September, No. 12

MOLDOVAN CABINET APPROVES RESOLUTION ON LICENSING FUEL IMPORTS

Moldova's cabinet of ministers has passed a resolution sanctioning the issue of petroleum product import licenses exclusively to companies having their own storage facilities with a capacity of at least 25,000 cubic meters in Moldova and their own capital equivalent to at least US$2 million. About 80% of small importers may go bankrupt as a result. Tirex Petrol and LUKoil are the only two companies currently possessing storage facilities of this scale.

BASA PRESS, October 2

ITERA ASSUMES CONTROL OF 100% OF SHARES IN SAKGAZI . . .

Itera has acquired 100% of shares in Sakgazi, reported the Georgian company. Until now Itera controlled Sakgazi on a parity basis with Channel International, which has ceded its stake to its partner.

VEDOMOSTI, October 1, 2001

. . . AFTER CHANNEL INTERNATIONAL GIVES UP ITS 50% STAKE

The international company Itera has assumed full control of the Georgian gas distribution company Sakgazi. Itera, which had a 50% stake in Sakgazi, has acquired the remaining stake from the Georgian partner as represented by Channel International.

CASPIAN NEWS AGENCY, October 4

AZERBAIJAN, GEORGIA SIGN TWO AGREEMENTS ON GAS TRANSPORT PROJECT . . .

The governments of Azerbaijan and Georgia have signed two agreements in Baku providing for Caspian gas transportation across Georgia to Turkey and Georgian purchases of natural gas from Azerbaijan. Under the newly-signed agreements, Georgia will be supplied natural gas in payment for its transit across the country. Georgia has also secured the right to buy up to 500 million cubic meters of natural gas annually at US$55 per 1,000 cubic meters. Azerbaijani gas is expected to cost up to US$80 on the Turkish market. Itera will thus have a serious rival in Georgia. Experts believe that owing to its enormous capacity the projected Baku-Tbilisi-Erzurum gas pipeline (of about 30 bcm per year) will be able to pump gas both from Azerbaijan and Turkmenistan. Transit tariff negotiations preceded the signing of the agreement, with Georgia insisting on a fee of US$5 per 1,000 cubic meters pumped through its territory for fear of seeing its World Bank credit slashed.

KOMMERSANT, October 1, 2001

. . . BP TO START WORK ON SHAH-DENIZ GAS PIPELINE NEXT YEAR

BP, the operator of the Shah-Deniz deposit exploration and development project in the Caspian Sea, intends to launch the Baku-Tbilisi-Erzurum export gas pipeline construction project in 2002.

CASPIAN NEWS AGENCY, October 4

SOCAR SAYS KAZAKSTAN CAN’T JOIN BTC PROJECT IMMEDIATELY

Kazakstan will initially be unable to join the Baku-Tbilisi-Ceyhan (BTC) main export pipeline (MEP) project, announced the State Oil Company of Azerbaijan (SOCAR). The pipeline capacity will initially be restricted to the oil output of the Azeri-1 and Chirag-1 platforms of Azerbaijan.

KHABAR, October 1

AIOC TO CALL TENDER FOR EXPANSION OF SANGACHAL TERMINAL SOON . . .

The Azerbaijan International Operating Company (AIOC) will shortly call a tender to expand the Sangachal oil terminal within the framework of Phase One full-scale Azeri-Chirag-Guneshli contract area development project. Four more tanks, each with a capacity of 20,000 metric tons, and additional pumping equipment are expected to be built at the terminal, thereby boosting its annual capacity from the current 5.5 million to 25 million metric tons of oil.

EKHO, October 1

. . . WILL PUMP ASSOCIATED GAS THROUGH PIPELINE PARALLEL TO BTC

Associated gas extracted during the development of the Azeri-Chirag-Guneshli concession in Azerbaijan will be pumped through a special pipeline that will be laid parallel to the Baku-Tbilisi-Ceyhan main export pipeline (MEP).

MEDIA PRESS, October 2

SOCAR REPORTS ON PERFORMANCE IN JANUARY-SEPTEMBER PERIOD

The State Oil Company of Azerbaijan (SOCAR) extracted more than 6.75 million metric tons of oil in the first nine months of 2001, 96,600 metric tons (1.5%) more than targeted. Compared to the same period of last year, oil output rose by 14,800 metric tons (0.2%). SOCAR subdivisions extracted 744,200 metric tons of oil in September, of which 611,500 metric tons came from offshore and 132,700 metric tons from onshore deposits. The company's gas output totalled 4.1815 billion cubic meters, compared to last year's 4.281 bcm. A total of 0.3825 bcm of gas was extracted in September of 2001, with 0.3636 bcm coming from offshore and 0.0189 bcm from onshore deposits. SOCAR's joint ventures extracted 0.007 bcm and the Azerbaijan International Operating Company (AIOC) 0.0783 bcm of gas in September.

EKHO, October 3, 2001

JAPANESE CONSORTIUM SET TO BEGIN DRILLING ITS FIRST TEST WELL . . .

The drilling of the first exploratory well at the Atashgyakh-Yanan-Tava contract block will begin on October 4, 2001, announced JAOC, the Japanese consortium in Azerbaijan. JAOC, the project operator, intends to sink two exploratory wells in this contract area.

EKHO, October 1

. . . SEDCO FOREX TO ACT AS JAOC’S DRILLING CONTRACTOR AT ATASHGYAKH

The consortium of Japanese companies working in Azerbaijan that is known as JAOC has chosen the Sedco Forex company as its chief contractor for drilling the first exploratory well at the Atashgyakh structure.

EKHO, October 2

SALYAN OIL TO SINK THIRD TEST WELL AT KYURSANGI

Salyan Oil has decided to sink the third exploratory well at the Kyursangi deposit. Survey data collected at the neighboring Karabagly deposit, which also forms part of the contract area, were used to determine the well spud-in place

MEDIA PRESS, October 3

SOCAR SAYS CHEVRON MUST SINK ANOTHER TEST WELL AT ABZHERON

The State Oil Company of Azerbaijan (SOCAR) has insisted that Chevron drill another well at the Abzheron block.

EKHO, October 5

REPORT ON AZERBAIJAN GAS WORKS’ PERFORMANCE IN JANUARY-SEPTEMBER PERIOD

The Azerbaijan Gas Works (AzGPZ) processed 1.9157 billion cubic meters of gas in the first nine months of 2001, 1 million cubic meters more than targeted. Process butane accounted for 10,220 metric tons and gas oil for 12,600 metric tons.

MEDIA PRESS, October 3

TWO NEW LINES TO BEGIN OPERATING AT TURKMENBASHI REFINERY ON OCTOBER 12

Two newly-built lubricant and polypropylene production lines will begin operations at the Turkmenbashi oil refinery in Turkmenistan on October 12. The lubricant-making line with a capacity of 80,000 metric tons per year was built by France's Technip Group, and the polypropylene making line with an annual capacity of 90,000 metric tons was built by Japan's JGC.

TURKMENISTAN, October 1

U.S. WANTS KAZAKSTAN TO HELP ESTABLISH AKTAU-BAKU-CEYHAN OIL TRANSPORT ROUTE

The U.S. administration is discussing with the government of Kazakstan a project to build an oil transportation corridor along the Aktau-Baku route between Kazakstan and Azerbaijan, said Larry Napper, the U.S. ambassador to Kazakstan.

KHABAR, October 4

KAZAKSTAN TO CUT OIL TRANSPORTATION TARIFFS IN JANUARY . . .

Kazakstan will cut oil transportation rates from January of 2002, said Kairgeldy Kabyldin, the deputy general director of the Transport Neft i Gaz (TNG) company, at the KIOGE-2001 international oil and gas conference in Almaty.

KHABAR, October 5

. . . AND EXPORT 15 MMT OF OIL VIA ATYRAU-ORSK-SAMARA PIPELINE IN 2002

Kazakstan will export 15 million metric tons of oil through the Atyrau-Samara pipeline in 2002, compared to this year's 14 million metric tons, said Kairgeldy Kabyldin, deputy general director of the Transport Neft i Gaz (TNG) company. About 20 million metric tons of Kazakstani oil is expected to be exported through the Caspian Pipeline Consortium (CPC) line next year. According to Kabyldin, the Kazmorflot company is discussing a joint venture project with Russia's Novoship (the Novorossiisk Sea Shipping Company) for a Russian tanker with a deadweight of 125,000 metric tons of oil to carry oil from the Black Sea terminal of the CPC. The joint venture may be formed on a parity basis.

KHABAR, October 3

KAZTRANSOIL SAYS KENKIYAK-ATYRAU PIPELINE COULD BRING OIL TO ATYRAU REFINERY

Kaztransoil is considering laying a 430-km Kenkiyak-Atyrau oil pipeline in order to speed up oil supplies to the Atyrau oil refinery.

TRANSKASPIISKY PROYEKT, September 27

TNG TO INVEST US$1 BN IN MODERNIZATION PROJECTS BY 2005

The Transport Neft i Gaz (TNG) company, which controls 90% of hydrocarbon shipments in Kazakstan, will invest about US$1 billion by 2005 in modernizing, expanding and reorganizing company assets that were put under its management by Kaztransgaz and Kaztransoil in May of 2001. By that time, the two companies are expected to abandon non-core assets and transfer some of its subsidiaries to TNG.

KAZAKHSTANSKAYA PRAVDA, October 1

CPC LIKELY TO BECOME COMPETITOR TO TNG

The Caspian Pipeline Consortium (CPC), which will export crude oil from the Tengiz deposit to Novorossiisk, will emerge as a key competitor of the Transport Neft i Gaz (TNG) company in the near future. Under the circumstances, TNG is ready to consider cutting its rates.

KAZAKHSTANSKAYA PRAVDA, October 1

FLUOR DANIEL, PARSONS TO DEVISE SERVICE LINES FOR KASHAGAN DEVELOPMENT PROJECT

The Anglo-American consortium set up by the Fluor Daniel and Parsons companies has won a tender to devise service lines for the Kashagan development project in the Kazakstani section of the Caspian Sea. The value of the contract has been estimated at US$20-50 million. The tender was also attended by the consortium set up by the Kellogg Brown & Root and Snamprogetti companies.

KAZAKHSTANSKAYA PRAVDA, October 3

KAZAKOIL TO HEAD CONSORTIUM WORKING IN CASPIAN OFFSHORE ZONE

The government of Kazakstan plans to appoint the national oil and gas company Kazakoil as the operator of a consortium of Kazakstani companies that will develop offshore deposits in the Caspian Sea.

CASPIAN NEWS AGENCY, October 4

DELIVERIES OF KARACHAGANAK CONDENSATE TO ORENBURG REFINERY WILL RESUME SOON

Oil and gas condensate supplies from the Karachaganak deposit in Kazakstan to the Orenburg oil refinery in Russia will be resumed in late October, said Uzakbai Karabalin, Kazakstan's deputy minister of energy and mineral resources. Supplies were suspended last summer after gas condensate exports from Kazakstan came under double taxation.

KAZAKHSTANSKAYA PRAVDA, October 3

TNG PLANNING TO SIGN GAS TRANSIT CONTRACT WITH GAZPROM

According to Kairgeldy Kabyldin, deputy general director of the Transport Neft i Gaz (TNG) company, TNG intends to sign a gas transit contract with Gazprom providing for mutual gas exchanges between Russia, Ukraine, Turkmenistan, Uzbekistan and Kazakstan.

KHABAR, October 5

KAZAKSTAN EXTENDS BAN ON DIESEL FUEL EXPORTS . . .

Under a Kazakstani government resolution, the temporary ban on diesel fuel exports will be extended until December 1, 2001.

KAZAKHSTAN PRESS, October 1

. . . AS PARLIAMENT REJECTS BILL ON LICENSING OF FUEL INDUSTRY

The parliament of Kazakstan has voted down a bill On the State Regulation of the Production and Turnover of Certain Petroleum Products. The bill provides for licensing hydrocarbon production, storage, transportation and sale and fixes the minimal amount of oil to be treated by refineries. The legal act for gasoline filling station licensing evoked heated debates.

KAZAKHSTANSKAYA PRAVDA, October 4

UKRAINE’S DONBASS INDUSTRIAL UNION ACQUIRES 39% STAKE IN UZNEFTEGAZSTROI

The Donbass Industrial Union corporation of Ukraine has acquired a 39% stake in Uzneftegazstroi, incorporated within the Uzbekneftegaz holding of Uzbekistan, for US$1.15 million, reported Uzbekistan's State Property Committee. Uzneftegazstroi is engaged in laying pipelines. This is the first deal to be made within the framework of the privatization project involving four Uzbekneftegaz subdivisions.

RUSENERGY.COM, October 3

KYRGYZSTANI GOVERNMENT RAISES RETAIL GASOLINE PRICES

The government of Kyrgyzstan has raised retail gasoline prices by an average of 20%. A-76 grade gasoline has gone up from 160 to 180 soms, and A-92 and AI-93 grade gasoline up from 185 to 220 soms per liter.

KABAR, October 3

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