StatoilHydro, Fire at Mongstad extinguished

The Mongstad refinery was evacuated after a fire in a coupling flange at around 14.35, Wednesday 23 January.

The fire was soon brought under control and the flames were reduced to a controlled spurt of flame while the facility was being shut down. Shortly afterwards the fire was put out.

The damages were limited and the fire will have little impact on the facility's production. No personnel were injured during the fire. The Petroleum Safety Authority Norway was notified about the incident. An internal investigation will be initiated.

Crosstex Energy Opens Regional Office in Fort Worth

The Crosstex Energy, L.P. team recently celebrated the opening of the company's new regional office, a 12,000-square-foot facility located in the International Plaza building in Fort Worth, Texas. Crosstex's expansion into Fort Worth results from the growth of its business in the Barnett Shale region in north central Texas, the most prolific natural-gas formation in the United States today.

Crosstex provides natural gas gathering, processing, transmission and other services to natural gas producers drilling in the Barnett Shale. Crosstex has approximately 50 employees in Tarrant, Denton and Parker counties, and a companywide employee population of nearly 700 people. Barry E. Davis, Crosstex President and Chief Executive Officer Crosstex, and a small group of only nine employees founded the company 11 years ago.

Sibir and Gazprom agreed on Moscow Refinery

OAO Gazpromneft and Moscow Oil and Gas Company (MOGC), with the approval of their respective parent companies Gazprom and Sibir and with the further approval of The City of Moscow, jointly announced today that they have agreed the terms of a Memorandum of Understanding (MOU) which provides for a board and management structure of Moscow Refinery acceptable to all concerned.

The MOU further provides for the steps and mechanisms to ensure a long term and transparent relationship between the parties as shareholders at Moscow Refinery.

The underlying principle of the MOU is that of parity and transparency in respect of all key issues. The new structure, when implemented following the formal documentation of the MOU into a shareholders' agreement, will also allow the parties as key shareholders in Moscow Refinery to participate fully in the implementation of the planned upgrade of the refinery and ensure the highest quality of product. Shareholders in Sibir will be kept advised of progress made in due course.

Commenting on the announcement Henry Cameron Chief Executive of Sibir Energy plc said "I am delighted that months of negotiations between MOGC and Gazprom Neft have led to an accord which is satisfactory to both parties. From a much publicised and troubled history hard work, careful and measured co-operation and good will on the part of Gazprom Neft and MOGC have combined to create a mutual confidence and trust to the point where an equitable accord could be achieved, the full details of which will be finalised in the very near future"

StatoilHydro submitted PDO for Yttergryta gas field

The plan for development and operation (PDO) of Yttergryta was submitted to the Norwegian Ministry of Petroleum and Energy. The gas field is located around five kilometres north-west of Åsgard B in the Norwegian Sea.

Expected production from Yttergryta is approximately 1.75 billion standard cubic metres (Sm3) of gas with very low carbon dioxide (CO2) content. It will be developed with a subsea template tied back to the Åsgard B platform.

Start-up is scheduled for the first quarter of 2009. The production period will be between three to five years with a maximum anticipated production of 3.5 million Sm3 per day.

The exploration well that was drilled in June 2007 will be converted to a production well in 2008. The template for the subsea production facility has already been installed. Development costs will total around NOK 1.2 billion, including drilling expenses.

StatoilHydro is operator for Yttergryta with a 45.75% interest. The other licensees are Total with 24.5%, Petoro with 19.95% and Eni with 9.8%. The PDO for Yttergryta is a “simplified” version. The Ministry’s processing is expected to take maximum eight weeks.

Petrofac to open training center in Dubai

Petrofac and the Dubai Petroleum Establishment (DPE) have entered agreement to invest in and develop a safety and technical training center in Dubai.

The Dubai Petroleum Training Centre (DPTC) will be managed and operated by Petrofac Training. The facility will meet the safety and technical training needs of the oil and gas industry throughout the Middle East as well as servicing the other industries within the energy sector, the joint venture says.

The center will be at DPE's headquarters in Dubai and is due to open this summer.

Premier Oil: Execution of shareholder agreements for EIIC JV

Premier Oil Plc and Emirates International Investment Co. LLC (EIIC) have formed two new joint venture companies to pursue the acquisition of upstream oil and gas assets across the Middle East and North Africa region. The new companies will be headquartered in Abu Dhabi.

The first JV, to be known as PREMCO, will be owned 49% by Premier and 51% by EIIC, and will hold all JV assets acquired in the UAE. In the event of a change of control of Premier Oil Plc, EIIC will have a pre-emptive right to purchase Premier's 49% of this JV at fair market value.

The second JV, to be known as PREMBV, will be owned 50% by Premier, 50% by EIIC, and will hold all JV assets acquired elsewhere in the Middle East and also in North Africa.

Senergy Ltd announce acquisition of Aberdeen-based Floyd & Associates

Leading oil and gas consultancy, Senergy Limited, has merged with Aberdeenshire-based Floyd & Associates. This continues the growth of Aberdeen-based Senergy as a diversified energy services organisation providing a holistic approach to field development. The new combined company will have a turnover in excess of £50 million and employ over 220 people.

Senergy Holdings chief executive, James McCallum, said: “The combination of the two companies will further develop Senergy’s extensive core skills in the global oil and gas sector and also enhance our diversification into alternative energy sectors such as offshore wind. We welcome such a highly respected organisation into our group.”

Floyd and Associates is one of the UK's leading independent project management consultancies in geohazard assessment, marine site surveys and rig positioning. In future Floyd & Associates will be known as Senergy Floyds and will operate under their existing management as a Senergy Group company alongside Senergy Oil and Gas, Senergy Alternatives and Senergy Investments. Daren Wallwork will continue as managing director of Senergy Floyds and will join the Senergy Holdings board.

This acquisition represents an exciting addition to Senergy's capabilities, linking further the subsurface and wells elements of the business and continuing Senergy’s development of its offering in integrated field development solutions. It is expected that there will be significant opportunity for worldwide growth and diversification for the combined group, including further acquisitions that will enhance the development of Senergy Floyds’ business.

Floyd & Associates managing director, Daren Wallwork, added: “We are delighted to be joining Senergy and this represents an exciting development for both companies. During the last five years Floyd & Associates’ market presence has rapidly expanded. The merger of our business with Senergy will enable us to fulfill our international aspirations and allow further expansion into other areas of business such as the energy alternatives market. The joining of the two companies will further enhance the services that we can offer our clients".

Svein Rennemo proposed as new chair of StatoilHydro

The nomination committee of StatoilHydro has nominated Svein Rennemo as the new chair of the board of directors. Marit Arnstad will remain deputy chair.

Ms Arnstad has been acting chair since Eivind Reiten resigned on 4 October last year. The election of a new chair will take place at an extraordinary meeting of StatoilHydro’s corporate assembly on 30 January.

Svein Rennemo (60) has since 2002 been chief executive of Petroleum Geo-Services ASA (PGS). PGS is a global oilfield service company involved in providing geophysical services. Mr Rennemo will according to agreement leave his position with PGS on 1 April. To avoid any conflict of interest he will not join the board of directors of StatoilHydro before that date.

Read full article here.

StatoilHydro: New oil discovery in Fram area

The results of an exploration extension drilled by StatoilHydro to well 35/11-B23-H in the Fram area of the North Sea indicate that a valuable discovery has been made.

This could be quickly phased in via fixed installations in the Troll and Fram areas. The well is about 10 kilometres north of the northern flank of the Troll West oil province.

Made in block 35/11 in production licence 090 in the eastern part of the Fram field, the discovery could extend into PL090D in block 35/12.

The well was drilled from Bideford Dolphin as part of a combined design which includes an exploration target as well as a horizontal producer in a previously proven Fram East reservoir.

“This type of combined well has become an important part of our exploration strategy in parts of the Norwegian continental shelf with existing infrastructure,” says Tom Dreyer, vice president for infrastructure-led exploration North Sea.

The extension of drilling into the exploration target also functions as a commitment well for PL090D, handed out as part of the 2005 awards in predefined areas (APA).This C East discovery contains both oil and gas, but crude accounts for the bulk of the volume.

Resources in place are expected to total some 100 million barrels of oil equivalent. That could yield recoverable reserves of 20-40 million boe, depending on such considerations as the recovery factor and reservoir thickness.

StatoilHydro has already proven oil and gas resources during recent years in the Astero and H North discoveries in the same part of the NCS.

Exploration in the Fram area – PL090 – has so far proven resources in place totalling more than 600 million boe. Oil accounts for three-quarters of this total.

Studies will now be launched to see whether the C East discovery can be brought on stream quickly, perhaps through a tie-back to installations such as Fram East or Troll C.

The licensees in PL090 and PL090D are StatoilHydro (operator) with 45%, Gaz de France with 15%, Idemitsu Petroleum with 15% and ExxonMobil with 25%.

StatoilHydro's Kizomba C development in Mondo Mondo field starts production offshore Angola

The Kizomba C development in block 15 off the Angolan coast started production from the Mondo field on 1 January 2008. The second phase consisting of the Saxi and Batuque fields will follow later in 2008.

Mondo production is expected to reach a plateau rate of 100,000 barrels of oil per day (bopd).

Production from the three fields (Mondo, Saxi and Batuque) in the Kizomba C Development is anticipated to plateau at a total of 200,000 bopd.

Eni SpA and Associates return back equity in Kashagan operations

KazMunaiGaz National Co. (KMG) is pleased to announce that agreement has now been reached with the entire Kashagan consortium in a new Memorandum of Understanding signed today.

The new Memorandum, which implements the Memorandum of Understanding signed on December 20, 2007, confirms the agreements tentatively reached in December regarding economic adjustments to the PSA and the operating model for future petroleum operations in Kashagan.

It also sets forth the agreement of all private Contracting Companies to transfer equity to KMG's subsidiary, bringing its participating interest in the PSA equal to that of the largest shareholders as of January 1, 2008. The parties will now proceed to draft and execute the appropriate amendments to the PSA. In the meantime, operations will proceed in accordance with the new arrangements.

With this successful end to the long and difficult negotiations which began last August, the way forward for the Kashagan Project has been found.

Winfield Resources Awaits Libya's Decision on Refinery Proposal

Winfield Resources Limited said that it has made a proposal for its own account to build, own and operate a new 300,000 bbl/day oil refinery at the Port of Ras Lanuf, in the Great Jamahiriya of Libya.

By letter dated Sept. 20, 2007 the company was invited to put forward a detailed proposal to the Libyan National Oil Co. (NOC) for the installation of a new stand-alone oil refinery at Ras Lanuf.

Based on such invitation, Winfield engaged KBC Process Technology Ltd. of Surrey, UK, under a services agreement (dated Nov. 12, 2007), to provide consulting services and technical support to include: Refinery Configuration Review; Refinery Product Yields and Qualities; Marketing Plans; Technology Selection and Licensor Selection; Energy Efficiency Review; Project Design Basis Document review and Project Schedule strategy review. To date, Winfield has paid KBC $120,000 under the Service Agreement.

Winfield and KBC representatives met with NOC representatives on Nov. 28, 2007, and presented a technical presentation on the proposed refinery configuration, product yields and technology. Winfield now awaits a formal response from the NOC as to whether it will grant the company conditional approval to its Ras Lanuf EPMC Refinery proposal. If conditional approval is granted by the NOC, the company will move forward to investigate sources of crude oil feedstock and financing.

Winfield confirmed that it has not entered into, settled or negotiated any agreements (oral or written), or any agreement in principle, and that a Change of Business has not yet been triggered (as such term is defined in section 1.1 of TSX-V Policy 5.2). It also be noted that with respect to the proposed refinery at Ras Lanuf, Winfield has no firm commitment from the NOC, and the company is only at the stage where it is investigating the opportunity. There is no assurance that Winfield will receive conditional or final approval from the NOC to construct and operate a refinery at Ras Lanuf on terms acceptable to the company, or at all. There is also no assurance the company will be able to source crude oil feedstock or financing for such refinery project.

Mazeikiu Nafta started sales of Sulfur-Free grade 95 gasoline

This week Mazeikiu Nafta, the only Refinery in the Baltic States, has offered its customers – wholesale and retail networks – sulfur-free gasoline grade 95.

Sulfur-free gasoline, as called in accordance with the EU requirements, is low-sulfur gasoline containing sulfur compounds up to 10 ppm (10 mg/kg). The Company started producing and supplying gasoline grade 98 to all Lithuanian customers in 2004. In 2005 the Company commenced deliveries of sulfur-free gasoline grade 95 to the Polish and Estonian markets, and with commissioning of the gasoline desulfurization unit in August 2007, all gasoline grade 95 produced by Mazeikiu Nafta and delivered to the markets of the Baltic countries and CIS already meets the EU requirements to be effective on January 1, 2009. The Company will discontinue production of gasoline with the larger sulfur content – gasoline of all grades will be sulfur-free.

Dresser-Rand wins Angola FPSO contract

Dresser-Rand has won a $44-million contract to supply advanced turbomachinery for the FPSO that will be installed on the Pazflor field offshore Angola.

Under the terms of the contract, Dresser-Rand will supply gas compression packages and four DATUM centrifugal compression trains. Two trains will be driven by gas turbines and the other two will be driven by electric motors.

"This award is representative of the value our technology brings to our clients," says Jesus Pacheco, Dresser-Rand's executive VP of new equipment worldwide. "Our DATUM technology adds value to Total by reducing the weight and footprint of the compression system, as fewer casings are required. It also maximizes gas throughput compared to competitor offerings as a result of the high efficiency of the compressors."

Pazflor's floating production unit will operate in block 17 and will be designed to process 200,000 b/d of oil and store about 1.9 MMbbl of crude. First oil production is expected in 2011.

Poland's Petrolinvest to Buy 6 Kazakh Peers

Polish upstream oil venture Petrolinvest said its prospective oil resources should rise 130% thanks to acquisitions of Kazakh oil assets it plans to seal this month.

Petrolinvest said in a statement today it plans to raise its capital by up to 70% to gain control over six Kazakh exploration and oil production companies in return for its own shares.

"Bourgas-Alexandroupolis Pipeline" three-party agreement signed in Athens

Representatives of energy companies from Greece, Bulgaria and Russia signed in Athens a three-party agreement for the establishment of an international company for the construction of the oil-pipeline Bourgas-Alexandroupolis.

The establishing agreement will probably be signed in Sofia on January 17 during the visit of the Russan President Vladimir Putin to Bulgaria.

The agreement signed on January 10 in Athens, was signed by the deputy chief of Russian Transneft, Vladimir Nemtsev, as representative of the Russian "Truboprovoden Consortium Bourgas-Alexandroupolis", managing director of Bulgargaz, Lyubomir Danchev, member of the BoD of Greek HELPE-THRAKI S.A., Theodoros Vardas and the Greek Minister of Development Mr. Christos Folias.

According to an agreement signed between Greece, Bulgaria and Russia on March 15 2007, the owner of the Bourgas-Alexandroupolis oil-pipeline would be the new International Project Company (IPC) "Transbalkan Oil Pipeline".

In December 2007, a protocol was signed in which the three parties agreed that this company would also construct the pipeline. The new company would be registered in the Netherlands.

Russian "Truboprovoden Consortium Bourgas-Alexandroupolis" would own 51 per cent of the shares of the new company. The Bulgarian company Bourgas-Alexandroupolis BG would own 24.5 per cent of the shares in the new company. While the Greek share of 24.5 per cent would be split between the HELPE-THRAKI consortium(Hellenic Petroleum, Latsis Group, Copelouzos Group), which would own 23.5 per cent, and the Greek State, holding the remaining 1 per cent.

The project was estimated to be worth $1.2 billion. Construction was expected to start in 2008, with the pipeline going into production in 2009.

BP Exploration & Production choice for Honeywell automation services

Honeywell has signed a six-year agreement with BP Exploration & Production to provide Main Automation Contractor services at the company's new and existing facilities. Honeywell will help BP E&P accelerate production schedules and improve efficiency in the facilities by "integrating all levels of plant operations and automating critical processes."


"Automation will be a key to streamlining operations and improving business performance as we move into the future," says Tim Bass, director of procurement and supply chain management, projects and engineering. "Honeywell has the tools and experience to enable BP to implement its Automation strategy, improving integration and the operating efficiency of our assets."

DEPA says interruption of Natural Gas flow from Turkey will not affect operations

Regular natural gas shipments from Iran to Turkey will resume next week, possibly on Monday, following a same-day confirmation that gas shipments to Greece, via Turkey, from Azerbaijan have ceased as well, a negative development two months after a Turkey-Greece natural gas pipeline was inaugurated in November 2006.

Reports cited statements by Iranian officials claiming that weather conditions in Iran caused a decrease in gas shipments to Turkey and not a total interruption.

Meanwhile, other reports said Turkey will import electrical power from Greece, given that the shortage in natural gas was reportedly straining power output in the neighbouring country. According to reports, 50 percent of power generation in Turkey is fuelled by natural gas. A figure of 185 MW of imported electricity for January and February was cited.

Officials with Greece's state-run natural gas utility (DEPA) on Wednesday noted that the development will not affect the country's production, as supplies from other providers (Russia, Algeria) are uninterrupted, while reserves of liquefied natural gas (LNG) are also available from the utility's Revythoussa isle site.

In an announcement, DEPA said it is in direct contact with its Turkish partner, BOTAS, to ensure the fastest possible resumption of natural gas supplies from Turkey.

Finally, energy giant Gazprom said it increased natural gas shipments to Greece by up to 1.5 million cubic metres a day, beginning in late December, and following a request by Athens. Gazprom said it also increased supplies to Turkey last December by roughly eight million cubic metres a day.

StatoilHydro: Promising discovery in Gulf of Mexico

StatoilHydro has, together with the operator ExxonMobil, discovered hydrocarbons 265 miles southwest of New Orleans.


"This is a promising oil discovery," says Helen Butcher, StatoilHydro’s exploration manager for deepwater Gulf of Mexico.

Patrick Zuber new Superior Executive VP of International Sales

Superior Energy Services has appointed Patrick Zuber as executive VP of international sales. The company also has named Charles Hardy as executive VP of marine services.

Canada's National Energy Board appoints Pradeep Khare as new Ops Chief

Gaetan Caron, Chair and CEO of Canada's National Energy Board (NEB), has announced the appointment of Pradeep Khare as the regulator's new Chief Operating Officer, effective Feb. 4.

Khare most recently served as the Vancouver-based Regional Director General for Environment Canada. He holds a master's degree in chemical engineering from the University of Saskatchewan and has held senior posts with the federal and provincial governments.

Khare's previous positions include Deputy Commissioner and Chief Operating Officer for the B.C. Oil and Gas Commission and Assistant Deputy Minister for Aboriginal and Immigration Programs with the Government of B.C.

Mike Burdon joins AfLNG as Commercial Director

Gasol plc, whose strategic objective is to become the premier independent liquefied natural gas (LNG) company creating value by connecting LNG produced in West and Central Africa to high-value growth markets in the US and Europe, is pleased to note the appointment of Mike Burdon as Commercial Director of African LNG (AfLNG), the LNG project company in which Gasol has a 20 per cent shareholding and an option to acquire the remaining 80 per cent.

Mike Burdon, an energy sector expert with more than 20 years' international experience in commercial, business development and technical roles, has an impressive track record in LNG, most recently heading up the London LNG practice at Poten & Partners (UK) Ltd, the energy consultant and ship broker. Key assignments at Poten & Partners have included LNG sales transactions from West Africa and the development of upstream energy strategies and regasification terminals.

Mike Burdon, who began working at AfLNG this week, has previously been employed by oil and gas majors including Phillips Petroleum, Conoco, Hamilton Brothers Oil Corporation and British Gas. Between 2000 and 2006, he worked as an independent consultant to the oil and gas industry, where his assignments included LNG terminal development and the development of a European LNG strategy for a US independent.

Aramco to start up Khursaniyah oil field

Saudi Arabian Oil Co., the world's largest oil company, said it is in the process of bringing on stream its 500,000-barrel-a-day Khursaniyah oil field development, originally due for completion in late 2007.

"Pre-commissioning activities are currently underway. The facility will be brought online upon completion of commissioning activities," Aramco said in an emailed statement without providing a reason for the delay or a revised timeframe.

The project, to produce 500,0000 barrels a day of Arabian light crude, was initially estimated to be completed by the end of the fourth quarter of 2007, in line with the project's original schedule.

The development covers the onshore Abu Hadriyah, Fadhili, and Khursaniyah fields, and will also add capacity to process 1 billion cubic feet a day of associated gas and 80,000 barrels a day of condensates.
The Khursaniyah project is part of Saudi Arabia's plan to raise daily production capacity to 12.5 million barrels from just above 11 million barrels now by the end of the decade.

"Should the need arise prior to the completion of the project, Saudi Aramco stands ready to meet market demands with ample spare capacity including one million barrels of Arab light crude," the Dhahran-based company said in the statement.

Dow Jones Newswires

Mark L. Johnson new CEO of Max Petroleum

Max Petroleum, an oil and gas exploration and development company focused on Kazakhstan, is pleased to announce the appointment of Mark L. Johnson as Chief Executive Officer and a member of the Company's Board of Directors with effect from 22 January 2008.

Mark has over 26 years' experience in the oil and gas sector, including 24 years with major oil and gas companies. With degrees in both mechanical and petroleum engineering, Mark has held senior positions with British Gas, Chevron, Texaco and Transworld E&P, with global experience in Kazakhstan, the Middle East, West Africa, Trinidad & Tobago, and the United States.

Mark was the Managing Director of the North Buzachi project in Kazakhstan for ChevronTexaco from 1998-2003, where he established the first Texaco subsidiary operating in Kazakhstan, initiated production operations that grew to more than 9,000 barrels of oil per day ('bopd'), secured government approval to further increase production to 42,500 bopd and ultimately negotiated the sale of the subsidiary to the Chinese National Petroleum Company in 2003.

Max Petroleum also announced today plans to restructure its Board of Directors. In conjunction with Mark Johnson joining the Company as a Director and CEO, Jim Jeffs will move to non-executive Chairman of the Board, Lee Kraus and Bob Holland will resume their roles as non-executive Directors, and Michael Young will join the Board as Finance Director. Messrs. Jeffs, Holland, and Kraus will form an executive committee of the Board, and Mr. Kraus will continue to oversee the Company's farm-out process. The Company will provide the information required to be disclosed under Schedule 2(g) of the AIM Rules for Companies for Messrs. Johnson and Young regarding their appointments to the Company's Board in a separate announcement which will follow as soon as practicable.

Crosstex Energy appoints Leldon E. Echols to Board of Directors

Crosstex Energy, L.P. and Crosstex Energy Inc. announced today that Leldon (Lel) E. Echols will join the Board of Directors of Crosstex Energy GP, LLC and the Board of Directors of the Corporation to fill the vacancies created by Frank M. Burke Jr., who announced his retirement in 2007.

Burke began his board service with the Crosstex companies in 2003 and has served as chairman of the Audit Committees of both companies. A noted author on energy taxation and financial reporting for energy companies, he led the companies' development of financial reporting and audit practices during times of significant growth and change.

Echols brings 30 years of financial and business experience to Crosstex. After 20 years with accounting and consulting firm Arthur Andersen LLP, which included serving as managing partner of the firm’s audit and business advisory practice in North Texas, Colorado and Oklahoma, Echols spent six years with Centex Corporation as executive vice president and chief financial officer. He retired from Centex Corporation in June 2006. Since then, he has continued to serve on company boards, managed private investments, and pursued public service and charitable endeavors. Echols is a member of the boards of directors of another publicly traded company, Trinity Industries, Inc., and two private companies, Roofing Supply Group Holdings, Inc. and Colemont Corporation. He also served on the board of TXU Corp. where he chaired the Audit Committee and was a member of the Strategic Transactions Committee until the closing of the recently completed private equity buyout of TXU.

Crosstex Energy, L.P., a midstream natural gas company headquartered in Dallas, operates over 5,000 miles of pipeline, 13 processing plants, four fractionators, and approximately 200 natural gas amine-treating plants and dew point control plants. Crosstex currently provides services for over 3.5 Bcf/day of natural gas, or approximately 7.0 percent of marketed U.S. daily production.

Ukraine's Naftogaz on the brink of bankruptcy

Ukraine's state gas monopoly Naftogaz is on the brink of bankruptcy, premier minister Yulia Tymoshenko told Interfax following a meeting with the group's new head, Oleg Doubina. Doubina estimates that losses have doubled to U.S. $1 billion in 2007 from a year earlier.

Serbia to seek fair price for Naftne Industrije Srbije

Serbian President Boris Tadic has said Serbian oil monopoly Naftne Industrije Srbije (NIS) must not be sold at a price below its worth.

"We cannot sell NIS for nothing, or surrender it to any partner for political reasons," Tadic said in an interview with daily Dnevnik. "That is why we shall be negotiating with a potential partner. These negotiations will not be simple but will offer a great opportunity."

He said negotiations with Russia's Gazprom will be difficult, adding Serbia will carefully weigh the Russian group's offer. "If we bring the negotiations to a successful end, Gazprom could become the strategic partner of NIS," Tadic said. "If not, we shall have to search for a partner elsewhere."

Gazprom signed a letter of intent with Serbia in December 2006 to build a 400-kilometer gas pipeline across the country from its border with Bulgaria to the frontier with Croatia. In exchange, Gazprom is keen to secure majority stakes in NIS and electricity monopoly Elektroprivreda Srbije (EPS), which is also up for privatisation. Serbia expects income from the pipeline project in the form of transit fees, in addition to money earned from construction and maintenance of the pipeline.

At a special session on Dec. 29, the Serbian government adopted a platform for negotiations on Gazprom's offer. Tadic said he would support an arrangement with Gazprom in return for stable gas deliveries to Serbia over the next 30 years and if the interests of the NIS employees and public finances are respected.

But minister for the economy Mladjan Dinkic said the sale of NIS should be separate from the gas pipeline agreement. "Instead of excluding NIS from this arrangement and announcing a qualification tender that ends with an auction, at which they would get a price five to eight times higher than what is being offered, the government has rejected the proposal of the ministry for the economy and has opted for making a direct deal," Dinkic told the Politika daily.

Dinkic claimed Gazprom's offer requires Serbia to sell 51 pct of NIS' capital for 400 million euro, which is half of the company's book value. Austria's OMV AG is also reportedly interested in taking part in the privatisation of NIS together with Hellenic Petroleum.

Russian businesses have acquired several Serbian companies, among them tourist agency Putnik and major industrial engineering company Termoelektro.