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Russia to block foreign firms from auctions; could affect TNK-BP, Lukoil
A Russian move to bar foreign-controlled companies from bidding in this year’s auctions for strategic oil fields could have an impact on multinational firms such as BP and ConocoPhillips. Only firms with 51 percent Russian ownership will be allowed to compete.
TNK-BP, which is 50 percent owned by BP, would be ineligible to bid, according to Russian officials. And Lukoil, where ConocoPhillips is moving to increase its stake to 20 percent, may be out as well if other foreign shareholders put it over the 50 percent threshold.
Up for bids this year in the strategic category outlined by Russian authorities are fields around eastern Sakhalin Island, the Trebs and Titov deposits in the Timan Pechora region and leases in the Barents Sea. Mineral deposits for copper and gold are also covered by the new policy announced Feb. 10.
The Sakhalin 3 project is one of the big prizes. ExxonMobil and ChevronTexaco were part of a consortium that thought it had locked in that resource in 1993, but the government revoked the group’s rights last year and said it would be auctioned in 2005.
The new restriction came as foreign investors were already nervous about the Russian government’s increasing control of resource powerhouses. Gazprom is slated to become government-controlled as early as this month. Then there’s the Yukos matter, which shook investors’ confidence in private property protections and led to government control of another big chunk of the country’s reserves. Official: nationalization not the goal Russian officials defended the rule Feb. 16, as Natural Resources Minister Yuri Trutnev told a press conference that “any country has the right to use its natural advantages to achieve its national interests.”
But nationalization isn’t the goal, Trutnev said earlier, and Russia will need Western expertise and capital to develop its offshore resources.
“The competitive sector works more effectively than the regulated one,” Trutnev was quoted as saying by the Itar-Tass news agency. And Trutnev said that the government wasn’t making all resources off-limits to foreign companies, just “strategic fields.”
Along with foreign-controlled companies, Russian-owned firms registered offshore won’t be eligible for the auctions. That would include Sibneft, for one, and perhaps Lukoil, where Trutnev used to work.
The Russian government is now drafting a new natural resources law, and industry executives are hoping the foreign limits could be loosened when it is completed.
Russia provides one of the few opportunities available for majors shopping for huge deposits, and they have poured billions of dollars into Russian investments in recent years despite problems in the past.
On the other side, Russia’s economy and government have become more and more dependent on revenues from petroleum, so the government has an incentive to encourage foreign capital and expertise to keep production levels high.
—Allen Baker
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