Russia signs strategic Caribbean gas deal, as Russian navy follows

Gazprom extends gas and LNG projects to North, South America and Sechin looks to develop Cuban nickel resources too.

MOSCOW -

Gazprom, Russia's leading company and the world's largest exporter of energy, has signed an undertaking with the Venezuelan government to take a 15% stake in the development of two offshore oil and gas zones in the Caribbean.

The memorandum was signed on Monday in Caracas, as a Russian Navy squadron, including the heavy cruiser Peter the Great and three escorts, set sail from St. Petersburg to join Venezuelan vessels in the first show of Russian naval power in the American hemisphere for many years. They have been preceded by the Russian Air Force, which despatched a pair of long-range bombers to Venezuela for the past week A Russian naval spokesman told Mineweb the squadron will operate in the Caribbean, and will enter the sea from the Atlantic Ocean.

The Gazprom MoU with Venezuela caps a week of Russian resource politicking in Latin America, as Igor Sechin, the deputy prime minister in charge of resources, visited Cuba, Venezuela and Nicaragua. In Cuba, large Russian plans are under way to mine nickel.

Gazprom's move into the Caribbean will involve a feasibility study of the Blanquilla Est and Tortuga zones, before a decision is reached on whether to develop a new LNG export facility, costing almost $6 billion. Others in the project are Petroleos de Venezuela S.A. (60%), Eni of Italy (10%), Petronas of Malaysia (10%), and Energias de Portugal (5%).

The official Gazprom communique said the Blanquiila-Tortuga project will involve "exploration and production of natural gas on the shelf, its supply on the domestic market, as well as liquefaction and export of gas. The document foresees a join study project data in order to determine the level of interest in future participation in exploration and development of hydrocarbon fields in the region."

It is not Gazprom's first move in Venezuela. In 2005, Gazprom won a tender for Phase A of the Rafael Urdaneta project and received the respective licenses to explore and develop natural gas on the Urumaco-1 and Urumaco-2 fields in the Gulf of Venezuela. Pursuant to the terms of the tender, Gazprom established two joint-stock companies on the Urumaco-1 and Urumaco-2 fields - UrdanetaGazprom-1, S.A. and UrdanetaGazprom-2, S.A. Gazprom says the forecast natural gas reserves at Urumaco-1 and Urumaco-2 are about 100 billion cubic metres.

Last week, Gazprom's deputy chief executive Alexander Medvedev, who was the signatory in Venezuela, was also in Bolivia, where he met the president of the Bolivian state-owned oil and gas company YPFB Santos Ramirez. The Gazprom communique says the two sides "discussed the state of current projects, as well as scientific and technical co-operation and personnel training. Besides, meetings with representatives of other oil and gas companies operating in Bolivia were held. The negotiations resulted in the signing by OAO Gazprom, YPFB, and Total EP Bolivia, in presence of Bolivian President Evo Morales , of a trilateral Memorandum which foresees the joint assessment of the Acero block and marks another step forward to the creation of a new joint venture to produce hydrocarbons in Bolivia." Medvedev also met Bolivian President Evo Morales.

Bolivia holds the third position in Latin America after Venezuela and Trinidad and Tobago in volume of estimated natural gas reserves with 1.5 trillion cubic metres. In February 2007 Gazprom and the Bolivian state energy concern signed an MoU for co-operation in exploration and development of oil and gas fields, as well as LNG production. Gazprom is now working on three blocks -- Sunchal, Acero, and Carohuaicho, in southeastern Bolivia, in the gas-bearing Subandino Sur basin.

The politics of Gazprom's expansion into the energy sectors of the American states drew a mocking comment from the US State Department, whose spokesman intimated surprise that the Russian Navy has vessels with the capability to sail as far as the Caribbean from their Barents Sea base.

The expansion of Russian military and civil interest in Venezuela has been accelerated by US involvement in aiding Georgia. A new US allocation of $1 billion in assistance to the Saakashvili administration in Tbilisi was announced after the recent Georgian attacks on South Ossetia turned into a rout by the Russian military.

In support of the Americans, the Canadian government was interpreted as saying that it may punish Gazprom. A statement by Prime Minister Stephen Harper, currently running for re-election, has been interpreted as threatening revocation of last year's agreements for Gazprom to participate in the Rabaska LNG project -- an $840 million terminal and regasification plant on the St. Lawrence River.

Canadian government sources told Mineweb that Harper did not refer explicitly to the Rabaska project. Whatever he said or meant, the Quebec minister for economic development, Raymond Bachand, visited Moscow last week, where he met with Gazprom, and expressed strong government backing for Gazprom to supply gas to the Rabaska LNG plant. The Quebec project concept is for Gazprom to ship LNG direct from its still to be developed Shtokman gasfield, in the Barents Sea. This would bypass a proposed LNG plant that has been under discussion with Petro-Canada in the St.Petersburg region. It would also provide the Russians with their first LNG gateway in North America through Canada, not the US

UralSib Bank reports today that the Caribbean project is "is positive for Gazprom, as the project gives it access to Latin America and transforms the gas giant into a global player. LNG trading is a gateway to the future. The deal will give Gazprom its first exposure of working on a LNG project in a foreign market, and provide the gas giant with valuable technical knowledge and experience. We welcome Gazprom's expansion into Venezuela, whose oil reserves in the Orinoco heavy oil belt could exceed 235,000 mln bbl. The venture provides great opportunities in both upstream and downstream segments for oil and gas companies, and opens the door for other Russian oil companies such as Gazprom Neft, LUKOIL and TNKBP, which have also signed MoUs with PDVSA. We foresee further cooperation between Russian companies, in Venezuela."

"We see North America as a region of our strategic interests,", Gazprom's chief executive Alexei Miller said three months ago. "We have noticed a growing interest of Canadian companies in co-operation with Gazprom of late. We have received many interesting proposals based on objective competing advantages of Canadian companies in gas supplies to the US market....In general, one can say that we are creating a new configuration of gas supplies to North America."