The Credit Crunch Hits Russia’s Oil and Gas Sector

Back in March of this year, I wrote about the high levels of debt held by Russia’s flagship oil and gas companies, particularly Gazprom and Rosneft, and the trouble they may face in getting it refinanced by the western financial institutions who lend them the money.

Now, via Upstream Online, it appears their problem has become critical:

The Kremlin is set to channel $50 billion from its foreign exchange reserves toward helping companies – including a number of Russia’s upstream giants – refinance foreign debts, as the global financial crisis makes it almost impossible to raise new loans abroad.
Russian companies borrowed extensively during Russia’s 10-year economic boom to expand and make acquisitions and now have to repay or refinance $120 billion before the end of next year.

Yesterday, a report in financial daily Kommersant said the government would lend $9 billion to four companies, including $4.2 billion to state-run Rosneft, $1 billion to Gazprom, $2 billion to Lukoil and $1.8 billion to TNK-BP.

Despite the state aid, it looks as though Russian companies are going to have to find a lot of refinanced money from somewhere whilst their share prices are falling through the floor and the western financial institutions are barely keeping their own heads above water.  There is a good chance that this $50bn loan – about 10% of Russia’s foreign currency reserves – may not be the last such loan required, and is certain to cause uncertainty as to who will fund Russia’s $2.6 trillion offshore development plans at a time when the oil price has plummeted almost 50% to a 13-month low.

Perhaps we will see some revising of the development plans over the next year or so.

Sakhalin’s Literary History

It is well known that the remarkable author and playwright Anton Chekhov undertook an arduous journey from St. Petersburg to Sakhalin Island in order to study the conditions in the Tsarist penal colony.

What is less well known is that many famous literary works were the product of inspiration drawn from the author’s visit to Sakhalin Island.  I list a few of these below:

1. The Big Sleep by Raymond Chandler – Detective Philip Marlowe takes on a difficult case requiring his attendence in a progress meeting at the offices of a local oil company.

2. The Odyssey by Homer – Odysseus is working a 7/3 rotation on Sakhalin Island and is supposed to go home after each trip to be with his wife Penelope.  This epic poem is an account of the ten-year journey Odysseus undertakes following his first rotation and the dangers he faces, such as the Sirens of Chas’te who help our hero out of his clothes, the cyclops at the immigration counter whom Odysseus outwits by working on a business visa, and the milkman who has won Penelope’s affections whilst he has been away.

3. The Tristan Betrayal by Robert Ludlum – Oxbridge engineer Tristan Corey-Barnett arrives for a management role on Sakhalin Island with an oil and gas service provider, only to find that his salary will not be reviewed in the New Year and promises of a bonus were actually lies.  Tristan is also shocked to discover the existence of an incumbent in the form of a short, fat, unpleasant, incompetent, corrupt local woman of whom he was told nothing prior to coming.

4.  A Time to Kill by John Grisham – Rotating equipment engineer Carl Lee Hailey has been sent to Korea to renew his visa, a trip which involved him racking up several hundred dollars in expenses.  On his arrival back in Sakhalin, he submitted his business expense report as per the correct procedure.  Six months later Hailey has still not been reimbursed and calls up the appropriate department to find out what’s going on. The girl at the end of the phone says it’s nothing to do with her.  Another person says it is to do with him, but he’s off on leave.  A third person says it has been paid.  After making a series of international phone calls to his bank, Hailey confirms it has not been paid.  He calls the department again.  A girl says it is is nothing to do with her. Another person says he thought he’d been paid.  A third person says they have lost his business expense report.  A fourth person is off on leave.  Shortly afterwards, Hailey is on trial for murder.  Will the jury sympathise?

5. Anna Karenina by Leo Tolstoy – Formerly known as “The Belle of 777”, the story of Anna Karenina tells of a simple girl working in the finance department of a foreign company who dreams of meeting a wealthy expat (preferably not much older than her grandfather), weekends in Japan, a child, and – if she’s lucky – an apartment.  Will Anna find a man and get her wishes before his wife finds out?

6. The 39 Steps by John Buchan – In this whirlwind action thriller we follow hero Richard Hannay through his work visa application process.

7. The Da Vinci Code by Dan Brown – A team of top engineers are tasked with decoding a commissioning procedure written by Julio Da Vinci, an Italian engineer who quit the project six months back without a handover.  This sad tale takes us through a journey of initial optimism which leads to despair, anguish, and ultimately, suicide.  Not for the faint hearted.

8. Much Ado About Nothing by William Shakespeare – A play set in the immediate aftermath of somebody having been caught not using a handrail.

9.  Around the World in Eighty Days by Jules Verne – Phileas Fogg lives in London and has just signed up for a job in Sakhalin.  He has planned his route from London to Sakhalin via Moscow to perfection, but his employer has found an alternative route which will save them thirty-five dollars.  Unfortunately, this new route takes Fogg from London to Tirana on Albanian airlines where he must help refuel the aircraft upon arrival, and from there to Ankara by bus.  Leaving early in the morning eight days later, he will travel by taxi (the fare for which must be paid in daughters, sisters, or nieces) to Nagorno-Karabakh where Armenian bandits are enjoying shooting at Azeri soldiers who seem to have forgotten that the war ended 14 years ago.  Having served on an Azeri mortar crew for a period of no less than five weeks, Fogg will be permitted to walk to the coast of the Caspian Sea where, if he is lucky, he can catch a ferry across to Turkmenistan where, if he is lucky, he can avoid catching anything at all.  On the Turkmen-Uzbek border regular camel trains leave for Tashkent, which Fogg should make in about ten days if he avoids becoming somebody’s husband at the two-day stop in Kiva.  Assuming Fogg makes it, we can expect him to be crossing the Pamirs into Tadjikistan and onto China by the seventh week (or ninth if winter has set in) and making his way across the Gobi desert.  On the third day in the barren wilderness, he should turn northwards and into Russia where he will find himself in a barren wildnerness only with bears.  If he doesn’t loaf about he should make it to the Tatar Straits in good shape to strip to his undies, dive in the water, and strike out for the distant shore.  If he takes the recommended rest on Moneron Island, he should hit Kholmsk on the 79th day of his journey.  From there it is a simple day’s walk into Yuzhno-Sakhalinsk, where he will find that nobody has arranged his accommodation and he has forgotten to bring his diploma.

10. The Man in the Iron Mask by Alexandre Dumas – A short story about a welder working for a local contractor who is forced to make his own PPE by his unscrupulous employers.