MOSCOW, January 24 (RIA Novosti) Gas OPEC may be established in June / Russian satellite navigation system inferior to GPS / Rosneft to cut oil deliveries to China / Price of TNK-BP's Kovykta stake rises / UAE company to build refinery in Chelyabinsk Region / U.S. truck producer to enter Russian market
Gas OPEC may be established in June
Members of the Gas Exporting Countries Forum (GECF), which includes Russia, plan to set up an international organization on its basis, around the same principles as OPEC.
The charter of the new structure could be submitted at the forum's seventh meeting in Moscow in June.
But experts do not believe that a gas OPEC will quickly become as influential as its oil counterpart, with opposition from the United States and the European Union.
The main question being discussed at the forum now is how to change an informal club with no central coordinating or control bodies into a serious international organization of natural gas suppliers.
Its members could have more clout to control the gas market in the same way as OPEC does the oil market.
A source close to the Russian government said it was Iran that last year proposed examining a draft charter.
"Most of its articles concerning membership, secretariat and financial provisions are almost a carbon-copy of OPEC's charter," the source explained.
A source in Russian energy giant Gazprom confirmed that Iran's draft was "very much like" OPEC's. "But it is not a final version, because the gas business has its own specifics," he added.
The final touches are expected to be made in June at the next meeting of the GECF high-level committee. It is to take place a day before the seventh annual forum. No exact date has been confirmed, however.
Analysts believe that an international organization of natural gas exporters will be set up within the next few years, but that it will not copy OPEC.
Maxim Shein of Broker Credit Finance said that if the charter of a gas OPEC is presented at Moscow's GECF meeting, it will lead to an inevitable worsening of relations between the United States and Russia.
Valery Nesterov of Troika Dialog said that the organization would be established in the next few years, but because of active resistance by the U.S. and EU, it would not be as domineering on world gas markets as OPEC is on the oil market.
In his view, natural gas exporters will be forced to take an evolutionary, rather than a revolutionary, path in consolidating their efforts.
Vremya Novostei/Novye Izvestia
Russian satellite navigation system inferior to GPS
On Wednesday First Deputy Prime Minister Sergei Ivanov, who oversees the creation of the Global Navigation Satellite System (GLONASS), criticized the Federal Space Agency (Roskosmos) and affiliated companies for their failure to provide the required services and to compete with the Global Positioning System (GPS) of the United States.
Roskosmos officials promised that the system would become operational in early 2008.
Ivanov, who had previously told President Vladimir Putin, other government members and ordinary Russians that GLONASS was superior to GPS, now says its satellites do not cover the entire country and provide less precise coordinates.
The GLONASS program was conceived by the Reshetnev Research and Production Association of Applied Mechanics in the 1980s as a response to GPS and was intended for military and civilian users. However, Soviet-era know-how proved barely sufficient to meet Defense Ministry requirements for a short time period. In December 1995, there were 24 GLONASS satellites in orbit, but many of them had to be scrapped after expending their service life. Only 16 spacecraft are in service today because Russia did not launch them on a regular basis; the last three were orbited in December 2007.
The Roskosmos press service did not argue with Ivanov because the agency which coordinates the GLONASS program wants to request additional budgetary allocations for its implementation.
Valery Gartung, a member of the budget and taxes committee of the State Duma, the lower house of parliament, said one should not reinvent the wheel, and that the best civilian-industry achievements had to be used.
Gartung said GPS was now better and cheaper than GLONASS, that the latter's market prospects were bleak, and that the Russian system was better suited for military use.
Rosneft to cut oil deliveries to China
Chinese oil company Sinopec, which has signed a 12-month contract for crude deliveries with the J&S trader, plans to cut the import of Russian oil from Rosneft. Russia's largest state-controlled oil company will cut oil supplies to China by one third, to 1.65 million metric tons (12.13 million bbl), between May 2008 and May 2009.
Last August, Rosneft pledged to deliver 2.5 million metric tons (18.38 million bbl) of oil to Sinopec per year.
The J&S Group is an international group of companies active in crude oil, petrochemicals, liquefied natural gas, and electricity.
This is unpleasant news for Rosneft, given the problems that accompanied the signing of its contract with Sinopec. Experts say that the main stumbling block is the transport tariffs, which have greatly increased the cost of Russian oil.
Rosneft singed the agreement with Sinopec only after rail monopoly Russian Railways and the Mongolian and Chinese railways promised to cut transport tariffs. It appears that Sinopec has now been offered better terms.
Alexander Shtok, head of the due diligence department at independent consulting group 2K Audit-Business Consulting, said Russian oil costs too much for Sinopec as the transit tariff is $49 per metric ton across Russia.
"The ultimate cost of deliveries is very high even though the Mongolian and Chinese transit tariffs are lower than the Russian ones," he said.
Sinopec has not reported where it would receive oil from and how its cost could be cut, but J&S may supply Russian oil to it, cutting the cost by delivering oil through the Atasu-Alashankou pipeline across Kazakhstan.
Shtok said that Russia's largest private oil company LUKoil and Russian-British joint venture TNK-BP considered delivering oil by the Omsk-Atasu-Alashankou route in a bid to diversify destinations. LUKoil, which used the J&S services to deliver oil to Poland, could resume cooperation to supply oil to China.
Price of TNK-BP's Kovykta stake rises
Gazprom and TNK-BP have been unable to complete their deal on Siberia's Kovykta natural gas field for half a year now. In the meantime, the price has rocketed up by one quarter, exceeding $1 billion. Gazprom is, nevertheless, prepared to pay.
TNK-BP estimates the deal to sell its stake in the Kovykta project to Gazprom at $1 billion, said TNK-BP co-owner and executive director Viktor Vekselberg.
The estimate is based on the investments the company made in the project. TNK-BP president Robert Dudley had earlier said that in assessing the deal, account would be taken of the company's investments over the previous 14 years (BP began investing in the Kovykta deposit in 1992 by contributing to feasibility studies).
An agreement to sell 62.9% of Rusia Petroleum and 50% of the East-Siberian Gas Company (ESGC), which is managing the construction of a pipeline from Sayansk to Irkutsk, was signed by TNK-BP and Gazprom last summer.
"At the moment of signing, the deal was estimated at $700-900 million, but there were six more months to live and an investment of $200 million to make," Vekselberg said.
A source at TNK-BP said Rusia Petroleum spent the money on new wells, infrastructure (including roads), and a comprehensive gas treatment unit on the Kovykta field.
Denis Borisov, an analyst at Solid brokerage, described the Kovykta expenses mentioned by Vekselberg as substantial: TNK-BP invests something like $3-4 billion a year.
The odds that TNK-BP will get the sum named by Vekselberg are high. Gazprom experts estimate this asset (bearing in mind the expenses made and its growing investment value) at $0.8 billion to $1.2 billion, two Gazprom managers said.
The difference in assessment could be due to different scenarios which Gazprom foresees for Kovykta, Borisov believes.
In his opinion, the hike in price for the share in Rusia Petroleum and the ESGC is a good piece of news for TNK-BP. Market players did not think they would be able to sell above $600-700 million, because Gazprom could have requested a discount for a possible recall of the Kovykta license.
The Ministry of Natural Resources has been pressuring Rusia Petroleum to withdraw its license for several years now for not observing deadlines for field commissioning, but now that the company announced selling the asset to Gazprom, the ministry said it had no issue with it.
UAE company to build refinery in Chelyabinsk Region
On Wednesday, Quality Energy Petro Holding International Ltd., a specialized British Virgin Islands-registered oil and gas company of the United Arab Emirates, signed with the administration of the Chelyabinsk region in Russia's South Urals an investment memorandum on building a $4.5 billion local refinery that will annually process 9 million metric tons of crude oil.
Analysts and market players said there might not be enough oil for the project.
Yevgeny Yeliseyev, who represents the Chelyabinsk region at the Federation Council, the upper house of parliament, and who brokered the deal, said the refinery would turn out the entire range of hydrocarbon products, including polyethylene crumbs.
Yeliseyev said QE Petro CEO Adel Al-Otaiba, a member of the UAE Royal family, planned to invest his own assets into the project.
The Chelyabinsk region's economic development minister, Yury Klepov, said the company would contribute 75% of the sum total.
This is not the only refinery-construction project involving independent companies lacking their own oil. Alexei Kokin of Metropol brokerage said Russian oil companies were taking advantage of the high refining margins to upgrade their refineries and to expand production.
A source at Invest Union (formerly Gazpromneft), a Russian company based in St. Petersburg and a former subsidiary of energy giant Gazprom, said nearly all companies were now overhauling their refineries, that the Urals gasoline market was just 1-2 million metric tons, and that the nearby Omsk refinery and those in Bashkortostan, a Russian republic in the Volga area, met all local demand.
He said the new refinery could not count on any surplus oil.
Yeliseyev said the Arab partners knew about this problem and were negotiating oil supplies, and that QE Petro could probably acquire an oil deposit in Russia.
Business & Financial Markets
U.S. truck producer to enter Russian market
U.S. company International Truck and Engine Corp. has opened an assembly plant in Russia to tap demand for heavy-duty vehicles in the country. International's used trucks are selling well in Russia, and the success of new trucks will depend on price, experts say.
International, a unit of Navistar Corp., unveiled the new facility this month under the name of local distributor GoodWill Holding.
The plant, based in Pushkin, near St. Petersburg, will produce 16 to 24 trucks a month, mainly the International 9800i model, using parts from Brazil and the United States.
So far, International Truck and Engine has sold only used trucks in Russia, but haulers tend to buy new trucks now, said Dee Kapur, Truck Group president, International Truck and Engine.
Truck sales are not growing in North America, so the company has decided to redirect its sales to Russia, China and India. Russia now mainly buys European-made trucks. Sweden's Scania was the trade leader in Russia in January to the end of September 2007, selling 3,900 trucks. U.S.-made bonneted trucks, above all Freightliners, lead the market of used trucks.
International's cabover trucks are currently assembled from components delivered from Brazil. GoodWill Holding has invested $1.5 million in the facility with a capacity of 300 trucks a year.
International plans to work on the Russian market without a Russian partner, which stipulates setting up its own production facility. Kapur said trucks adapted to local standards would be sold in Russia.
Gennady Sukhanov, an analyst with the Troika Dialog investment company, said sales of Russian and European truck producers are on the rise. International will succeed in Russia if it develops a dealership network, he said.
Mikhail Lyamin, an analyst with the Bank of Moscow, said many used U.S.-made trucks are sold in Russia and there are enough spare parts for them. To succeed in the market of new vehicles, the Americans will need to sell trucks at more competitive prices.
Lyamin said the American company might produce a special model for the Russian market, which would be simpler and cheaper than American analogues.
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