MOSCOW, July 30 (RIA Novosti) Gazprom and Rosneft likely shelf partners / Bulgaria's withdrawal from energy projects would hit Russia hard / Reserve Fund money will run out next year / Moscow, China agree to invest $1 billion in shopping center
Kommersant
Gazprom and Rosneft likely shelf partners
Russia's oil producer Rosneft and energy monopoly Gazprom, for years competing for access to Russia's continental shelf, may share their first common project on it - the gas monopoly, which is offered two plots on the Kamchatka shelf, is casting about for a partner to develop them, eyeing Rosneft in the first place.
Gazprom, to which the Federal Agency for Mineral Resource Management (Rosnedra) is preparing to issue a license for the exploration of the shelf sites Koryakia-1 and Koryakia-2, is, however, ready to give them up.
The company is drafting a request to the government to issue the license not to it but to Rosshelf, one of whose shareholders is Rosneft. On July 14, Gazprom's deputy CEO Alexander Ananenkov told the monopoly's board member Vasily Podyuk to look into the matter. In this way Gazprom wants to reduce geological exploration risks. Podyuk is expected to draft a letter with proposals to Deputy Prime Minister Igor Sechin, who is also chairman of Rosneft's board of directors.
Ananenkov believes cooperation "meets Russia's interests," quoting a cooperation agreement between Gazprom and Rosneft from November 2006. Gazprom refused to say on Wednesday if the letter had been sent to Sechin. The deputy prime minister could not be reached for his opinion - he is visiting Latin America. Rosneft has declined to discuss cooperation with Gazprom.
Koryakia-1 and Koryakia-2 are located on the shelf under the Sea of Okhotsk and the Bering Sea on either side of Kamchatka. Koryakia-1's geological reserves, according to Gazprom, are 420 million metric tons of oil and 1 trillion cubic meters of gas, and Koryakia-2's, 70 million tons of oil and 205 billion cubic meters of gas.
The Natural Resources Ministry has different estimates: 330 million tons of oil and 1.2 trillion cubic meters for the first project, and 650 million tons of oil and 1.4 trillion cubic meters for the second.
Last year, both Rosneft and Gazprom laid claim to Koryakia-1 and Koryakia-2, but amendments to laws gave the government the right to distribute shelf plots without competitive bidding. Only state-controlled companies may claim them. In the middle of May, the head of mineral resources regulator Rosnedra, Anatoly Ledovskikh, said a government resolution to hand these plots over to Gazprom would be ready in three to four months.
In Rosshelf, to which Gazprom is proposing the licenses be given, the monopoly controls a 56.7% stake, directly and indirectly, with Rosneft accounting only for 26.4%. Until now, the prospects for a shelf partnership between the companies have been poor. Just three years ago, Rosneft was in full control of the Far Eastern shelf, running five projects and planning to expand its presence there. The situation altered when in 2006 Gazprom declared the Far East a zone of its strategic interests. It joined the Sakhalin II project, and this year obtained three Sakhalin III plots claimed by Rosneft (it owns the fourth plot in the project). Gazprom also got hold of the license to the Zapadno-Kamchatsky block, which Rosneft explored for five years, but failed to extend the license. On the Arctic shelf, the companies' interests also overlap. And although in 2006 they concluded a cooperation agreement "for the search, exploration, production, transportation and processing of crude hydrocarbons," things never reached a practical stage. The only remaining shared project is Tomskneft, purchased from Yukos and divided up half and half.
Nezavisimaya Gazeta
Bulgaria's withdrawal from energy projects would hit Russia hard
Bulgarian authorities say they might review or suspend large joint energy projects with Russia, namely the South Stream gas pipeline across the Black Sea, the Burgas-Alexandroupolis oil pipeline from Bulgaria to Greece, and the Belene nuclear power plant.
This would cost Russia billions of dollars.
Greece has also expressed concern over Bulgaria's plans. On Tuesday evening, Development Minister Kostas Hadzidakis said they hoped the Burgas-Alexandroupolis project would be implemented, and the new Bulgarian government would honor the agreements between Russia, Greece and Bulgaria.
The Greek response came after Bulgarian officials had announced the intention to review several strategic energy projects.
The Financial Times quoted Simeon Djankov, a senior World Bank economist who has taken over as Bulgaria's finance minister, as saying that Bulgaria - the poorest EU member - would consider freezing a 4 billion euro Russian-backed project to build a nuclear power station at Belene on the Danube. It would also review participating in a 1 billion euro Russian-Bulgarian-Greek project to build an oil pipeline linking the Black Sea with the north Aegean.
Before that, Bulgaria's new plans were made public by Bulgaria's minister for the economy, energy and tourism, Traicho Traikov, and Boyko Borisov, who at that time was running for the post of prime minister.
These sentiments have not even been influenced by Russia's promise to issue a 3.8 billion euro ($5.3 billion) state loan against Bulgarian government guarantees for completing the Belene project.
Mikhail Krutikhin, a partner at the RusEnergy consultancy, said Bulgaria is in a strong position.
"On the one hand, it fits the policy of the European Union, which has been trying to break away from the [energy] domination of Moscow and Gazprom," he said. "On the other hand, this could be Bulgaria's attempt to get privileges at the talks. The previous Bulgarian government made concessions to Russia, but the new authorities could demand a review of the clauses they think are unprofitable to Bulgaria. They may even eventually abandon Russian-backed projects, at least the oil and gas pipelines."
In principle, a gas pipeline could bypass Bulgaria, going instead via Turkish waters to Romania, Krutikhin said.
"But this would at least double the cost of the project's underwater part, from 5 billion to 10 billion euros," the analyst said. "And furthermore, we don't know what the Romanian authorities think on this score, since they want to prove their loyalty to the EU, whose Nabucco project is a direct rival of South Stream."
But Alexander Shtok, head of due diligence at 2K Audit Business Consulting, said Moscow had a chance to resolve the problem. Bulgaria has so far not announced its withdrawal from the joint projects with Russia, he said.
"If it does, Bulgaria will lose oil and gas transit revenues," Shtok said. "And also a nuclear power plant, which it needs so much. Getting a nearly 4 billion euro loan in the current situation would be extremely difficult. Likewise, Bulgaria should not forget about the jobs these projects will create."
Novye Izvestia
Reserve Fund money will run out next year
In the next three years, the federal budget will be running a deficit, the Finance Ministry said on Wednesday as it presented a draft budget for 2010-2012 to the government. Next year's deficit will be higher than planned, and to meet it the authorities will have to spend all of the Reserve Fund and even borrow money from the West. So for the next three years we will be living on borrowed money.
For the first time this year, a draft budget will be submitted to the State Duma not in August, as everybody is wont to expect, but in September. The delay is due to the government's long dithering with its economic forecast for the coming period. The authorities do not hope for an explosive growth in oil prices, but on the other hand, they do not expect the other extreme, either - like last winter's $30 per barrel.
The budget therefore was put together based on a Urals benchmark crude price of $55 per barrel in 2010, $56 in 2011 and $57 in 2012. At the same time, despite growing oil prices, the ruble-to-dollar exchange rate, in the government's view, will worsen: to 34.5 rubles in 2010, 37 rubles in 2011, and 39.2 rubles in 2012.
Like this year, in all three years the federal budget will run a deficit. Next year, spending will exceed revenue by 3.187 trillion rubles, or 7.5% of GDP, and the hole will then contract to 2.011 trillion rubles (4.3% of GDP), and in 2012, to 1.599 trillion rubles, or 3% of GDP. This gradual reduction of the shortfall will ensure Russian economic growth, which is forecast to be 1% in 2010, 2.6% in 2011, and 3.8% in 2012. At the same time, all budget spending over these three years will be kept at about the same level: between 9.822 trillion rubles and 9.635 trillion rubles.
"Compared with the initial three-year budget, which was planned before the crisis, spending has been cut drastically, and cannot be reduced any further," Yelena Penukhina, an analyst with the Center for Macroeconomic Analysis and Short-Term Forecasting, told Novye Izvestia. "We cannot go back on social spending, which makes a sizeable part of the budget. We need to index pensions and to pay wages to public-sector workers, which in 2009 will cost us 1.5 trillion rubles."
The authorities promised that all social obligations contained in the 2010 budget, making up 73% of all expenses, would be honored. There will be no reduction of defense spending, APEC summit costs, or financing for the 2014 Winter Olympics in Sochi. But a number of investment and special federal programs will be axed. In case a second wave of the crisis comes, the authorities have penciled in a sum of 310 billion rubles into next year's budget to support the banking system.
To balance the budget, the shortfall will have to be covered. This year, the Reserve Fund will be used for this purpose, but in the future it will only cover half of the deficit: 1.675 trillion rubles. The gains of the recent "fat" years will run out there, although the authorities used to say that the reserves would run for at least another couple of years.
To cover the other half of the deficit, the holy of holies - the National Welfare Fund - will be tapped. In 2010, it will be milked for 681.7 billion rubles. Still, debt will have to be issued. For the first time in a decade, the country will be accumulating, rather than paying, debts. Next year, the Finance Ministry plans to issue Eurobonds worth 613.6 billion rubles, and borrow another 11.5 billion rubles from international agencies, perhaps the World Bank. According to the analyst, aside from external loans, in-country borrowings will be activated in the near future, which are a fairly large market.
What will follow the three years of deficit is anybody's guess. Oil is, as before, Russia's main hope. If the black stuff is priced higher than the budgeted $55 to $57, the deficit will be lower, and Russia will not need to get too far into debt.
Kommersant
Moscow, China agree to invest $1 billion in shopping center
China has agreed to invest $1 billion in the construction of a shopping center to replace the Cherkizovsky outdoor market where many Chinese worked, a Moscow government official said.
Several land plots with an area of 40-60 hectares (148 acres) are being considered for the center, including in the territory of the Cherkizovsky market.
Vladimir Malyshkov, head of the Moscow government's department of the consumer market and services, said that the decision was made at talks with a delegation from the Chinese Commerce Ministry. He said China was prepared to invest $1 billion in building warehouses, shopping premises, customs and migration services, a medical checkpoint, a two-star hotel, and other elements of infrastructure.
The closure of the Cherkizovsky market in June alarmed the Chinese authorities, which said that up to 70% of the 100,000 people who had worked there were Chinese. Besides, Chinese goods worth $5 billion still remain on the territory of the closed market.
On July 22, a Chinese delegation led by Deputy Commerce Minister Gao Hucheng came to Moscow, but the city authorities initially refused to discuss the issue. The talks started only when the Russian Foreign Ministry said the developments around the Cherkizovsky market "must not have a negative effect on trade and economic cooperation between Russia and China."
Gao Hucheng said on July 24: "Russia and China have reached a consensus on the issue of the Cherkizovsky market. Our countries will draft a joint plan of fighting against gray imports."
Kommersant was told by the Moscow government that the complex could occupy part of the territory of the now-closed market. It did not exclude, however, that the complex could be built in the Lyubertsy District in the Moscow Region, and several other sites near the MKAD ring road with areas of 40-60 hectares (148 acres) are being considered. The site is to be chosen in the fall.
"Such districts around the world are called China Town, but I don't like the name," Malyshkov said. "On the other hand, we have an Armenian Trade Center, so why not have a Chinese one too?"
Nikolai Yevtikhiyev, head of Moscow's Eastern Administrative District, said residential neighborhoods, shopping centers, as well as halls of residence and a hotel for the Physical Fitness University would be built on the territory of the Cherkizovsky market. The university owns 80% of the market's 200 hectares (494 acres). They also plan to rebuild the Stalinets stadium.
The construction of a new shopping center could take two years. In the meantime, all traders from the Cherkizovsky market have been offered places at the Luzhniki and Sadovod markets and several other sites.
According to the Moscow department of the consumer market and services, 38% of goods had been removed from the Cherkizovsky market by July 29. Goods belonging to owners who do not turn up will be destroyed, which could cost the city authorities 200 million rubles ($6.4 million).
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