[MOCKBA]

Interesting two announcement in one day... For one Gazprom is trying to muscle ExxonMobil out of Sakhalin-1 and for another Russia is 45 million tons a year short to fill that pipeline to Asia that is going ahead of the schedule and should come fully online in 2010.

Sakhalin-1 is very simple. Exxon has 30% share of which they have a commitment to supply half to Russia and plan on selling other half to China, but that would undermine Gazprom monopoly. So Gazprom is urging to sell the other half to Russia under excuse that Far East would be short on gas while in reality they would want to liquify it on a shiny new Sakhalin-2 plant they got from BP and then export it under Gazprom label keeping monopoly status. Big wildcard is RosNeft which is Gazprom subsidiary but apparently would love to trade from own account. My guess the gas would be liquified and then sold to China or Japan as Gazprom gas.

The second article got me interested even more... Here is a short official translation to English. The story in Russian is a lot more interesting. What got me interested is a quote from Vice Minister of Natural Resources Department that "Those oil fields do not exist". Note, he didn't say that they are not ready, etc... he said that they do not exist... And then they went into figuring out what went wrong and how come Russians are building 80 million tons a year pipeline to the Pacific for which 45 million tons of oil do not exist.

Turns out the reason is very simple... nobody bothered to look for new oil (kinda what I expected). Well, to be precise SurgutNeftegaz (the one in bed with Putin no less) did and they are the only one who invested any money into looking for oil (and their oil would more likely go to Europe then to Asia because they are in Tumen that supplies Europe and production should start collapsing there sooner then later).

So what did the only company to look for new oil did? Out of 10 billion rubles in profits in the first 2 quartes they commited 8 billion for exploration for the year and bitched that they simply have no money, regardless of high oil prices because new duties eat it all(BTW, SurgutNeftegas is the only company that could afford bitching in Kremlin)... So what did the head of the government sugested to do to come up with missing half to fill the pipeline? More taxes to fund exploration from government coffers sometimes later. Ask me, I doubt all that was ear-marked to Japan and everything else that would be left and ear-marked to China would happen. As it was, they ear-marked the full capacity to each country (i.e. twice the capacity), but now it looks like there is just a half.

Anyhow, interesting number... with oil at $67, Russian oil companies pay to the government $27 in duties and transit and $37 that left should cover their costs, make some money and yeah look for new oil. Would you spend any money on useless task of looking for oil when Soviets did it for you for free and when it run out... well, there was always another Yukos to go after?

The article pretty much confirmed that Russians didn't do any meaningful exploration outside of already producing and explored fields - that would be too expensive and very useless because time-horizon in Russia is less then 10 years.

[MOCKBA]

What a day... Yet another article in Russian this time a front page. In this one they quote the VP of LukOil saying that "oil production in Russia could fall in half and to keep it at current level it is neccessary to produce as many new fields as was produced in the last 100 years" and then he goes into saying that $300 billion is needed in the next 8-10 years... $300 billion BTW is how much GazProm, RusNeft, Russian Railways and electricity generator owe foreign investors as of rightnow and earlier it was said that when foreign investors stop flooding Russia with money probably it would look very much alike 1997 in Asia - so were the words of the head of Russian Central Bank a month ago.

LukOil breakdown 2002-2006 46% of profits were paid in taxes... so far this year taxes took 60%...

In general they say that growth rates in Russian oil sector would be half the rate of the growth of the economy overall and oil sector is the major sector and once again stress out that all oil companies are buying assets and go for capitalization instead of investing in core business.

[cube]

$this->bbcode_second_pass_quote('MOCKBA', '.').. And then they went into figuring out what went wrong and how come Russians are building 80 million tons a year pipeline to the Pacific for which 45 million tons of oil do not exist.
....

[MrBill]

$this->bbcode_second_pass_quote('MOCKBA', 'W')hat a day... Yet another article in Russian this time a front page. In this one they quote the VP of LukOil saying that "oil production in Russia could fall in half and to keep it at current level it is neccessary to produce as many new fields as was produced in the last 100 years" and then he goes into saying that $300 billion is needed in the next 8-10 years... $300 billion BTW is how much GazProm, RusNeft, Russian Railways and electricity generator owe foreign investors as of rightnow and earlier it was said that when foreign investors stop flooding Russia with money probably it would look very much alike 1997 in Asia - so were the words of the head of Russian Central Bank a month ago.

LukOil breakdown 2002-2006 46% of profits were paid in taxes... so far this year taxes took 60%...

In general they say that growth rates in Russian oil sector would be half the rate of the growth of the economy overall and oil sector is the major sector and once again stress out that all oil companies are buying assets and go for capitalization instead of investing in core business.

[MOCKBA]

$this->bbcode_second_pass_quote('MrBill', '
')I do not think it is an accident that they use their cash flow 'from' Russia to make the bulk of their investments 'overseas'. They can see the writing on the wall.

[MrBill]

Ya, a trillion dollar trust fund and no roads outside of the Moscow-St.Pete corridor. I had to laugh at a list of Russia's largest construction projects slated for state aid, and one of them was a 15-20 km road linking a bedroom community outside of Moscow to the city. Not that Moscow doesn't need better roads. I will be there tomorrow and hope it won't take more than 'a few hours' to get from Sheremetyevo II to Kuznetsky Moct? As you say, no one has a time horizon longer than 10-years.

[seahorse2]

Mockba,

Did the article saying Russian production could fall in half give any type of time frame?

Also, Mockba, Mr. Bill, others, what will be the ramnifications of being short 45 m tons a year on the Asian pipeline? If this is supposed to be shipping oil by 2010, but can't, how will that affect world oil prices, the economies etc?

[MrBill]

$this->bbcode_second_pass_quote('seahorse2', 'M')ockba,

Did the article saying Russian production could fall in half give any type of time frame?

Also, Mockba, Mr. Bill, others, what will be the ramnifications of being short 45 m tons a year on the Asian pipeline? If this is supposed to be shipping oil by 2010, but can't, how will that affect world oil prices, the economies etc?

[MOCKBA]

$this->bbcode_second_pass_quote('seahorse2', '
')Did the article saying Russian production could fall in half give any type of time frame?

[Bas]

I wonder how much oil remains to be found in Russia; since the fall of the soviet union there seems to have been hardly any exploration using western techniques. Also considering the huge finds in Kazachstan it makes me wonder if there aren't still some significant finds to be made in that huge country, much more so than any other (big) country in the world. I'm not counting on it though, nevertheless it would be interesting to do some exploration on the state of oil exploration in Russia.

[lateStarter]

$this->bbcode_second_pass_quote('Bas', 'I') wonder how much oil remains to be found in Russia; since the fall of the soviet union there seems to have been hardly any exploration using western techniques. Also considering the huge finds in Kazachstan it makes me wonder if there aren't still some significant finds to be made in that huge country, much more so than any other (big) country in the world. I'm not counting on it though, nevertheless it would be interesting to do some exploration on the state of oil exploration in Russia.