The Pipes of Contention - 21 October, 2002

Russia’s energy cooperation with American companies will not be right, not even when Russia and America work together. Russians keep thinking that their American partners  want to get more and more money for themselves only. This is wrong.

The expert committee for metallurgy attached to the committee for industry of the Russian State Duma expressed its concern over foreign oil companies that deal with the international oil projects Sakhalin 1 and Sakhalin 2 (Sakhalin is an island in the Far East of Russia).

Russian deputies accused respectable international companies  Exxon Mobil and  Royal Dutch-Shell   of their unwillingness to attract Russian pipe producers to cooperate in the projects.  It seems that there is nothing  surprising about it, especially from the point of view of business. Why would international capitalists worry about Russian metallurgists? They don’t care about them. They have their own companies, and they know the quality of their pipes. Furthermore, the developed countries are currently experiencing an industrial setback.

However, pursuant to the law “On the Production Division Agreement,”  an investor is supposed to purchase no less than 70% of equipment, materials, and services from Russian contractors. There will be no cooperation otherwise. Respectable international oil companies were aware of this and agreed upon the conditions. Sakhalin oil is a great attraction after all.

However, the Russian deputies were wide awake, which was good, as the people elected them to parliament so that they would stand up for their interests, not for the Americans’ or anyone else’s interests. All the reports pertaining to the production agreements proved that no company fulfilled the above-mentioned condition. In addition, the majority of pipes for the Sakhalin 1 and Sakhalin 2 oil projects  were delivered from Japan. Japanese pipe producers have already won the tender for the delivery of 70 thousand pipes for the Sakhalin 1 project. Investors want to gain access of Sakhalin oil as soon as possible. That it why there might be no place for Russian pipes.

Foreign oil companies tried to explain to the Russian deputies that it was not their fault at all. They also tried to explain that they observed the Russian law. It seems that this can not be said about Russian metallurgists. Russian pipe factories cannot manufacture  pipes that meet  international requirements (API standards and others). They break the Russian law by this, so Russian deputies must be furious with Russian pipe producers, not foreign oil companies. Yet, the deputies won’t listen to the voice of the reason.

It has recently become known that  the State Duma was working on a package of amendments to the law about production agreements. For example, the deputies intend to institute a norm, pursuant to which investors will profit only  if they use Russian equipment. If the Russian equipment is not good, then  they will have to pay for the equipping of the Russian deposits.

Why do  Vladimir Putin and Prime Minister Mikhail Kasyanov get upset about the low level of investments in the Russian economy? This is not going to stop in this case, no matter what officials might promise. If an investor does not feel comfortable,  there will never be any investments made.

Kira Poznakhirko
PRAVDA.Ru

Translated by Dmitry Sudakov