Under the contract, the supply of up to 875 billion cubic metres of gas. The contract envisages annual supplies of up to 35 bcm of Rosneft-produced gas to the power plants of INTER RAO – Electric Power Plants (or any other INTER RAO UES power plants) beginning on [January 1ST 2016 and running through December 31 ST 2040] on a take-or-pay basis. 32.3 bcm of gas is to be supplied in 2016.

Under the agreement, natural gas and dry stripped gas will be supplied from oil fields, which will allow Rosneft to significantly increase associated petroleum gas utilisation.

Rosneft President and Chairman of the Management Board Igor Sechin said: “Rosneft has significant reserves of gas and producing and selling this gas is a priority in terms of generating additional profit for Rosneft shareholders. Concluding an agreement to supply gas directly to Russia’s largest generating utilities is the most effective way to monetise our reserves. It will also guarantee fuel supplies for power generation on transparent terms.”

“Our partnership with Rosneft, a global oil and gas major, is strategic in nature and will guarantee stable supplies of fuel to INTER RAO UES’ power stations,” said Boris Kovalchuk, chairman of the management board at INTER RAO UES. “This contract is designed to guarantee stability for our company in the long term and will allow us to considerably improve the efficiency of power generation in Russia.”

Rosneft president, Eduard Khudainatov, has responded to a recent Federal Anti-Monopoly Service proposal on further fuel price reductions with a counter offer to introduce a new fuel price calculation formula, saying that continued pressure on retail fuel prices could lead to a fuel crisis.

“If FAS continues to push oil companies with requests on fuel price reduction we will see a tremendous demand for fuel and huge consumption as well as procurement of stocks that inevitably leads to fuel deficit or complete depletion of fuel stocks.”

In February Prime Minister Putin obliged oil companies to cut retail fuel prices, which consequently promoted increased fuel exports, and led to a deficit in the domestic market, which became reasonably acute in some Russian regions. The government then focused on promoting fuel trading, which prompted unintended logistic supply chain consequences, as the introduction of new stricter fuel environmental standards pushed upwards price pressures.

In June the government halted all fuel exports by introducing new duties and an export ban to overcome the fuel crisis. By the end of June fuel prices fell 17% on the Global markets giving the FAS a chance to push for a similar price cut on domestic markets, but local fuel suppliers responded with only a 2-3% cut.

According to Rosneft’s letter to the FAS the regulator should pay attention to export parity in favor of imported netback when calculating the competitive price.

“FAS should not regard domestic prices as high, in case they do not exceed the price of petroleum products imported from Europe.”

Stanislav Emelianov, Deputy Director at Omnicomm believes domestic fuel prices are likely to rise over the medium term, with parity with European retail fuel prices likely.

“The new fuel crisis, forecasted by the Rosneft is unlikely to happen, especially the mechanism of its emergence from the actions of small speculators seems very doubtful. However, I assume that neither state fuel companies nor the private ones will agree on price reductions and are willing to engage on this issue in the war, if not with the government, then with FAS. The consequence of this position, even without further increase of excise duties will lead to inevitable increase in fuel prices. In these circumstances, the Russian business should prepare for the fact that in 2012-2013 the price of petroleum products and diesel may reach European levels and seek to reduce the costs offuels and lubricants.”

Viktor Markov, Senior Analyst at Zerich Capital Management, says the pressure on oil companies has stems from political pressures in the lead up to coming Duma and presidential elections, noting that administrative pressure to keep retail prices low could lead to a production response by major fuel companies.

“In theory, fuel prices depend on global oil prices which have recently stabilized around 105-115 $ per barrel of Brent oil. What we have got now is price per fuel mark 95 in a range between 27-28 roubles per litre. FAS is trying to keep low prices, anticipating further decline of global prices, and prevent prices rising, which adds to inflationary stress. On the other hand, tough regulation policy and export restrictions cut oil companies profits given that 50% of fuel price is paid as tax to the government. This could be a driver to reduce oil processing and lead to the emergence of a deficit at some point.  However, the government policy against high fuel prices is more or less a political move which should disappear after elections. In these circumstances the fuel crisis is unlikely to happen.”

Source: rt.com/

Now, you can add another unwanted distinction to the list — we’re the nation’s third-worst area for gas guzzling at a time of high pump prices, Forbes reports.

The average Atlanta household drives 21,300 miles a year, using 1050 gallons of gas, Forbes writes. At $4 a gallon, that’s $4,200.

We burn 35 gallons of gas a year sitting in traffic jams, according to the Texas Transportation Institute’s 2010 Urban Mobility Report.

Metro Atlanta follows just two North Carolina areas — Raleigh-Durham-Chapel-Hill and Charlotte — for the top spots in gas guzzling, Forbes reports.

Forbes asked the Center For Neighborhood Technology, a think tank in Chicago, to come up with the numbers. It’s not enough to look at where gas prices are highest — what matters most is how many miles you drive, Forbes writes.

The methodology utilizes data gathered by federal and state surveys that come from the odometers of thousands of cars nationwide. Excluded are the miles driven by trucks, buses and travelers just passing through on the highway.

The Research Triangle area of North Carolina is No. 1 because the cities and suburbs are close enough that people don’t think twice about driving from one place to the other, Forbes explained.

On the flip side, the Los Angeles area is not a guzzler, but a gas miser, Forbes reports. That’s because residents of centrally located areas of L.A. don’t have that far to drive to get to work or the beach.

As a result, the L.A.-Long Beach area ranks second among the cities that use the least gasoline, Forbes writes.

New York ranks first as a gas miser because of its extensive subway system.

America’s biggest gas-guzzling metro areas

1. Raleigh-Durham-Chapel Hill

2. Charlotte-Gastonia-Rock Hill

3. Atlanta

4. Nashville

5. Monmouth-Ocean Counties, NJ

6. Greensboro-Winston Salem

7. Middlesex-Somerset-Hunterdon, NJ

8. Jacksonville

9. Washington, D.C.

10. Riverside-San Bernardino

- Henry Unger, The Biz Beat

Source: blogs.ajc.com

RT: High oil prices have helped the Russian budget, but is the country too dependent on energy exports?

PW:“Oil and gas accounts for about 60% of total exports.If you look at other natural resource oriented products you come to 85%.

I don’t think you can call Russia too dependent, it is dependent, but I think, you know, people talk about the Dutch Disease which is a common phenomenon.

I think one has to recognize that Russia has its own disease and it’s not sure, not certain, that it’s a disease already now.Because, at the moment you are generating enough revenues to cover your imports.

But the other side is that the, classical example of the Dutch Disease is that your dependency on oil and gas or other natural resources, pushes up your real exchange rate and destroys your manufacturing industry.Well Russia hasn’t got a manufacturing base to destroy in the first place.

Where you have a dependency, where you could be suffering is that you might have a hurdle for developing your manufacturing industry.

But I don’t think we could say that we are too dependent.In fact Russia is exporting what it is supposed to be doing, according to the comparative advantages.It’s another question of how to diversify the economy, a totally different story.”

RT:How much oil development does Russia potentially have?

PW:“Well first of all it is already developed, you have production right now, it is more or less fully explored.You have untapped resources in Siberia and in the Arcticand in order to do that clearly the investment side isimportant.

In other words channeling more money back into the development and exploration.From now, what they need is a better tax system, because you have a tax system right now, which is not helpful in terms of creating incentives for investment.

And that has been a problem for quite some time – more or less since 2002.And we see that in the growth numbers basically, basically flat output growth in the crude segment going forward for at least the next 15 years, in our models .

What they need? Well again a better tax system, and do they need help from foreigners? Well maybe in the geophysics and exploration side.

When it comes to actually pulling it out of the ground I think the Russians have the capacity to do it themselves.But I think the most important thing is to have an incentive structure, to basically allow the companies to invest, and that is lacking at this point.”

RT:Europe is very reliant on Russian energy, but how much is Russia doing to tap into the Asian market?

PW:“Well they are doing as much as they can.If you look at China, China is the obvious country to look at. Unfortunately if you look at exports you see that exports to China have been growing along with general exports whereas imports from China is actually the fastest growing bilateral trade flow that we have, that Russia has, globally.

The problem that you have with Asia is the transportation bottlenecks.

Because the structure of exports to China, for example, is similar to total exports – oil and gas, metals which is dominating that as well.

But you do have the fact that this has to be transported by railway, possibly by ship, and we don’t have a proper pipeline system to China when it comes to oil and gas.

Therefore you are very dependent on what sort of transportation system you have, and that is creating, they are doing as much as they can, but obviously to develop and build your infrastructure to increase your exports is going to time consuming.

But it is definitely something which is on the agenda, because we know that President Medvedev, and also Prime Minister Putin, have been making a lot of statements about the importance of Asia.

So it is definitely on the agenda but right now their hands are tied because of transportation bottlenecks and that is requiring quite a lot of money.”

RT:How open is the Russian energy sector to foreign investment and partners?

PW:“If you look at the FDI that we’ve had since let’s say 94 when the Rosstat and the central Bank started to produce statistics, foreign investment into the energy segment, if you look at FDI, has actually been quite small, relative to total.

It has been mainly dominated by into trade and catering, retail, food production, and lately automotive industry.

The energy segment, for exactly this reason, the reason being that Russian companies did not see the benefit of Russian help and they wanted to protect it from foreign influence, has really been there.

It opens up slightly later, so the energy sector has not been a major recipient.And, are they dependent on foreigners?

I think you have to look at the different areas of the energy sector.

I think in exploration, and that’s where you could see more cooperation with foreign companies, but when you are looking at actually bringing the oil out of the ground I think that Russia will continue to look for themselves, and not allow too much foreign competition in that segment.”

RT:What does the Russian oil industry need? Funding or technical skills?

PW:“It is probably more important on the technical skills rather than the funding basis.And if you look at other sectors in other countries you will see that the spillovers in terms of the technological spillovers, human capital, and distribution networks, is a vital key and a vital benefit of FDI.

But for Russia it would be the same, that is why when it comes to FDI we think that it will be more involved in the geophysical part, in the exploration part, rather than bringing the oil out of the ground.The funding part I think they have very much set themselves, and they probably have enough resources to bring enough funding for projects. In order to also have the benefit of the funding, I think again you are looking at the tax system, because that always will come back to haunt Russia, when you look at the investment projects they are going to be facing.

And I think also for the foreign investors, you don’t have PSA in Russia, Production Sharing Agreements, which you have in Kazakhstan and Turkmenistan, that has been extremely beneficial for the foreign partners.

That is lacking in Russia, so I think that, for the foreign partners, being on the exploration side and the geophysical side of the equation is going to be more attractive than actually bringing the oil out of the ground, because you don’t have these PSAs.

So I think that is more important than the funding issue.”

RT:Europe continues to reform its energy sector, how does this impact energy companies in Russia?

PW:“We know that Gazprom has said it will not sign the new energy charter with Europe.I do think that in the short term perspective, in the short term in this case I probably mean the next five years, maybe even ten years, Europe is very dependent on Russia so Gazprom not signing up to this I don’t think will influence it very much, because there are also bottlenecks for Europe and they have to try and diversify away from the Russian energy segment.

Even on the LNG side, which has been very, there has been a lot of talk about LNG,and therefore a decrease in the Gazprom market share in Europe, we think that will reverse, because we don’t think that you will have a capacity to actually deliver enough LNG to basically circumvent Gazprom.

So the energy charter sounds nice, but when push comes to shove I think a company like Gazprom is going to maintain or even increase its market share.”

Source: rt.com/business

Under the Kanga project, the government-owned oil company expects to open 22 new mini fuel stations across the country by December this year.

The first of the stations was opened on Wednesday last week at Nairobi’s Industrial area.

Chairman Peter Munga said the stations were part of a wider plan the company expects will help it lift its market share from seven per cent to 10 per cent by the beginning of next year.

Nock is the sixth largest in a market dominated by multinationals who take up 70 per cent. This has not enabled it to play its role of stabilising the country’s oil prices effectively.

The mini stations will each cost Sh30 million compared to over Sh90 million that it would take to put up a fully-fledged service station.

The stations will concentrate on the primary functions of refuelling and selling lubricants and cooking gas.

“The Kanga project is within the five year development plan by the firm to increase its presence in the country to be able to play its role of stabilising the oil prices,” said Nock managing director Sumayya Athmani.

Mr Munga said the plan involves spreading the branches across the counties as the decentralisation of government services envisaged in the new Constitution gathers steam.

“Nock underwent a period of stagnation until 2005. We have increased the service stations from six to 70 stations and increased our market share from one per cent to seven per cent in the last five years.

“The mini stations will be replicated along the highways and only have bigger stations with service bays at the counties,” said Mr Munga.

Fuel crisis

Nock’s role has increasingly come under focus in the last few weeks following a four-day fuel shortage that threatened to put the country on the verge of fuel crisis two weeks ago.

Mr Munga said the corporation will seek partnership with small investors close to the mini stations who will offer other vehicle-related services.

A fully-fledged service station has service bays, mini-supermarkets and restaurants which raises the cost of putting it up. Mr Munga said the new plan is based on the fact that most drivers wanted to refuel their vehicles.

Nock intends to increase its retail service stations to 165 by 2014. The company also intends to build an additional storage facility in Konza to store more fuel.

A floating jetty is also to be established so that larger vessels can offload oil in the high seas and which will also be connected to the mainland through a pipeline to increase offloading speed.

The company currently depends on other firms which limits the amount of fuel it can stock, rendering it irrelevant in influencing market prices, especially when crude prices are low.

A source familiar with the issue but who requested not to be named said Nock can effectively play its role by stocking fuel when international prices are low and release it to the market when they rise.

The government formed Nock in 1981 to control rising pump prices following the Iran-Iraq war which led to the global oil shock.

Source: nation.co.ke