Oil and Gas Disorder Ended?

Resource companies to undergo thorough examination, the most attractive fields to be closed
The government policy in natural resources extraction is becoming more clearly outlined. To all appearances, Gazprom is not to be reformed; at present analysts are pleased with the first financial statement of the state-run company done according to the world standards. Gazprom has started denying access to the gas pipeline for independent gas producers. The RF Nature Ministry intends to conduct checks not only of foreign oil producers such as ExxonMobil and Shell, but even Russian companies, Yukos, to be more exact. Finally, explored but undeveloped fields that used to be in the focus of attention of Russia's largest oligarchs, have been closed temporarily. What does this mean?

Gazprom published its interim financial statement done according to the international standards on Friday. The document has been estimated as extremely positive by analysts who declared that the state-run monopoly had overcome a crisis. At that, Gazprom itself has never admitted it has experienced any crisis at all. Meanwhile, judging from the Gazprom financial statement, the gas monopoly has improved the basic positions in the financial statement and in the profit and loss statement. In other words, Gazprom is developing into a company with increasing money flows. This is obviously a response to the EU that has recently demanded that the gas monopoly must be broken up.   

Another Gazprom move was performed on Friday: the gas monopolist disconnected independent gas producers from the main pipeline. Independent gas producers, the Union of Independent Gas Producers to be more exact, voiced their resolute protest and blamed Gazprom for unfair competition. To all appearances, small independent gas companies are terribly scared that in exchange for the access to the gas pipelines the gas monopoly will dictate at what price they must sell extracted gas. The situation does not resemble "forced uptake" so far, but if it happens, the small companies will give up their tiny independence. In other words, the situation may be treated as the state control in force.

However, it is not ruled out that the statements are just the voice of Gazprom's opponents, who slander the state-run company that maintains the pipeline system of the former Soviet Union and replenishes the budget. It is interesting that among companies disconnected from the pipeline is the Rospan, the joint possession of the Tyumen Oil Company (TNK) that has merged with British Petroleum and Yukos that has merged with Sibneft and is planning to merge with US's ExxonMobil.

PRAVDA.Ru has already reported the troubles that the US company ExxonMobil experienced at the end of the past week. It has been included in the list of "enemies" of Russia's Natural Resources Ministry and is now ranked together with another obstinate foreign company, Royal/Dutch Shell. The RF Natural Resources Ministry intends to conduct thorough examinations of both companies; Deputy Natural Resources Minister Alexander Povolotsky has already warned the management of the companies of the examinations to come. What is more, with a view to examine the companies' activity in Russia, the Natural Resources Ministry is to create a special authority, the Coordination Council for Control over efficient nature management. It is no doubt that after focusing on the foreign oil giants the new authority will also examine other oil companies of Russia. In fact, the ministry does not make any secret of this intention.

It is an open secret that companies extracting resources in Russia disregard the conditions stated in their licences. At different periods, the Natural Resources Ministry registered violations of this kind at branch establishments of LUKOIL, Yukos and even Gazprom. But the ministry was helpless to change the situation when heads of the companies were welcome in the Kremlin and could settle their problems in the offices of high-ranking officials. But the situation has changed and oligarchs are no longer welcome guests in the Kremlin, and the number of violations registered at their companies is still rather high. They are not used to a different mode of working. Do you think that having committed no violations the shareholders of the oligarchs-owned companies could have their fortunes of several billions?

This is interesting that Royal/Dutch Shell Group is almost the sole investor in the Sakhalin-2 oil and gas project; ExxonMobil is the actual operator of the Sakhalin-1 project. It is already known that this company was rejected a license for the Sakhalin-3 project. ExxonMobil is now said to be the most likely purchaser of a large shareholding of YukosSibneft. So, it is not a surprise at all that Yukos itself is to undergo examinations of the RF Natural Resources Ministry.

An official statement of the Natural Resources Ministry says that all the infrastructure of Yukos will be subject to examination. Thus, the following conclusion can be reached: the disorder that has reigned in the Russian oil and gas production is over. The state is retrieving the control over natural resources.

The forthcoming conservation of Yakutia's richest oil-gas condensate field, Talakany, is another example of this. State-run monopolies such as Gazprom and the oil oligarchs with Mikhail Khodorkovsky at head used to seek permission to develop the field. A tender conducted among the companies for the right to develop the field was several times cancelled by the Natural Resources Ministry for some good reasons. The other day, the RF Natural Resources Ministry has issued a statement according to which JSC Lenaneftegas must hand in the license for development of Talakany and the field itself must be temporarily closed.

In November 2002, Russian oil oligarchs realized that they were losing the Talakany oil-gas condensate field and sent an angry letter to Prime Minister Mikhail Kasyanov. The letter was signed by Yukos chairman of board Mikhail Khodorkovsky, Sibneft President Yeugeny Shvidler and Deputy Chairman of Board of TNK German Khan. They explained that they were extremely interested in development of the promising field and asked the prime minister to crack down on the Natural Resources Ministry. But the actions of the ministry were not investigated then as other companies claiming to the field appealed the Natural Resources Ministry and blamed Yukos, Sibneft and TNK for violation of the auction terms. What were the claimants? No names of the companies were officially published, but Mikhail Khodorkovsky and Yugeny Shvidler insisted those were Rosneft and Gazprom, because their branch establishments also appealed to participate in the tender.

Why are these fields being temporarily closed by the Natural Resources Ministry? It is supposed that reserves of the Talakany oil and gas field make up approximately 124 million tons of oil and 47 billion cubic meters of gas. One of the main conditions of the tender was that the winner must invest $150 million during the first year of development and not less than $200 million during the second year. It was mandatory that the winner must develop a new oil refinery close to the field. It is believed that $4.277 billion must be spent on realization of the project within eight years.

It is known that Russian oil giants strongly object to construction of new oil refineries in Russia. They are sure that Russia must increase the crude and gas production for further refining abroad. Unlike the oil giants, Rosneft, Surgutneftegaz and Gazprom want to have refining facilities of their own and increase the end product share. Russia President Vladimir Putin approves of this decision. Consequently, such is the government policy with respect to the fuel and energy complex. This may serve an explanation why Yukos and Sibneft are experiencing problems now.