Russian Energy Giants Battle over Natural Gas
September 27, 2013 by Paul Ausick
Gazprom is the only Russian gas producer allowed to export gas outside the country. Rosneft’s proved gas reserves in 2010 totaled 791 billion cubic meters (nearly 28 trillion cubic feet). Rosneft and Exxon want to build a liquefied natural gas (LNG) plant to liquefy 5 million tons of LNG a year for export because domestic demand in Russia is more than ample. Gazprom, of course, objects.
Rosneft and Exxon announced Friday morning that they have awarded front-end engineering and design (FEED) contracts for the proposed LNG plant, which is planned for Russia’s far east, very likely near Sakhalin Island, where Rosneft and Exxon hold leases to produce natural gas. The amount of the contracts was not specified, but Rosneft identified the winners as the U.K. division of Chicago Bridge & Iron Co. N.V. (NYSE: CBI) and Swiss-based Foster Wheeler A.G. (NASDAQ: FWLT).
Gazprom has tried to get an agreement with China to build a pipeline that would transport Russian gas to the Middle Kingdom. Rosneft’s plan to build an LNG plant, whether or not it is ever built, gives China an alternative and a bargaining chip that Gazprom would like to take off the table.
Rosneft’s gas resources are primarily the result last year’s $55 billion buyout of TNK-BP, the joint venture between BP PLC (NYSE: BP) and a group of Russia’s richest oligarchs. But the Russian oil giant has a 19.6% stake in a $20 billion LNG project inside the Arctic Circle — another thorn in Gazprom’s side.
The smart money seems to think that Russian President Vladimir Putin will side with Gazprom and that will end the dispute. Whatever side Putin comes down on wins in Russia, so stay tuned.
Exxon signed an agreement with Rosneft last year under which the two firms would invest some $500 billion in exploration and production in the Barents Sea off Russia’s north coast.
Essential Tips for Investing: Sponsored
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.