Friday, June 27, 2008
LUKOIL Buys into Italian Refinery
June 25, 2008 - Kommersant - LUKOIL has purchased 49 percent of the Italian ISAB oil refinery for €1.347 billion (about $2.1 billion) and may raise its share to 100 percent within the next five years. It is the first refinery in Western Europe to be owned by a Russian company and it increases LUKOIL’s capacity in Europe by 71 percent and its total capacity by 13 percent. It has been ten years since LUKOIL last bought a refinery in Eastern Europe, although it has made many unsuccessful attempts to buy refineries. LUKOIL owns two refineries in Europe, at Burgas, Bulgaria, where the capacity is 8.8 tons of oil per year, and in Ploiesti, Romania, where the capacity is 2.4 million tons of oil. LUKOIL president signed an agreement yesterday in Rome forming a joint enterprise with Alessandro Garrone, head of ERG S.p.A., which owns the other 51 percent of the refinery. The ISAB refinery is located in Priolo Gargallo, Sicily. The complex consists of two refineries, which produce kerosene and diesel fuel. It has three sea terminals, storage facilities, a generating plant and other infrastructure. It processes 16 tons of oil per year. LUKOIL is developing a retail network in Europe. At the end of 2007, there were 2200 filling stations operating under the company’s brand name. “Our acquisitions in Croatia, Macedonia and Montenegro will help the development of the company in that region,” LUKOIL vice president Leonid Fedun said. “We own more than 150 stations in that region, and our plans are expand the number of stations by three or four times in the coming years.”
Tuesday, June 24, 2008
Israel Wants Russian Gas
June 24, 2008 - Kommersant - Israeli Minister of National Infrastructure Binyamin Ben-Eliezer has proposed to Gazprom that it supply natural gas to the Israeli market. By 2010, the Israeli government estimates, consumption of natural gas will rise to 8 billion cu. m. from 800 million cu. m. last year. The contract could help Gazprom fill the Blue Stream pipeline, but infrastructure would have to be extended from Turkey to Israel. Gazprom topper Alexey Miller discussed those possibilities with Ben-Eliezer. Deputy head of Gazprom information Sergey Kupriyanov later confirmed that gas supplies n the basis of a long-term contract had been discussed, but noted that negotiations had been going on for three years, and it is still impossible to specify a timeline or volume of gas. Oil makes up about 67 percent of the energy balance in Israel. Coal accounts for 30 percent, and natural gas for less than 1 percent. Israel has proven reserves of gas of 47 billion cu. m. and produces about 800 million cu. m. per year. The country now buys gas from local deposits from the Israeli-American consortium Yam Thetis and from the Israeli-Egyptian Eastern Mediterranean Gas group. In 2006, Vladimir Putin, then president of Russia, and Olmert Ehud, then acting prime minister of Israel, discussed Russian gas deliveries to Israel through the Blue Stream pipeline. Israel’s only condition was a fixed price for the gas. Since then, however, the countries have been unable to agree on a contractor to build that section of the pipeline. Russia now sells Turkey 11 billion cu. m. of gas per year through the Blue Stream pipeline. It plans to raise sales to 16 billion cu. m. in 2011. Observers note that an extension of the pipeline to Israel would be exceedingly complex and costly.
Chevron Didn’t Find Oil in Russia
June 24, 2008 - Kommersant - The American oil company Chevron will stop operating on the Pyakutinsky and Aikhettinsky fields in Yamalo-Nenets Autonomous Area, which Gazprom Neft contributed to their joint venture, Northern Taiga Neftegaz. Both companies say their partnership remains intact. “The decision was made after two years’ work on geological exploration, drilling test wells and technical studies of the licensed lots,” a Chevron spokesman said. “And although this project did not live up to the initial expectations of the partners, we will be happy to have the opportunity for joint operations in the future.” Analysts say Chevron is more interested in that partnership than Gazprom, and the latter is unlikely to offer any promising fields. Northern Taiga Neftegaz was established in April 2006 to study the Achimov deposits in Yamalo-Nenets. At the time of its foundation, Chevron has a 70-percent share in the joint enterprise, but Gazprom Neft later raised its share to 75 percent. In 2003, when the last estimate was made, the C3 reserves of the Aikhettinsky field were 148.28 million tons and the D1 resources were 50.42 tons, of which 29 million and 8.6 million tons, respectively, were recoverable. In two fields in the Pyakutinsky lot, the Pyakutinsky and Malopyakutinsky, the recoverable C1+C2 resources were 5.6 million tons and 3.8 million tons. Geological exploration showed that the likelihood of discovering commercial reserves there were extremely low. The joint venture agreement between Gazprom Neft and Chevron requires Gazprom Neft to contribute licenses, property on the licensed lots nd intellectual property, while Chevron provides money equivalent to the value of Gazprom Neft’s contribution. Alexander Dyukov, head of the Russian company, said on Friday that a letter had been sent to Chevron suggesting a different lot to explore. No response has been received to that letter yet.
Monday, June 23, 2008
Exports begin from Lukoil’s vast new reserve
June 23, 2008, - Russia Today - Russia’s energy giant Lukoil has begun its first exports from the largest oil field to open in the post-Soviet era. The start of operations at the Timan- Pechora region marks a significant milestone for the company, in a joint venture with ConocoPhilips. Timan-Pechora, the company's second biggest crude-production region, is becoming even more important as reserves at the West Siberian wells are becoming depleted. They passed their peak production levels at the beginning of this century. The oil flows from the field via a 150 kilometre pipeline to the Varandey oil export terminal. From there, it is exported by tankers to Europe and the United States. The project cost $US 4 billion to develop, double the planned figure. That outlay included field development, infrastructure and the cost of the sea terminal. The field will reach its planned production level of seven million tonnes a year next year. The vast expense of the project will be offset not only by record high prices for oil, but also the tax breaks promised by the government, which may save Lukoil $US 1.2 billion. ConocoPhilips has brought 30% of the necessary investment and has allowed Lukoil to share the risks of developing the new field in the severe northern climate. Oil companies are counting on the government tax breaks initiative to help develop new fields. Lukoil, Russia's largest privately owned oil company, has 1.3% of the world's proven reserves. But oil production in Russia is falling. New fields like Yuzhnoe-Khilchuyiskoe, with 70 million tonnes of proven reserves, can boost the production figures of a company producing 95 million tonnes a year. However, it can't significantly improve the country's overall production figures.
Sechin Sees Resolution With TNK-BP
23 June 2008 - The Moscow Times by Miriam Elder - Igor Sechin, the deputy prime minister tasked with overseeing the energy sector, said Friday that he saw an end to the debate over TNK-BP, the British-Russian oil firm mired in an acrimonious shareholder dispute. Also Friday, Moscow prosecutors announced that an investigation into TNK-BP had uncovered two "insignificant" violations of the labor law. "It seems to me that some moves toward a resolution have begun," Sechin told reporters during a visit to Ivanovo, outside Moscow, Interfax reported. "At least the two sides have started to talk to one another," he said, without providing further details. TNK-BP, the country's third-largest oil producer, is half-owned by Britain's BP and half by a consortium of Russian oligarchs known collectively as AAR. A dispute over the company's future ownership structure and strategy exploded into the media last week, with both sides saying dialogue had broken down and accusing the other of trying to wrest control of the 50-50 venture. Both BP and AAR say they have no interest in diluting their stake in the firm and deny holding negotiations with state-run Rosneft or Gazprom amid market speculation that a state-run energy firm hopes to buy into the company. Sechin, chairman of Rosneft's board of directors, declined to comment on whether a third party hoped to buy into TNK-BP, Interfax reported. Rosneft became the country's largest oil company last year after buying up the main assets of bankrupted Yukos. Former Yukos CEO, serving an eight-year sentence on charges of fraud and tax evasion, accused Sechin of orchestrating the legal campaign against him. Sechin urged the two sides to do more to reach a speedy conclusion. "They need to resolve this more actively, or they will face losses," he said. In Moscow, prosecutors said they had found labor law violations during an inspection of TNK-BP, which has faced visa problems for nearly 150 BP employees assigned to the firm as the Russian shareholders call for a clampdown on expat hires. "Today, we completed the inspection of how TNK-BP observes labor and migration laws," said Yury Basov, prosecutor for Moscow's Presnya District, Interfax reported. "Two insignificant breaches of labor laws were exposed," he said. "The first deals with the registration and circulation of employment records at the company, and the second concerns the granting of vacations," Basov said. He said prosecutors had sent TNK-BP chief Robert Dudley a letter with suggestions on how to correct the violations. BP has accused AAR — which groups Mikhail Fridman and German Khan's Alfa Group, Viktor Vekselberg's Renova, and Len Blavatnik's Access Industries — of using corporate-raiding tactics reminiscent of the 1990s in hopes of gaining control over TNK-BP. AAR has denied the accusation.
The End of a Fairytale
06/19/2008 - Moscow News by Marina Pustilnik - When British Petroleum and a group of Russian billionaire owners of TNK oil signed their partnership deal, which created TNK-BP, back in 2003, it was not only the largest foreign investment in Russia to date, it was also a sign of hope. Hope that Russian companies can partner with foreign energy majors, learn from them and expand their presence on the international markets. That was an age of innocence. As this partnership is now unraveling with mutual accusations on both sides and active propaganda by both shareholder groups, it is becoming clear that this age is over. It also shows that apples and oranges are only good together in a fruit salad - putting two different interest groups under one venture umbrella is unlikely to reap much success. TNK-BP has been under much pressure in recent months. First, the company had to give up control over the giant Kovykta gas field in the Irkutsk region to Russia's gas monopoly Gazprom, because the state-backed firm refused to open up its pipelines otherwise. The Russian-British firm was then subjected to back-tax checks and cases, its foreign specialists had their work visas revoked and there was even an industrial espionage case involving a TNK-BP employee. All of this was happening as TNK-BP was nearing the end of the 5-year lock-up period, during which the partners could not sell their stakes. Analysts viewed this as the state applying pressure; driving BP to agree to take on a new partner instead of the Russian billionaires. That partner would most likely be either Gazprom or Rosneft. The general feeling was that the British would be uncomfortable with such a partnership, but reality proved to be much more interesting. During all those months the Russian shareholders of TNK-BP denied any plans to sell their stakes, while trouble was brewing. Several weeks ago the Russian shareholders launched an attack on TNK-BP CEO Robert Dudley, accusing him of mismanagement and demanding his replacement. BP tried to keep up appearances at first, but over the last week accusations started sprouting from both sides. BP Chairman Peter Sutherland accused his Russian partners of reverting to the raider tactics of 1990s and of trying to wrest full control and - ultimately - ownership of the com-pany. Russian billionaires Mikhail Fridman and Viktor Vekselberg accuse BP of sabotaging TNK-BP's international growth and IPO plans. At the same time the Russian shareholders say they are ready to sign an agreement on a new lock-up period, while sources close to BP say that the international energy giant wants guarantees of a partnership with Gazprom or Rosneft before it buys the billionaires' stakes. On top of that neither Gazprom nor Rosneft seem capable of affording the 50 percent stake in TNK-BP, which is worth over $20 billion according to expert estimates. Both state companies have spread themselves thin with various investments, and a source close to Gazprom said a couple of weeks ago there is no possibility of acquisition in the next 18 months. The major problem of TNK-BP is, of course, the conflict of interests. On the one hand you have an international giant, which is interested in improving the quality of its subsidiary's operations, but it is mostly interested in getting oil and gas from the company while promoting its original brand - BP. On the other hand you have private shareholders, who want both high dividends and the growth of the company's value. The Russian shareholders of TNK-BP are powerful men who are used to managing the assets they own. BP forced them to give up operational control, but they were willing to do it because the payoff was enough. Now the billionaires want full parity - and BP sees that as raiding. It's as if BP does not understand that the "raider tactics" of its current partners will seem like really innocent stuff compared to the new rules of play that Gazprom or Rosneft would most likely implement if a deal ever goes through.
Friday, June 20, 2008
The Kremlin Doesn't Need Another Yukos
18 June 2008 - The Moscow Times - The TNK-BP dispute promises to define Dmitry Medvedev's presidency in the same way that the Yukos bankruptcy defined Vladimir Putin's presidency. This makes the endgame of utmost importance to the Kremlin and investors alike. For all their differences, the Yukos and TNK-BP affairs share several key elements that helped determine the investment climate under Putin and could set the tone for Medvedev's next four years. Both cases have raised concerns about the rule of law. At Yukos, the company was singled out for tax and fraud claims that could have also been brought against many other companies. At TNK-BP, BP-affiliated employees have been curiously targeted by the Federal Security Service and the Federal Migration Service as the dispute escalated. Furthermore, the TNK shareholders have threatened to take their grievances to court, where any ruling might be suspect in the eyes of investors. Both the Yukos and TNK-BP cases have raised concerns about property rights. With Yukos, the owners of companies sold in shady 1990s privatizations worried about whether their property was at risk after prosecutors declared that Yukos owners had illegally acquired Apatit in 1994. Those fears seemed to be confirmed by the subsequent renationalization of most of Yukos' assets. At TNK-BP, BP is accusing the TNK side of using illegal corporate-raiding tactics to seize control of the company. Both the Yukos and TNK-BP cases are being perceived as politically motivated. At Yukos, former CEO Mikhail Khodorkovsky said the Kremlin targeted him over his political ambitions. At TNK-BP, observers say the dispute seems to be an attempt by a state firm like Gazprom of Rosneft to gain control of the company. The big difference between Yukos and TNK-BP, however, is that the Kremlin led the Yukos onslaught, while powerful business groups and businessmen appear to be using their political connections to put pressure on BP. This raises the specter that Medvedev either has chosen not to intervene or lacks full control the government. The image of a weak president who may genuinely want to introduce the rule of law but does not stop the use of federal agencies in business disputes could be worse for the economy than a strongman who initiates vendettas against disloyal tycoons. With few facts confirmed in the TNK-BP case, perception is of tantamount importance. The longer the dispute plays out, the more harm it threatens to inflict on the investment climate. The dispute has gone on long enough. The shareholders need to quickly reach a fair resolution, preferably without the courts. Finance Minister Alexei Kudrin hit the nail on the head on Tuesday when he said at an investors conference: "The conflict itself isn't as important as how it ends. The conflict should be resolved in a civilized way, then it won't do any harm."
Monday, June 16, 2008
Russian TNK-BP partners wanted 7.6% stake in BP
MOSCOW, June 16 (RIA Novosti) - Four Russian billionaire shareholders in TNK-BP sought to swap their 50% in the joint oil venture for a 7.6% stake in the British oil major, a Russian business daily said on Monday. Kommersant said the Russian partners could get 7.6% in BP, whose market value is estimated at $215.5 billion. Its Russian venture is estimated at $32.8 billion. Viktor Vekselberg, one of four Russian investors in the joint venture, said as quoted by Kommersant that BP had rejected the proposal, as well as the investors' demands on management and strategy. The Russian oligarchs have demanded equal board representation, a cut in TNK-BP's foreign staff and the replacement of CEO Robert Dudley, who they accuse of putting British oil major BP's interests ahead of TNK-BP, including in oil projects abroad. AAR - the consortium of Russian investors, also including German Khan, Mikhail Fridman and Len Blavatnik - said on Wednesday it would sue BP, which holds the other 50% in TNK-BP, for attempts to seize control in the joint venture. AAR said it planned legal action in the international arbitration court in Stockholm and in Russia. BP Chairman Peter Sutherland said last week the Russian partners had resorted to methods used by Russia's corporate raiders to wrest control of the company. Russian media reports on Monday quoted Vekselberg and Fridman - heads of Renova asset management company with 12.5% and Alfa Group investment with 25% in the oil venture respectively - as saying the asset swap was not longer being discussed. "No way! The sale [of the 50% stake] is out of the question today. When the conflict is resolved, we will see," Vekselberg said. Fridman said: "Any price [for the stake] proposed today would not correspond to the company's value in the future. TNK-BP has enormous growth prospects given the planned cuts in tax burden for oil producers in Russia" and growing oil prices, he said. Set up in 2003, TNK-BP is Russia's third largest producer. It accounts for a quarter of BP's overall output. Fridman told the paper the Russian shareholders' proposals were still on the table, but no new talks had been scheduled. Speaking at a news briefing on Monday, the tycoon said the Russian investors sought to buy an extra 1% in the joint venture from BP to gain a controlling interest. "We are not ready to sell, but we are ready to buy," he said. Asked whether Gazprom had proposed buying TNK-BP stock from the Russian shareholders, Fridman said they had not received any offers from the energy giant. "No one has contacted us or made any offers," he said. Some analysts have suggested that the dispute could result in the oil company being bought up by a state-controlled energy giant as part of the Kremlin's campaign to strengthen its grip on the oil and gas sector.
WorleyParsons lands $140m Sakhalin prize
16 June 2008 - Upstream OnLine - WorleyParsons confirmed today that it is preparing to start work on the key front-end engineering and design contract worth A$150 million (US$140 million) for the ExxonMobil-led Arkutun-Dagi development in the Sakhalin 1 project area off Russia’s east coast. The award, which was reported by Upstream last month, covers the centerpiece of the Arkutun-Dagi project, a giant production platform that will probably be a gravity-based structure with a 35,000-tonne topsides. WorleyParsons said it will be one of the largest floatover platforms in the world. ExxonMobil's offshoot in the area, Exxon Neftegas, awarded the deal to Sakhneftegaz Engineering, a Russian company owned 49% by WorleyParsons and 51% by a subsidiary of Russian outfit Zarubezhneft. ExxonMobil has approved A$28 million for initial engineering studies to be performed under this contract in 2008. Sakhneftgaz estimates that the value for services could total A$150 million over five years. Sakhneftgaz will provide overall project management services with co-ordination of subcontracts to be awarded to multiple third parties, including Russian design institutes. The project will be carried out from Moscow and Houston with additional support from Worley’s global resources in Perth, Melbourne, London, Beijing and California, the Australian company said in a statement today. Exxon Neftegas is the operator of Sakhalin 1 with a 30% interest. Its partners are Japan's Sakhalin Oil&Gas, also with a 30% stake, India's ONGC Videsh on 20% and Russian pair Rosneft and Sakhalinmorneftegas-Shelf, holding 8.5% and 11.5% respectively. The Arkutun-Dagi field is understood to be third in line for development at Sakhalin 1 after the Chaivo and Odoptu fields. These are giant fields with combined potential recoverable reserves of 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas. “I am very pleased that Exxon Neftegas has chosen to work with Sakhneftegaz on this strategically important project. Arkutun-Dagi continues our company’s participation in projects at Sakhalin Island that dates back over the past 10 years,” Worley’s chief executive John Grill said.
Wednesday, June 11, 2008
BP Sees an Era of New State Relations
10 June 2008 - Moscow Times - KUALA LUMPUR, Malaysia -- BP chief Tony Hayward, whose Russian joint venture, TNK-BP, is mired in a dispute, on Monday called for new forms of contractual relationships between national oil companies and global majors. Hayward said that while the industry required a hefty $22 trillion of investments to meet future energy needs within 30 years, it must develop new contractual ties between state firms and international oil companies that go beyond the old model that requires ownership of reserves and production. "These partnerships must be genuinely based on a deep sense of trust and mutual advantage, so that both sides benefit," he told an oil and gas conference in the Malaysian capital. "I think the principle of reciprocity will gain ground in the years to come, and I don't believe relationships between NOCs [national oil companies] and IOCs [international oil companies] will purely be confined to accessing resources in the host country. Rather, I think we'll have to move into the sphere of genuine international cooperation." The comments came as a cloud hung over the future of TNK-BP, which is embroiled in a dispute over strategy and ownership between BP and its Russian shareholders. Analysts believe the dispute was sparked by Kremlin pressure to hand a stake in TNK-BP to a state firm. Hayward also said oil prices are unstable because markets are not well supplied, and higher taxes in producing countries are not conducive to investing in new output. "In a well functioning market where supply and demand are balanced, prices should be stable. Where prices are high, however, they show that supply is not responding adequately to rising demand ... and that is where we find ourselves today," he said.
BP 'walks away from TNK-BP talks'
11 June 2008 - Upstream OnLine - Talks between UK supermajor BP and its Russian partners over the future of their 50-50 joint venture TNK-BP have broken down, sources close to BP said today. "BP rejected the ultimatum," one source told Reuters, referring to three demands presented to BP by the Russian shareholders. The demands were for a 60% reduction in TNK-BP's foreign employees, 50-50 representation on all TNK-BP subsidiary boards and increased powers of attorney for German Khan, a major Russian shareholder who is also part of TNK-BP's senior management. "The talks broke down at 11 pm last night in London," the source told Reuters. Speaking in London today, BP chief executive Tony Hayward insisted that he remained in discussions with the Russian partners, though he said it would take some time to reach an agreement. The boardroom battle at TNK-BP, as well as a campaign of harassment by Russian authorities this year, are linked to what company sources said is a fight over the company's strategy and future ownership. The Kremlin is widely believed to want a major stake for one of the country's state-controleed energy players in TNK-BP, which would mean that either BP or the Russian oligarch shareholders - or both - have to cut their stakes. The four Russian billionaire shareholders had delivered their ultimatum to Hayward - who attended an investment forum in St Petersburg on Saturday - and demanded BP agree to it by 1300 Moscow time (0900 GMT) today or face the consequences, the sources said. BP rejected the demand, they added. The four major Russian shareholders - Khan and Mikhail Fridman of Alfa Group, Viktor Vekselberg and Len Blavatnik - have accused TNK-BP's top management, led by expatriate Robert Dudley, of acting only in the interests of BP and have demanded his removal. Dudley insists he has always acted on behalf of all shareholders, and BP has backed him. The two sides had an angry exchange of letters last week. Alfa Petroleum Holdings sent Dudley a letter dated 5 June alleging he had "seriously violated Russian laws...and the shareholders agreement" by holding what it termed an "illegal meeting" of the TNK-BP Holding board. BP replied two days later rejecting the accusation as "disingenuous" and saying the letter did "not even articulate, let alone attempt to substantiate" its claims. "We're now expecting that the Russian side may well try to injunct the shareholders' meeting," the source said, referring to TNK-BP's plans to hold a meeting on 26 June. "We're expecting more legal action at any time." TNK-BP managers are dismayed by the prospect of action to stop the shareholders' meeting, which they say would prevent the company from being able to pay its dividend and would deprive the company's 18,000 minority shareholders of their vote on statutory matters. BP and the four oligarchs own half shares in British Virgin Islands-registered TNK-BP Ltd, which in turn owns through other units 95% of TNK-BP Holding, the listed Russian entity. Minority shareholders own the other 5%. Fresh legal action would come on top of a wave of other attacks on TNK-BP, which made net profits of $5.3 billion last year. According to sources familiar with the matter, these include three labour inspections, raids by the main domestic spy agency, a lawsuit in a Siberian court stopping the use of BP secondees at TNK-BP, an Interior Ministry tax summons and a Moscow bailiff's injunction. "What the Russian side is doing is taking a scattergun approach," said the source. "They are hoping that one or more of these actions will pay out and get Dudley suspended from his post." Attempts to reach the Russian shareholders for comment were unsuccessful. A spokesman for Alfa-Access-Renova, the consortium representing the billionaire oligarchs, had no immediate comment and spokesmen for Fridman and Khan's Alfa Group, as well as Vekselberg's Renova, were not immediately available.
ConocoPhillips ‘seeking Russian ties’
09 June 2008 - Upstream OnLine - US supermajor ConocoPhillips has a successful partnership with Russia's Lukoil and is looking for opportunities to build ties with other local companies, chief executive James Mulva has said. "Our partnership model is very successful... We are also seeking opportunities to build mutually beneficial relationships with other Russian companies," Mulva told an annual economic forum in Russia's northern city of St Petersburg, Reuters reported.
St. Petersburg to launch commodity exchange in July-August
MOSCOW, June 9 (RIA Novosti) - St. Petersburg will launch a raw materials and commodity exchange in July-August, expected to have turnover of around 1.5 trillion rubles ($63 billion) by the end of the year, a first deputy prime minister said on Monday. "The volume of trade will rise continually. By the end of the year, we can expect the trading volume to reach 1.5 trillion rubles," Viktor Zubkov, a former prime minister, said on Monday. Zubkov said the exchange, which was presented at the June 6-8 St. Petersburg International Economic Forum, will start off with a trial period. In the first stage, only petroleum products will be traded, and trade in construction materials, grain, and mineral fertilizers will begin at a later date. All commodity trade will be conducted in rubles, he said. The idea of setting up a commodities exchange was put forward in May 2006 by then-president Vladimir Putin.
Thursday, June 05, 2008
Only Rosneft Production Rising
June 05, 2008 - Kommersant - LUKOIL has admitted for the first time that its production is falling. It fell 3.3 percent in the first quarter of the year. The company said it would have the situation resolved by the end of the year. Gazprom Neft has not been able to do so for two years, however, even after taking such radical steps as firing the head of its main production arm Noyabrskneftegaz. Rosneft is now the only Russian oil company that is not having trouble with production. According to its quarterly account, published yesterday, LUKOIL produced 23.6 million tons of oil in that period, compared to 24.4 million tons in the same period of last year, that is, by 3.3 percent. Its production was down both in Russia (by 0.8 percent to 22.27 million tons) and abroad (by 10 percent to 1.35 million tons). The account cites depletion of reserves in Western Siberia and a lack of necessary electrical capacity for production due to the high quantity of oil production in the region as causes of the decline. LUKOIL had been showing growth in production until that point. Gazprom Neft production was down 0.3 percent last year. TNK-BP was down 4.12 percent, and Surgutneftegaz was down 1.6 percent. Western Siberia is the main area of oil production in Russia. Many wells there have been producing since Soviet times. All of the oil companies have new projects, but they have not gone into production yet. LUKOIL’s report and a fall in the price of oil (Urals fell 2.66 percent to $118.05 per barrel) drove down the price of stock in all Russian oil companies yesterday. LUKOIL lost 6.3 percent, Rosneft 4.6 percent and Gazprom Neft 3.96 percent, while the RTS index lost 3.13 percent and the MICEX index lost 3.07 percent.