"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Sunday, March 18, 2007

Russian Roulette in the Middle East - Putin stirs up the hornet's nest

Lord Patel revealed the establishment of LUKSAR the Lukoil Saudi Arabia Energy company 80% owned by LUKOIL in March 2004 when my old friend Vagit signed the 40 year deal with Ali al-Naimi, who acting on behalf of the government.

This you will remember was after he signed a deal on March 11th 2004 in Baghdad to train Iraqi oil industry employees and students. 40 Iraqi students will study in Russia's I.M. Gubkin Oil and Gas University... which ,despite all the problems today still going.

Anyway Vagit tells me that he was back in Saudi last month, this time with President Putin (the 1st ever visit by a Russian leader) and stirring the ordure for Washington as usual, during the visit he signed a co-operation agreement with Qatar Petroleum's chairman Abdullah Bin Hamad Al-Attiyah covering possible participation in oil and gas projects including GTL, LNG and petrochemicals ventures.

Whilst that was going on Putin was offering Crown Prince and Defence Minister Prince Sultan bin Abdul Aziz nuclear power stations , military helicopters, to build rocket propelled grenade (RPG) factories, provide sophisticated anti-aircraft systems-the Carapace (Pantsyr), TOR M1 and Strelets. To top all that he offered the Saudis expanded satellite launches and an opportunity to join the Russian satellite navigation system, GLONASS.

Diplomatic gossip says there is a "verbal understanding" on the sale of about 150 Russian T-90 battle tanks to Saudi Arabia, which is seeking to diversify its defence systems.Tests were carried out on the T-90 in Saudi Arabia last year to determine the tank's suitability for harsh desert conditions, and Russia is also looking to sell Mi-17 helicopters.

Gas OPEC - the first steps

He also hinted about future logistical co-operation involving LNG supply swaps for each country's global gas customers. This is what anxious observers in the US call a new OPEC - and they don't like it. At present there is a loose association called the Gas Exporting Country Forum (GECF). This was founded in 2001 by Algeria, Iran and Russia also includes Libya, Qatar, Oman the UAE, Egypt, Bolivia, Indonesia, Malaysia, Trinidad and Tobago, Venezuela as well as Norway as an observer.

Of course anything that keeps up prices for oil and gas rich Russia is a good thing - also the implied anti British and anti U.S. presence in the Middle East by playing to anti-Western sentiment in the "street" and among the elites plays well. Mr. Putin also solidified the high profile diplomatic stance of ther new kremlin, emphasizing their differences with Washington.

To date this group has not attempted to control prices - which would require a change in a market which involves large, lengthy (40years in some) contracts. With LNG demand growing at 12% a year thins may change.

Anyway when the gas exporting countries meeting in Doha in April they will have the development of an OPEC-like group. This is anidea being forcefully put forward by Iran's oil minister Kazem Vazeri-Hamaneh and Iranian leader Ayatollah Ali Khameni has called for Russia and other natural gas producers to establish a gas cartel. Iran is looking for new customers in Europe and Swiss traders have been buying heavily to supply customers in Italy and eslewhere via Turkey.

Fellow Muslim state Malaysia's independent power developer SKS agreed a $16 billion, 25-year programme to exploit the Ferdos and Golshan offshore gas fields in south-eastern Iran with the the National Iranian Oil Company in January. ...a dn a Pakistan / Iran pipleine project is nearing agreement - despite pressure from Washington.

LUKoil developments in Rub Al-Khali

Anyway, Vagit says LUKSAR is still on target with development of the 30,000 sq. mile block in the northern part of the Rub Al-Khali (Empty Quarter) south of the giant Al-Ghawar oil field. The Rub' Al-Khali is the biggest active sand sea in the world (between 500,00 and 600,00 km2 - roughly the size of France).

Lukoil say that 15 months ago the first exploration well was spudded in the central area of the block and they expect to invest $2 billion to exploit the deposits found there and expect commercial production of gas and condensate by 2014.

Saudi Aramco will have the right to buy all the gas produced at $22.7 per 1,000 cubic metres if annual production reaches an agreed level. The next stage of development involves building pipelines and other infrastructure development

Gazprom's were kept busy on the trip and their engineering subsidiary Stroytransgaz had talks with Saudi Oger on possible collaboration for energy and water pipeline work in the Kingdom.

Vagit told me that , 'Lukoil views the Middle East as a region of high priority. The Saudi project perfectly fits in the company's development strategy and matches all economic and competitive criteria the company applies to projects.'

He went quiet when asked about Iraq and simply said he hopes to restore oil extraction rights agreed before Saddam's downfall in 1997 to the vast West Qurna-2 oilfield (industry estimates 15 Mn barrels). Talk in St Petersburg is of $4 billion being invested in the field through to 2020.

Meanwhile Vagit is having a very close look at Oman's promising Khazzan and Makarem gas fields which the Sultanate wants to develop...he also has been having a chat with Abdullah Nasser Hawaileel of some outfit called Dana gas who had a wildly oversunscribed IPO in 2005 in Abu Dhabi.

Algerian Salafist rebels adopt Al Quaeda role - bombings kill foreign workers

Mind you, Vagit reminds me , there are problems in dealing in these zones, a Russian engineer, 3 Ukrainians and three Algerians were killed and five other people wounded in the bomb attack on their bus on March 5th at Hayoun, near Ain Defla in southern Algeria.The bus was carrying employees of tStroytransgaz , who were laying gas mains between Ain Defla, in the region of Medea, and Tiaret, 340 kilometers southwest of Algiers.

The Salafist Group for Preaching and Combat (GSPC) has, since last September, taken on the name of Osama bin Laden's terror network for North Africa and they claimed responsibility for the attack.

"We dedicate this modest conquest to our Muslim brothers in Chechnya ... victims of the criminal (Russian President Vladimir) Putin," it said in the statement posted on an Islamist site often used by Al-Qaeda.

In December one person was killed and nine injured in an attack on a bus carrying staff of the Brown and Root Condor (BRC) company, a subsidiary of the Algerian Sonatrach oil company and Halliburton.

And all this, even when Putin to establish his credentials in the Muslim world had brought along with him to Saudi , Mintimir Shaimiyev, the Muslim head of the predominantly Muslim republic of Tatarstan. Tickled pink with this gesture, King Abdullah had responded in kind, and awarded Shaimiyev the King Faisal award for service to Islam, praising Putin as , "a statesman, a man of peace, and a man of justice" despite Putin's brutal treatment of the Chechen Muslims.

Russia and Algeria, recently signed an agrement to coordinate investment and marketing and the transfer of technology - then they get their buses and workers bombed . No wonder Vagit sighed and headed for the casino.

Look out - the Russkis are back . Back in business.

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