RUSSIA DUE MORE UPSTREAM, DOWNSTREAM PROJECTS

Russia is marking progress on upstream and downstream projects with a big boost from foreign assistance.

Among the latest developments:

The U.S. Export-Import Bank (Eximbank) approved three loan guarantees for projects that involve sales of U.S. oil and gas equipment to Russia.
RAO Gazprom let a $1.6 billion contract to Nuovo Pignone to replace and modify gas turbines on Russian pipelines.
Veteran Resources Inc., Calgary, agreed with Uganskneftegas to advance field operations on a western Siberia development program prior to formalizing and registering a joint stock company.
Ryazan Oil Refinery, a Russian joint stock company, let contracts for first phase modernization of its 360,760 b/cd refining complex about 200 km southeast of Moscow.
Several Japanese firms are seeking loan guarantees from Japan's Export-Import Bank to help fund modernization projects at Russian oil facilities.

U.S. EXIMBANK GUARANTEES

U.S. Eximbank's loan guarantees, which total nearly $600 million, are the first under the Russian oil and gas framework agreement.

The bank approved an $86.7 million guarantee to support financing for Lukoil-Permnefteorgsyntez, a refinery in the Urals region that is part of Russia's largest oil conglomerate.

Under a $96 million contract with ABB Lummus Crest, Bloomfield, N.J., Lukoil will buy U.S. equipment and services for an upgrade program at the refinery.

Eximbank also approved a $245.3 million guarantee to support financing for Permneft Oil Production Association in the Urals region (OGJ, Mar. 28, p. 37). Permneft will buy $271.7 million of drilling and production equipment and services from various suppliers to rehabilitate wells.

Pending congressional review, the bank also approved a $258.7 million guarantee for Nizhnevartovskneftegaz, one of Russia's largest oil production associations, located in western Siberia.

Ramoil Management Co., Boca Raton, Fla., has a $286 million contract to provide the association with production equipment from a number of U.S. manufacturers for an oil field rehabilitation program.

Eximbank Chairman Kenneth Brody said, "This is a tremendous opportunity for both the U.S. and Russia. The agreement will give a major boost to American oil and gas equipment suppliers and help reverse the decline of the Russian oil industry. The approval of these first transactions signifies that procedures are in place for U.S. suppliers across the country to take advantage of the agreement."

Eximbank has nine other cases totaling more than $1 billion pending under the Russian oil and gas framework agreement.

PIPELINE CONTRACT

General Electric Industrial & Power Systems, majority ownership interest holder in Nuovo Pignone, said its $1.6 billion contract with RAO Gazprom represents the largest single foreign order awarded by the Russian Federation.

The contract includes refurbishing 161 industrial and aeroderivative gas turbines using GE technology to increase pipeline efficiency and throughput. GE said the project is to be complete in March 1998 and will increase Russian gas export capability by 194 bcf/year.

Nuovo Pignone's contract is part of a $1.9 billion total award won in concert with Italy's Snamprogetti SpA.

WESTERN SIBERIA AGREEMENT

Veteran Resources and Uganskneftegas' agreement allows development to begin in South Surgut, Prirazlomnoye, and Salym oil fields before the formalities of formation and registration of a new Russian joint stock company take place.

The two signed a letter of intent covering the project late last year (OGJ, Dec. 13, 1993, p. 26).

Veteran will at its cost build and mobilize a self-supporting, fully equipped drilling rig to western Siberia to provide underbalanced horizontal drilling. Veteran, as operator, Will provide all tubing and consumables required to drill and evaluate as many as six horizontal wells.

AU expenses incurred will serve as Veteran contributions to the joint stock company when it is formed.

Veteran will share in all production from any new wells, in contrast to other ventures that typically share in production increases for well workovers.

Veteran said 3D seismic work is being completed and will be jointly evaluated before picking well sites.

If the initial six wells are not promising or if the joint stock company is not formed, Uganskneftegas is to purchase all equipment and pay all of Veteran's unrecovered costs associated with the interim drilling program. The agreement is also conditioned on Veteran finding project financing, estimated to be $30 million at first.

Meantime, the companies are proceeding with forming and registering the joint stock company, which will be held 55% by Uganskneftegas and 45% by Veteran.

REFINERY MODERNIZATION

Ryazan Oil Refinery hired John Brown of the engineering division of Trafalgar House, London, to provide detailed engineering, procurement, and construction management to revamp the plant's 1968 vintage fluid catalytic cracking unit.

The project, to be complete by yearend 1995, will increase unit capacity to 40,000 b/sd from 16,000 b/sd.

Modernization project manager Amoco Eurasia Oil Co. is providing process technology and operating know-how.

John Brown also is conducting refinery upgrades at Kirishi near St. Petersburg and Chimkent in Kazakhstan (OGJ, Feb. 28, p. 25).

JAPANESE PLANS

Mitsui & Co. and Toyo Engineering Corp. have asked for $200 million in export credit from Japan's Eximbank to modernize an oil refinery in Yaroslavl, northwest of Moscow. Tokyo's Kyodo News Service said Mitsui plans to invest about $240 million in the project.

Russia's Itar-Tass sources said Mitsui also plans to sign a $700 million agreement with Lukoil to buy oil well workover equipment and plans to conclude a $400 million deal with Gazprom to buy compressors for the Yamal gas pipeline.

Meantime, Marubeni Corp. and Chiyoda Corp. are requesting $150 million in credits from Japan's Eximbank, Kyodo reported, for an unspecified oil refinery project in Khabarovsk.

Japan's Eximbank has as much as $400 million available in export credits to Russia.