July 19, 2007

Russia -Britain : British investments in Russia's oil in dolldrums

The price of the question is too high
14:07 | 19/ 07/ 2007




MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - Russia will not revise its agreements with British investment companies developing its oil and gas fields because of the sharpening of relations between the two countries, Natural Resources Minister Yury Trutnev said Tuesday.

Trutnev was speaking at a meeting of the working group of the Advisory Council on Foreign Investments attended by representatives of foreign mining companies on July 17. As follows from Trutnev's words, Russia will maintain its present policy towards foreign investment companies: new fields will be developed under the eye of Russian state-owned companies, but foreign investors will be welcome as junior partners.

Companies in the news also attended. Last year Anglo-Dutch Shell was the biggest shareholder of the Sakhalin II gas project, but was obliged to cede a controlling stake to Gazprom following environmental complaints from the Natural Resources Ministry. On the other hand, Gazprom agreed to buy a controlling stake in the Kovykta gas condensate deposit in the Irkutsk Region from TNK-BP, a subsidiary of British Petroleum. TNK-BP had failed on its license agreement and risked losing the field without any compensation. Now it can return to Kovykta by repurchasing a 25% stake in the project under an agreement with Gazprom.

But as the diplomatic conflict between Russia and Britain sharpened, the future of British investments in Russia's oil and gas sector was again questioned. Trutnev dismissed these fears, saying that the Ministry would not revise investment agreements with British firms.

France's Total was luckier. Last week, to the surprise of many, it partnered with Gazprom in the Shtokman gas condensate deposit in the Barents Sea, one of the most promising fields in the world. The French obtained 25% of the company that will build the project's infrastructure and promised to invest billions of dollars. According to Gazprom spokesmen, other foreign companies, above all Norwegian and American ones, also have the chance to join the project later, but as Gazprom's junior partners, although foreign oil and gas giants would have liked more.

Ben Haynes, president of Exxon Mobil Russia, spoke on their behalf at the meeting. He pleaded for greater foreign access to Russian natural resources, licenses for new deposits and tax breaks to explore the most difficult of them. Remarkably, Western politicians have also been demanding greater access to Russian energy resources recently.

But Trutnev said Russia itself must control its new deposits, most of which are offshore. "The price of the question is too high," he stressed after the meeting. Russian companies Gazprom and Rosneft, controlled by the state, will develop the shelf, he said. "But this does not mean they cannot attract foreign companies," he added. He also turned down requests for tax breaks, saying they were unwarranted. "Drilling one to three exploratory wells is no problem for any serious company," he said.

With current high oil prices, the minister's remarks are to the point. Even with such restrictions, foreign companies can benefit from their investments in Russian oil and gas.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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