the RUSSIA oil & gas competitive intelligence report - Report Buyer

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Russia Oil and Gas Competitive Intelligence Report 2010 In July 2007, following months of indecision by Gazprom, Total was chosen as a partner in Shtokman. Originally, Gazprom had pre-selected IOCs to act as minority equity partners in the field’s development, and shortlisted Total, along with Norway’s Statoil and Norsk Hydro, and US majors Chevron and ConocoPhillips. In October 2006, however, Gazprom performed a sudden volte-face and declared that it would develop the field on its own. This move raised doubts among analysts as to whether the company had the financial resources and technical ability for such a challenging project, especially considering its lack of LNG experience at the time. Since then, Gazprom has gradually softened its approach, first stating that it would allow IOCs in contractors, and then giving Total a major role in the field’s development. In 2006, Rosneft cancelled a deal with Total to develop the Vankor oil field, and the French major lost its appeal against the decision. © Business Monitor International Ltd Page 49
Russia Oil and Gas Competitive Intelligence Report 2010 Novatek Company Analysis SWOT Analysis Russia’s largest private gas producer is going from strength to strength. On the back of good Kremlin connections and solid management, production and reserves continue to rise steadily and profitability remained strong even in the 2008-2009 downturn. The big test for the company’s ambitions, however, will come once its Arctic LNG projects get under way, as the company will be challenging Gazprom’s export monopoly. Strengths: Large untapped Arctic gas field Good reserve base Good Kremlin connections Condensate cash flow Financial Statistics Sales • RUB52.3bn (H110) • RUB86.9bn (2009) • RUB76.1bn (2008) Net income/(loss) • RUB18.1bn (H110) • RUB25.7bn (2009) • RUB22.9bn (2008) Operating Statistics Net Condensate Production • 60,000b/d (2009) Net Gas Production • 32bcm (2009) Proven Hydrocarbon Reserves • 8.85bn boe (end-2009) Weaknesses: Remote deposits High costs of LNG projects Kremlin’s anxiety over foreign partners in the Arctic Opportunities: Northeastern Passage Exports to Asia Threats: Lack of export markets Resurgence of Gazprom’s monopolistic instincts Cost inflation in the Arctic Market Position Novatek was founded in 2004 and is Russia’s largest private gas-focused player, focusing its activities on Yamal-Nenets. Its proven reserves were 8.85bn boe by the end of 2009. The strong reserve growth was attributed to new wells at the Yurkharovskoe and Sterkhovoye fields, and the discovery of new deposits in the Khancheyskoe field. The company is majority-owned by its management, although Gazprom has a 19% interest. While still a minnow in comparison with the state gas giant, Novatek has been growing steadily, reaching 32bcm of output in 2009, plus 60,000b/d of oil and condensate. © Business Monitor International Ltd Page 50
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