TPT May 2008

40 / 132

May 2008 38 ›
Oil & Gas News
Russian oil and gas companies protest rise
in the price of steel
Russia’s Federal Anti-Monopoly Service will investigate OAO
Severstal, the country’s biggest steel maker, and three other firms
after receiving complaints about higher prices for steel slated for use
in oil pipes. As reported by Maria Kolesnikova on Bloomberg.com,
the antitrust watchdog said in a statement that the oil producer
OAO Surgutneftegaz had joined OAO Gazpromneft, the oil unit
of the world’s largest gas company, in filing a complaint over the
1 April hike in steel prices (‘Russia to probe steel makers over prices
for oil pipes,’ 3 April).
OAO Magnitogorsk Iron & Steel, OAO Novolipetsk Steel, and OAO
Ural Steel, part of the Metalloinvest Holding Co, are the other steel
makers to be investigated, the regulator said.
Ms Kolesnikova wrote, “Record energy prices in the past year have
encouraged producers to probe deeper for reserves and build
pipelines. Flat hot-rolled steel, which is used in products including
pipes, averaged $550 a ton in 2007, 21 per cent more than a year
earlier, Magnitogorsk said in a statement in January. Prices for
pipes produced by the steel maker averaged 22 per cent higher last
year.”
The investigation is ‘slightly negative’ for the steel makers,
UniCredit Aton analysts were reported to have said in a 3 April
note to investors. According to these industry observers, materials
used to make pipes for the oil and gas industry do not represent ‘a
significant portion’ of steel makers’ sales.
Indeed, Novolipetsk – which alone was willing to provide Bloomberg
with a comment – said the antitrust agency closed a similar probe
into its affairs four years ago because the company’s output of
steel for pipes was insignificant. Declaring that it sells steel at
market prices in line with Russian regulations, Novolipetsk pledged
cooperation with the authorities.
Moscow-based Interfax, the nongovernmental news agency,
reported that the watchdog hoped to complete its investigation by
1 May.
Total, of France, acquires a Chinese investor
A Chinese public fund has been gradually building a stake in the
French oil major Total SA since before the end of 2007. While
confirming this, Paris-based Total on 3 April declined to say whether
or not the fund is China Investment Corporation. This is the $200
billion sovereign wealth fund that has taken stakes in the American
private equity firm Blackstone Group and the investment bank
Morgan Stanley, only to sustain losses on both endeavours.
As reported by the financial information firm Dow Jones, a
spokeswoman for Total said it would neither name its Chinese
investor nor disclose the size of the stake. She noted, however,
that under French rules a stake higher than 5 per cent would oblige
the fund to make the size of its holding public through a filing with
the market regulator (‘China building stake in French oil company,’
4 April).
A UBS analyst told Dow Jones that it made ‘a whole lot of sense’
for the Chinese fund to build a stake in Total, whose assets he
considers undervalued. This source observed that sovereign funds
are generally more willing than Western equity markets to take a
longer-term view of value.
■ In other news of Total, on 1 April the French integrated oil and
gas company announced that its wholly owned subsidiary Total
E&P USA Inc was highest bidder for the leasehold of 13 blocks
in the Central Gulf of Mexico. Situated in deepwater (1,500m to
2,000m) and close to Total’s wholly owned blocks in this area,
each of 13 blocks in Lease Sale 206 is approximately 25km2 in
area. The lease period for these exploration blocks is 10 years.
Total has been active in exploration and production in the US
since 1957.
India’s biggest non-state refiner Reliance
casts its eye far afield
“We are seeing two projects in Latin America and looking at a
majority stake in one of them, and will be the operator in at least
one of them,” Atul Chandra, president of the international business
unit of Reliance Industries Ltd, told Bloomberg News in Mumbai
(‘Reliance may invest in two Latin American oil areas,’ 5 April).
Bloomberg’s Archana Chaudhary observed that India’s highest-
valued company needs to expand overseas to offset the impact of
state controls on domestic gas, diesel, and petrol prices. Already
the largest non-state refiner in India, the Reliance Petroleum Ltd
unit will complete the world’s largest refinery complex this year, with
nearly all the output earmarked for export.
The company’s plans to explore for oil and gas in Latin America,
together with its interest in possibly starting drilling services, are
seen as advancing chairman Mukesh Ambani’s aim of building a
global energy business. Mr Ambani said last October that Reliance
plans to produce 80 million cubic metres of gas a day from the
Dhirubhai 1 and 3 fields within the first year of operations, doubling
India’s output. Oil output from the area is forecast to peak at 40,000
barrels a day.
Reliance, which plans to start pumping oil and gas from its Krishna
Godavari basin area later this year, is also considering building
and owning rigs after having experienced delays in the delivery of
essential drilling equipment.
“We are certainly considering entering the oilfield services
business,” Mr Chandra told Bloomberg. “We are looking at the end
of this fiscal or the beginning of next fiscal [but] haven’t started talks
with partners as yet.”
Elsewhere in oil and gas . . .
■ Opposition from Kurdistan, which fears losing control over the
oil riches in that semiautonomous northern region, has kept a
bill on regulation of Iraq’s oil industry stalled in parliament since
February 2007. On 5 April, however, a senior Iraqi lawmaker
said a committee is working on two oil-related draft bills, one
to re-establish the state-run oil company and another to fight
oil smuggling. The legislation to restore the Iraqi National
Oil Co, at least, was set for presentation to parliament soon.
The measure is part of a package that includes legislation to
distribute revenues among Sunni, Shiite, and Kurdish regions