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Russia says no to foreign hand on its oil
As crude prices soar, the world is beating a path to the Kremlin's door in hopes of buying into the vast and largely untapped oil and gas reserves that lie beneath the Siberian tundra.
As crude prices soar, the world is beating a path to the Kremlin's door in hopes of buying into the vast and largely untapped oil and gas reserves that lie beneath the Siberian tundra.
But although the welcome mat is still out for foreign oil interests, experts say the door is closing fast as the Kremlin moves to clamp its own control over Russia's main source of income and global influence, its energy sector.
"The Russian government's energy strategy is increasingly xenophobic," says Mikhail Krutikhin of RusEnergy, a Moscow oil consultancy. "Even friendly countries, like India, will find it harder than ever to get past the talking stage when it comes to investing in Russian oil".
Indian Petroleum Minister Mani Sha-nkar Aiyar arrives in Moscow next Monday to press ONGC's case for acquiring a $2-billion, 15 per cent stake in Yuganskneftegaz, the production unit of Yukos, the Russian oil major being broken up and sold to pay $28-billion in back taxes.
Chinese officials have been courting Moscow for months, also hoping for a piece of Yugansk, a Siberian oilfield complex that pumps more crude daily than some OPEC countries.
In a closed auction last December Yugansk was sold to Russia's state oil company Rosneft for $9.6-billion, about half its book value.
A group of Chinese banks lent Rosneft $6-billion to close the deal, but got nothing more than promises of future oil deliveries in return.
Russia, the world's second-largest oil producer, may also contain the biggest untapped reserves. In the past decade, potentially huge deposits have been found, but not yet fully explored, in eastern and northern Siberia.
Energy-thirsty economies such as India and China are racing to acquire a stake in Russian assets, hoping for guarantees of future supply.
India has already invested $1.8-billion stake in the giant Sakhalin-1 oil and gas project on Russia's Pacific coast.
During his Moscow talks next week, Aiyar will probe the possibilities for buying into Sakhalin-3, a huge oilfield that US major ExxonMobil was hoping to develop until its offer was rebuffed by the Kremlin last year.
"The Kremlin does not want to directly say no to Chinese or Indian companies, because these countries are important partners in other areas," says Michael Heath of Aton, a Moscow brokerage group. "But in the past, whenever there's been a major privatization, the foreigners always get frozen out in the end".
That happened to China's state-owned National Petroleum Company two years ago when it tried to buy a stake in Slavneft, the last big Russian oil asset to be privatized.
"The Russian government warned the Chinese that it wouldn't be able to protect their interests if they proceeded in bidding for Slavneft," says Krutikhin. "The message was that we want the Chinese as customers, we want them to lend us money, but they won't actually be allowed to own anything in Russia".
Last week Russia's Natural Resources Ministry decreed that no foreign-owned company will be permitted to participate in auctions for oil or mineral exploration and development licenses in the coming year. Experts say even tougher rules are likely to be enacted soon.
