Russian ministry looks to widen ban on foreign control of fields

Russian ministry looks to widen ban on foreign control of fields

Moscow (Platts)--6Jun2006

Russia's natural resources ministry has proposed reducing significantly
the size of gas fields which can fall in a so-called "strategic reserves"
category from 1 trillion cubic meters of gas to 75 Bcm to put more acreage out
of reach of foreign companies, Russia's daily Vedomosti said Tuesday.
"The criteria for gas fields [to become "strategic"] is reduced to 75
Bcm. [New] criteria for oil fields is yet to be defined but it will be less
than [current] 150 million mt (1.1 billion barrels)," Russia's deputy natural
resources ministry Yuri Tyomkin was quoted as saying.
"Criteria [for oil fields] will take into account recoverable reserves
rather than total reserves, i.e. [150 million mt] is to be divided by 3," he
added.
Russia's government is considering criteria for reserves to be defined as
"strategic" within a framework of a new subsoil draft law. Companies with
foreign ownership of more than 49.5% will be barred from bidding for strategic
fields and will be able to take part in the development of such fields only as
minority partners.
The draft also suggests that if a foreign company discovers a strategic
field it should sell at least a 50% interest in the project to a Russian
entity in order to receive rights to develop that field.
Tyomkin did not say when the draft law is expected to be submitted to the
state Duma, the lower chamber of Russia's parliament. But he said the law
might still be passed this year, local media reported.
The Duma had repeatedly postponed consideration of the subsoil draft law,
first planned for October 2005, after the natural resources ministry asked for
more time to finalize criteria for defining strategic fields.
Initially, Russia considered its fields to become "strategic" if their
reserves exceed 150 million mt of crude oil or 1 trillion cu m of gas.
In December 2005, Russia's gas monopoly Gazprom submitted to the
government "requirements" to improve the subsoil draft and suggested
considering "strategic" fields with reserves amounting to 60 million mt of oil
and 75 Bcm of gas, a source in the company told Platts at the time.

NEW LAW MIGHT MAKE 20 OIL/GAS FIELDS "STRATEGIC"
If the new criteria are adopted by the Duma, some 20 oil and gas fields
which have not being developed at the moment will become strategic, the
newspaper said, citing an unnamed official with Russia's natural resource
fund.
But the number of strategic fields might rise up to a hundred, after new
blocks in East Siberia as well as offshore Sakhalin Island in Russia's Far
East and in the Arctic are explored, he added.
Under the previously considered criteria, only a few fields were set to
become "strategic", including Roman Trebs and Anatoly Titov oil fields, both
in the Yamal region of northern Russia, Chayandinskoye oil and gas field in
East Siberia, as well as the Sukhoi Log gold deposit and the Udokan copper
deposit.
Tyomkin also said that the natural resources ministry was considering the
possibility of including nickel deposits among strategic natural resources,
local media reported. "All large and unique" oil, gas, gold and copper
deposits will also be considered strategic, Tyomkin said.
The new subsoil law is expected to attract more investments into the
production of mineral resources and to boost oil output growth more quickly
than the current planned rate of 1.8-2% over the next three years.
It provides for introduction of a graded mineral extraction tax to take
into account differences in fields being developed by companies. The bill also
envisages a tax holiday during the first seven years for new fields in
under-developed territories such as East Siberia or the Timan-Pechora oil
province in Russia's northwest, among other measures.

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