Kommersant: Russian Authorities to Create a Megacompany To Take Over the Russian Shelf

…Russian gas and oil giants Gazprom, Rosneft, and Zarubezhneft may be combined into a single government monopoly… 

Dec. 11, 2006
Such a Company

On Saturday Russian President Vladimir Putin held a meeting of the Russian Security Council at which a new strategy that would give the government control of gas and oil extraction from the Russian shelf was discussed.

It is hoped that the shelf will be Russia’s main energy resource base for the 21st century. To achieve this goal, the strategy calls for an end to joint-venture projects and a renewed focus on Russia’s home-grown strengths.

To that end, the Russian gas and oil giants Gazprom, Rosneft, and Zarubezhneft may be combined into a single government monopoly that would take over the shelf, which would mean new inspections and headaches for foreign operators already working there.

The reports for Saturday’s meeting were prepared by Natural Resources Minister Yury Trutnev and Industry and Energy Minister Viktor Khristenko. According to the Ministry of Natural Resources, the Russian shelf holds more than 100 billion tons of potential fuel, which by 2020-2030 will be the country’s main hydrocarbon source. The government is now concerned about how to consolidate its control over that wealth of energy resources.

The first item on the agenda is a careful inspection of the basis and legality of all licenses previously issued for the development of the shelf’s fields, as well as a review of the degree to which the operators of those projects are following the conditions of their licenses. The main operators in question are the foreign owners of licenses for projects on Sakhalin Island where extraction has already begun.

Rosneft, for example, holds only a 20% stake in the “Sakhalin-1” project: the rest of the shares are owned by ExxonMobil (USA), ONGC (India), and Sodeco (Japan). The operator of the “Sakhalin-2” project is Shell (55%); no Russian companies are involved in that project at all. All of the operators of these projects are now being warned that their extraction of oil and gas from the shelf is not compatible with Russia’s national interests.

The second question concerns the consolidation of shares and licenses by large Russian companies. Gazprom already owns the license for the Prirazlomnoe and Shtokman oil fields, while Rosneft, in partnership with the Finnish company VR and Chinese and Korean companies, is developing the “Sakhalin-3,” “Sakhalin-4,” and “Sakhalin-5” projects.

It is likely that the Security Council will charge Gazprom, Rosneft, and Zarubezhneft with creating a single government-owned company for oil and gas extraction on the Russian shelf. The question of the creation of such a company was first mooted in 2005, and the Natural Resources and Industry and Energy Ministries have often said that developing the shelf would be impossible without foreign investment but that Russian holdings have a hard time competing with foreigners on the Russian shelf. The megacompany would solve the problem by absorbing and channeling foreign participation in the development of the shelf.

The third issue is the demarcation of boundaries with Norway in the North Sea, with Ukraine in the Sea of Azov, and in the Caspian Sea. In the opinion of specialists from the Norwegian companies Statoil and Hydro, the “grey zones” of the Barents Sea hold large reserves of oil and gas, but the lack of clear boundaries makes studying and developing them impossible for either side.

Natalya Grib and Denis Rebrov 

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