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Financial Times: Moscow plans to reserve new oilfields for state giants

By Neil Buckley in Moscow
Published: January 23 2007 02:00 | Last updated: January 23 2007 02:00

Russia is preparing to reserve control of all new offshore oil and gas fields for Gazprom and Rosneft, its state-controlled energy giants, in what analysts are calling a further example of resource nationalism.

President Vladimir Putin held a meeting with senior ministers and the heads of the two companies last week in which they studied proposals to split future offshore projects between the two state giants, according to people familiar with the discussions.

The move would prevent both foreign companies and Russian non-state companies such as Lukoil from controlling future developments on Russia’s continental shelf.

Moscow’s latest step away from what was once one of the most liberal regimes for foreign energy investors comes just weeks after Royal Dutch Shell and two Japanese partners agreed to sell a controlling stake in the $20bn (€15bn, £10bn) Sakhalin-2 project – one of the world’s biggest offshore projects – to Gazprom. The deal followed months of pressure on the Shell-led consortium from regulators.

Russia’s natural resources ministry is also preparing to probe whether TNK-BP, the Anglo-Russian joint venture, is complying with the terms of its licence for the onshore Kovykta gas field in eastern Siberia. Analysts think the move could herald an attempt to transfer control of the field – or even of TNK-BP itself – to Gazprom.

The people familiar with last week’s meeting on offshore fields said a final decision had not been taken, but was possible within a month. The rule would come into effect through amendments to laws on subsoil and offshore resources.

The plans were first reported yesterday by Vedomosti, the Financial Times’ Russian sister paper.

Deutsche UFG, the Moscow-based investment bank, said in a report it believed the “main rationale behind the government’s decision not to allow foreign investors access may be yet another example of Russian energy nationalism”. But many analysts and bankers point out Russia’s moves to ensure domestic companies control its most lucrative energy resources only bring it in line with many other countries.

The latest proposals may only formalise what foreign companies had come to see as an unwritten rule that foreign control of big Russian energy projects was no longer possible.

They include a shift from open auctions to award new offshore field licences to closed tenders, which would give as much weight to technical and environmental considerations as to the value of bids.

Deutsche UFG warned Gazprom and Rosneft lacked the technology and expertise to develop offshore reserves – which could lead to a fall-off in the quality of offshore developments. Other analysts said the changes could mean lower receipts to Russia’s budget than if there were open auctions, and reduced transparency in how fields are allocated.

Copyright The Financial Times Limited 2007

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