INVESTMENT BOOM

RUSSIA-AZERBAIJAN FROM ALTERNATIVE TO ANALOGY

Expressed at the beginning of current year after his second election to the post of the president of Russia, that "art policy consist from the finding of the golden mean between the necessary and possibility". Vladimir Putin continued the beginning in last year economical transformations and according to the opinion of the major analysts he has already found in these "the golden mean". The result of this year became not "nationalization" of oil and gas sector of economy as supposed by the major of foreign investors after the problem with "YUKOS", but the attraction to the country, namely to Russian Fuel Energy Complex of new strategy investments, - the conclusion of economy to the new stage of development.

Under the point "+"

In autumn of the current year Russia was "covered" by foreign investments. Companies holding of a state strategic rate the loyal to the underlined topping to a role of Kremlin in realization of economic policy got a chance to become a part of the world economic system and global processes of capitals, originating integration since beginning of the century; they are BP Amoco, ExxonMobil, Chevron Texaco, Conoco Fillips, Total FinaElf, etc.

In the middle of September French Total has announced about purchase for $ 1 bln. of package with the volume of 25 % plus one stock in the largest independent gas manufacturer in Russia, which is company NOVATEK.

On September 21 "Rosneft" has signed with Korea National Oil Corporation (KNOC) the memorandum of joint development of the Venin block included to the project of "Sakhalin - 3" and located onto the Sakhalin shelf, and also with Western-Kamchatka shelf area of the Sea of Okhotsk. The licenses for both areas are owned by "Rosneft" structures. The first stage of works is planned for two and a half of one year and provides by the investments at a rate of $ 150 mln. in geological prospecting on Kamchatka and about $ 100 mln. on Sakhalin.

The LG International company signed an agreement with Russian "Tatneft" on designing, delivery of the equipment and construction of a new oil refining and petrochemical complex to Nizhnekamsk (Tatarstan). The volume of the Korean investments will make $ 1,7 bln.

At the same day Samsung signed an agreement with the Russian group "Alyans", which will invest a beginning to the 10-year's project of modernization Khabarovsk Oil Production Plant in amount of $ 500 mln.

On September 29 Conoco Phillips has got on auction state packet of LUKOIL's stock in amount of 7.59 % of the authorized capital for $ 1.988 bln. About $ 1.5 bln. can be invested by the American company to the field development of Timano-Pechora within the bounds of JV in which LUKOIL will possess of 70 % and Conoco of 30 %. Besides the Americans till the end of the year plans to buy in addition in the market of 2.4 % of LUKOIL's stocks that will do approximately $ 600 mln.

If the company decides to increase the portion in LUKOIL up to 20 % then its investments will exceed of $ 6 bln. So, Conoco Phillips got approximately the equivalent of the Russian actives BP that in summer of last year has spent the same sum to purchasing at the stockholders of Tyumen Oil Complex of the portion in the Russian holdings.

After increasing of package up to 10 % Conoco will bring into the Russian company's committee of directors of its representative, and the partner will correct the charter so that Conoco got the right of the veto on questions having the attitudes to LUKOIL's holdings.

"The high prices for oil changes a lot - make comments of events the representative of large western company that works in Russia. For Conoco the incentive is to purchase of LUKOIL's stocks became an example of BP that for the first year of the joint venture work of TOC-BP managed to return about 30 % of the investments directed to purchasing of Russian holdings. If earlier the major constraining factor for the foreigners were the high countries risks then there appear the other matter not to be late to division of Russian pie".

To the long list of concluded transactions it is possible to add the intention of Russian government in 2005 again to expose to a tender the "Sakhalin - 3" project for which in the Ministry of Natural Resources expect to receive not less than $ 1 bln. Preparing the program of realization of tenders to the perspective blocks in East Siberia and Yakutia. The work of blocks licensing program in Barents Sea is close to end.

"Moscow skillfully uses the interest to the resources which on a background of high prices to oil and gas is shown by the foreign companies, says the representative of Western Oil Company working in Russia. And according to concluded bargains on September to this time in the Russian government is adjusted resolutely. If planned tendency gets its continuation it will advantage for both of foreign investors and Russian budget. If the certainly the prices for oil will further promote this".

Graded "-"

Again YUKOS appeared at the center of events after the Federal tax service has represented the certificate of tax checking for 2002 to $ 6.7 bln. On calculations of the IC expert "Russian investors" A. Gromadin the cumulative tax suits of Ministry of Tax and Collection to YUKOS for 2000-2002 reached more than 500 bln rubles ($ 17.4 bln). The Oil Company has already paid the suits for 2000, transmitted $ 3.5 bln.

So, now the YUKOS tax obligations make about $ 14 bln. And there is still has a suit for 2003, about the quantity the participants do not have any idea. Actually the cumulative suits claims of MTC to YUKOS are at a level of market cost of the basic obtaining division of Oil Company - "Yugansneftgaz" - according to western invest banks.

"We believe, that such kind of Federal Tax Service actions informs of soon completion of "YUKOS matter", - says A. Gromadin. With such kind of quantities of company's debts by the taxes the state becomes the main creditor of Oil Company (approx. 70 % of debts). At the same time, the state is not interested in destruction of company's integrity".

According to the analyst, it is impossible to exclude that in current situation the buyer of the major YUKOS suits "Yugansneftgaz" can become one of western companies. "At guarantees of government to not pursue the Oil Company in the future any of the largest integrated companies which have not had time to get the Russian suits of (Exxon or Shell), can lay out of $14-17 bln. for 30-40 % of all YUKOS", - Gromadin guess.

If it happens the status of Russia as a country with market economy will be saved, the resources from sale will be transferred to the state treasury, the major stockholders will lose the control over the company but they will keep the certain part of the property. Rusenergy writes about it. Thus Kremlin grades the negative consequences of artificial reorganization of the largest Russian oil holdings.

Vector change

The sale of Russian oil and gas suits for many observers still recently seem improbable, the analysts as well as western as Russian thought that Kremlin returns back not to distroyed at the end of last century of the Soviet system of culture but to reviewing of the result of privatization in 1990s it was shown by the following factors the proceeding tax prosecutions of YUKOS, the strengthening of the state role within the accepting of projects abroad, the unexpected resignation on January and February in 2004 of Kasyanov's government, the aggressive policy of Gazprom in downturn of the role of independent gas producers, the occupying of lost Central Asian market in the first half of current year and the revival of highway Central Asia - Centre after disintegration of the USSR.

Appealing in Commercial and Industrial chamber on December, 2003 the Russian president Vladimir Putin has made some important applications, which can have important consequences for oil and gas branch. One of them, according to Putin in the majority of advanced countries the incomes from the minerals production are divided into 20 to 80, the 20 % remains at the companies and 80 % transfers to state. In the meanwhile in Russia this figure was established as 50 to 50. And government attempting to change this proportion for the benefit of the state invariable encountered by the counteraction of the number of fractions, including KPRF, CPC, "Yabloko" and "Yedinaya Rossiya" - is probable it happens in the result of oil industry workers participation…

In 2002 Kremlin actually was deduced LUKOIL company from the largest Caspian international project "Azeri", "Chirag", "Guneshli", where the operator is BP did not let it to participate in the strategic export project Baku - Tbilisi-Ceyhan named after Heydar Aliyev through which in middle of 2005 the Caspian oil will arrive to the world markets goes a roundabout way of Bosphorus Gulf and Dardanell. Truth in an exchange LUKOIL received a number of state preferences and "Russian operator" status onto the Caspian shelf by the confirmation of this became the signing by this company a number of new contracts n the base of structures as well as in Azerbaijan, Kazakhstan and Russian sectors on Caspian Sea.

Exception of the general news became the bargain by the BP sale of the 50 % of stocks in the joint venture TOC-BP, and under the terms of fulfillment of last exchange for lobbying by last reverse of Odessa-Brodi pipe with the purpose of the subsequent export of Russian oil to Odessa terminals. It has taken place after registration of the bargain and persistent resistance of the president of Ukraine Leonid Kuchma, which earlier planned to enable this direction for export through the territory of Ukraine to West (goes a roundabout way of Russia) of the large volumes of Caspian Oil.

Despite of the generated precise tendencies and appropriate to the analysts' prognosis on August of the current year Putin has accepted not ordinary decision to change a vector of Russian Caspian policy. The first public display of Putin's new Caspian policy became displacement by him of Victor Kalujna from the post of the special representative in region at the end of August 2004. Kalujna appealed for restriction of the USA influence onto Caspian and against of all projects destroying Russian control over the hydrocarbon export from the former USSR.

Among these projects appeared BTC named after Heydar Aliyev, also Baku-Tbilisi-Erzurum, Transcaspian Oil Pipeline and Gas Pipeline for joint to Eastern-Caspian hydrocarbons to the highways directed from Azerbaijan to West. Besides Kaljna was the supporter of yield increasing of the Caspian Pipeline Consortium (CPC) for Russia at the expense of increase of the tariff, and opponent of throughput expansion without preliminary rise in price of priming cost. Against of this idea the western stockholders are exporters of the Kazakhstan oil and official Astana not to wish of taxable income's quantity reduction.

After some weeks, after a resignation of Mr. Kalujna at CPC Council Session the stockholders have accepted the decision to expanse of throughput of the pipeline from 28 up to 67 mln tons. The quantity of the tariff in $ 26 was increased only with taking into account of inflation. At the beginning of October Russian Prime Minister Michael Fradkov has declared in Astana that Russia does not have differences from the sights of Kazakhstan on the ways of CPC project development.

From the alternatives to analogy

So, strengthened the positions Vladimir Putin has begun for realization of new investment policy with western inclines. Russia as a matter of fact became the third after Azerbaijan by the state in CIS within the realizing of the projects of strategic investment attraction in oil and gas branch in such scale volumes and such kind of temps. Since 1994 Azerbaijan has signed with the foreign companies 24 oil and gas contracts of elaboration and prospecting both the perspective areas and fields of the native Caspian sector. Half of these contracts were completed but 50 % of efficiency is a large success according to the accepted world standards. And is more important that for small Azerbaijan that has 1 millions refugees appearing in the result of the part of grounds occupation by Armenia, the strong push for the development of none oil industrial sector of economy.

In Russia sincerely would like to see Azerbaijan as stable, safe and economically strong state, has declared Vladimir Putin on October within the meeting in Moscow with the president of Azerbaijan Ilham Aliyev. According to his opinion only economically independent countries can form and carry out influential independent policy that is very important for Russia. "Russia is interested namely in it", - the president noted, appealing at the second of All-Russia Azerbaijan congress. Putin has also paid attention that the efficiency of the Russian-Azerbaijan partnership directly influences to the course of positive processes in CIS. "Studied foreign policy line, uniform positions by many questions raises the authority and the importance in the world of both Russia and Azerbaijan", - was emphasized by the president of Russia.

Russia and Azerbaijan are interested in the markets of both countries, the president of Azerbaijan Ilham Aliyev declared addressing at the second of All-Russian Azerbaijan Congress. "Our countries experience the period of economic revival", - Aliyev noted. Noted "rebraidness" of the two countries' economy, the president emphasized: "Russian market for Azerbaijan and Azerbaijan market for Russia are the priority ".

So, amplifying with the connection of soon completion of the two export projects Baku - Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum, Baku positions in the region attracts more partners, it is possible to note from the among of former opponents. Having advanced independent network of pipelines Azerbaijan has got the strongest positions onto Caspian Sea by the way of influence to investment appeal of the future obtaining projects, price and tariff policy of the conducting persons onto Caspian. Baku is the unique Caspian capital of the state has reserved the status of central transit unit of the Caspian raw material export in the world markets.

There was paid a little attention to that fact, that Conoco Phillips with the 2,50 % includes into the structure of the stockholders of the BTC project so, LUKOIL has got new chance to take part in this project. In interview to CASPIAN ENERGY on October 2004 the regional director of LUKOIL Overseas Holdings Ltd. under Kazakhstan Boris Zilberminc has not excluded an opportunity of export of the future Kazakhstan Caspian oil of LUKOIL by the direction of Aktau-Baku-Tbilisi-Ceyhan under the terms of the economic feasibility of this project.

By the participants of the BTC project named after Heydar Aliyev are: BP (30,1%); SOCAR (25,00%); Unocal (8,90%); Statoil (8,71%); TPAO (6,53%); ENI (5,00%); Itochu (3,40%); ConocoPhillips (2,50%); INPEX (2,50%), Total (5,00%) and Amerada Hess (2,36%).

So, the political opposition of CPC and BTC, also the claims of Moscow to the presence of Azerbaijan hydrocarbons in pipelines and export plans of Russia seem as a history. Probably that in the nearest months the intergovernmental agreement with Kazakhstan about transit of the Kazakhstan oil by the route Aktau (Kurik) - Baku - Tbilisi - Ceyhan. The strengthening of the attitudes is possible by way of realization of new large oil and gas projects onto Caspian Sea.