Although by no means free, I find the news feeds pumped out daily by Business New Europe to be really helpful and interesting: I'm a fan (except, maybe, when they try to write about politics) and I think their service is worth the Euros 300 or so a year to subscribe to the feeds that cover my patch.
This came through the other day as an extract from a (forthcoming?) Alfa Bank report. Looks like it will be worth begging, borrowing or stealing a copy, if you're not already an Alfa investment banking client...
The emerging 4x4 Energy Strategy
Tuesday, June 26, 2007
While the government has never formally clarified its strategy for either its involvement in the oil and gas sector in Russia or its plans to help Russian companies expand internationally, both upstream and downstream, we now have almost enough evidence allowing us to build a model of how it is most likely to work. That is, at least based on current evidence, best described as the "4x4 Energy Strategy".
The four domestic strategies are:
• State companies control 51% of all major energy projects.
• An international energy major is included in each project with an equity participation of 25%. That company will more often than not be the operator of the project.
• The remaining 24% is eventually allocated in several smaller lots to National Oil Companies from other countries (e.g. China, Malaysia, India, etc) for which the Kremlin has bartered greater energy cooperation in exchange for some reciprocal trade, investment or political deals.
• The next major investment theme will be to concentrate on downstream processing of greater volumes of gas and oil inside Russia so as to eventually have a better balance between the export of raw material and higher value-added products from the raw material.
The four international strategies are:
• Access to international upstream and downstream projects for Russia's National Champions Companies by bartering reciprocal deals in upstream Russian oil and gas.
• Creating JVs with international energy majors to facilitate access to politically and economically sensitive downstream, particularly in both LNG and natural gas distribution.
• To develop Russia's National Champion Companies to eventually rank amongst the world's biggest energy giants.
• To have a controlling/influential role in export routes from Russia and the CIS countries.
Note: This is a subject and theme to be written about separately later.