Royal Dutch Shell Plc  .com Rotating Header Image Russian chill cast doubts over new oil investment

Published: 04/06/2007 12:00 AM (UAE)

London: A frostier climate for private investors in Russia, holder of the world’s largest natural gas reserves, is likely to stop oil firms from pressing ahead with new projects there.

BP’s Russian venture is facing the loss of the licence for the Kovykta gas field. The move follows Kremlin pressure on projects involving companies like Royal Dutch Shell and Total.

“The big oil companies haven’t been doing much new in Russia, they have been seeking to hang on to what they’ve already got rather than signing new deals,” said Julian Lee, analyst at the Centre for Global Energy Studies.

“Private investors generally are finding life more difficult. There’s a lack of clarity for investors.”

Russia’s vast resources of oil and gas have prompted Western oil firms, facing increasing difficulties in gaining access to large sources of new reserves, to flock to Russia.

Now, the companies are finding the climate increasingly tricky and, in a shift in tone, some are indicating that new investment might be shelved.

ExxonMobil CEO Rex Tillerson said on Wednesday his company would likely need more clarity as to how Russia plans to treat foreign investors before it considers any new projects there.

Tillerson, whose company holds a stake in Russia’s Sakhalin-1 oil and gas venture, said the country is still going through the process of deciding what sort of control it wants to assert over its natural resources.

“Until that process is complete, my guess is it wouldn’t be real clear as to how we’d participate,” Tillerson said, speaking at a news conference after the company’s annual meeting.

Russia’s licensing agency on Friday postponed taking a decision whether to strip BP’s venture of the Kovykta licence by two weeks, a news agency reported.

Interfax agency quoted an unnamed source as saying the decision was postponed “due to the complexity of the issue”.

A withdrawal of the licence would not spell disaster for BP but would raise doubts about the future growth of its Russian venture TNK-BP, investors said last week.


“It casts a shadow over their ability to implement any greenfield projects in Russia, which will be important if they want to grow TNK-BP’s output,” said Ivor Pether, who manages $2 billion at Royal London Asset Management.

The battle for the $20 billion field follows state pressure on Shell’s Sakhalin-2 project last year and some analysts see it as part of a Kremlin move to consolidate major energy resources under state control.

For its part, Russia says it is not singling out foreign investors.

“Our approach to foreign and domestic investors is exactly the same,” Energy Minister Viktor Khristenko told reporters at an energy conference in Paris on Thursday.

While Exxon’s Tillerson said the situation needed more clarity, his counterpart at Shell said on January 26 that the company would continue to seek new business in Russia.

Jeroen van der Veer told reporters at the World Economic Forum in Davos that Russia had “a lot of oil, a lot of gas and we happen to know something about it.

“We will continue to look at all opportunities that we have and might be possible,” he added. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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