With a decision on Russneft’s future likely a couple months away and part II of my post on RosUkrEnergo still in the works, lets catch up on a bit of news concerning Gazprom. First off, Norwegian oil major StatoilHydro will join the French firm Total in cooperation with Gazprom in developing the giant Shtokman gas field. Sort of. While StatoilHydro has agreed to participate in the currently ongoing planning and exploration phases, it is reserving judgment on a rumored $800 million investment until a more detailed prospectus is released in 2009. From Forbes.com:
Market rumours have suggested StatoilHydro could have agreed to pay Gazprom 800 mln usd in return for its 24 pct stake in Shtokman, however the firm this afternoon said no payments have yet been made.
‘When it comes to potential bonus payments, we haven’t paid any bonuses yet, but if there is a positive investment decision in 2009 there will be a cash bonus paid, but I can’t comment on amounts at this stage’, said chief financial officer Eldar Saetre.
Similar to the deal Gazprom made with Total, this agreement offers shares to StatoilHydro in the “special-purpose company to manage engineering, financing, construction and exploitation of installations at Phase 1 of Shtokman field development.“ Gazprom owns a 51% stake in that firm, Total a 25% share, and now StatoilHydro has the remaining 24%. Meanwhile, the license for the reserves as well as “all the rights for marketing of the commodities will be retained by Gazprom.”
Shotkman is still years for development, beyond just the 2009 date for further preliminary research. StatoilHydro, a majority government-owned oil and gas company formed following the recent merger between Norwegian firms Statoil and Hydro, has the experience to work in harsh conditions. But no project of this magnitude and difficulty has ever been attempted — the risk and expense levels will be huge.
In other Gazprom news, CEO Alexei Miller was recently elected chairman of Gazprom Media, which controls the television channels NTV and TNT, as well as press outlets Izvestia and Itogi (among others). Some analysts, citing Miller’s deteriorating health, speculate that this is a type of “golden parachute” for the well-connected chief executive. However, heading Gazprombank (where he is the chairman) seems to be a more fitting position for the technocrat with an economics background. The move also contradicts previous assertions by Gazprom that it is working on spinning off its media arm as a more independent part of the Gazprom Group.
Gazprom Media reported over $100 million in profits last year, which is a stark increase from the losses the division had been suffering from for much of the past. The previous chairman, Alexander Dybal, got bumped up to head of the newly empowered Gazprom Neft, possibly a reward for turning around the debt-ridden media holding company. By inserting Miller, perhaps Gazprom may be attempting to put a further legitimate face on the media group as it seeks to take advantage of this additional revenue stream — particularly as Russia heads into its parliamentary and presidential election seasons.
In another bit of news, Ukraine’s President Yushchenko weighed in on expectations for price negotiations with Russia over next year’s cost of natural gas:
“Given the trends on energy markets, the optimal, rational price for gas at the Russia-Ukraine border, the price which would be viewed with some understanding by most of the market, is about 150-160 dollars per 1,000 cubic metres.”
My own hunch is something closer to $170, but some analysts are going as high as $190. Everyone seems resigned, however, that the price will rise from the current $130. Of course, that’s just one half of the equation — Ukraine will likely attempt to renegotiate its price for transiting Russian gas through its territory. These tariffs are a major source of income for state energy company Naftogaz Ukrainy, and it relies on them for offsetting the market price of gas against the capped residential end-user price. Hopefully the upcoming negotiations will not be as contentious or controversial as those in late 2005 / early 2006, although the recent government shake-up in Ukraine following snap parliamentary elections, as well as renewed calls for completely changing the structure of the Central Asian-Russian-Ukrainian gas trade by removing middleman RosUkrEnergo, will add plenty of uncertainty to the bargaining table.