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Russian ministry seeks review of oil deals
>By Arkady Ostrovsky in Moscow
>Published: May 25 2006 13:34 | Last updated: May 25 2006 19:13
>>

Russia’s natural resources ministry called on Thursday for a review of the two largest foreign oil projects in the country, even as senior Russian officials sought to assure EU leaders that Russia was a reliable energy partner.

The ministry said the legal agreements underpinning oil and gas developments on Sakhalin island, on Russia’s eastern flank, were ineffective and should be reviewed.

It said it planned to ask the Duma, Russia’s lower house of parliament, to review production-sharing agreements signed in the 1990s, saying they were damaging Russia’s national interests.

Any review of PSAs would threaten the two largest foreign investments in Russia: the Sakhalin-1 project, on which ExxonMobil and its partners have already spent nearly $5bn; and the Sakhalin-2 project, in which Royal Dutch Shell and its partners are investing $20bn.

However, two Russian ministers insisted separately that all Moscow’s agreements with foreign energy companies would be honoured, suggesting a rift had opened within the government.

Speaking on the margins of a European Union-Russia summit in Sochi, Viktor Khristenko, energy minister, told the Financial Times that there were elements of the agreements Russia was no longer happy with.

“If I was signing them again today, I would do it differently,” he said. “But they are legal obligations for us. We are fulfilling them and we expect our partners to fulfil them.”

German Gref, Russia’s economy minister, added: “We can only work in the framework of the existing agreements.”

Chris Finlayson, the head of Shell’s Russia operation, said the company had been recently told by the energy ministry that existing PSAs would be honoured. “I have no reason to doubt this,” he said.

Nevertheless, the statement by Russia’s resources ministry comes as the Kremlin moves to reassert control over energy resources, helping state-controlled companies such as Rosneft and Gazprom gain influence.

Affiliates in Rosneft hold a 20 per cent stake in Sakhalin-1. Under the terms of an asset swap agreed last year, Gazprom is also set to acquire a 25 per cent state in Sakhalin-2.

Russia’s natural resources ministry also said it would start legal proceedings against Total, the French oil company, for allegedly violating its licensing conditions for the development of the Kharyaga oil field in the north of Russia.

Rinat Gizatulin, the spokesman for Yuri Trutnev, the minister for natural resources, yesterday told the FT: “We have all the evidence that Total’s use of the oil field is not effective.”

He said Total was unlikely to win a tender to participate in the development of a massive Shtokman gas field in the Barents Sea.

Total declined to comment.