Top official says Russian energy firms can go it alone


MOSCOW (AFP) – Russian energy firms can develop the country's immense oil and gas fields on their own, a top official said Friday, declaring that the era of production-sharing agreements with foreign companies was over.

The comments by Deputy Prime Minister Igor Sechin were the latest sign that Russia is determined to maintain tight state control over the energy sector even as its development has been slowed by the global economic crisis.

"Current Russian production-sharing agreements will continue to go ahead but the system of production-sharing agreements will not have such importance in the future," Sechin said, quoted by Russian news agencies.

"Our companies are able to develop on their own. They have sufficient experience and technical capacities," added Sechin, a close ally of Prime Minister Vladimir Putin who oversees the country's energy sector.

Sechin was speaking at the annual general meeting of Russia's biggest oil firm Rosneft, where he is also chairman of the supervisory board.

In the 1990s, the government and foreign companies signed numerous production-sharing agreements, or PSAs, giving Western oil majors access to vast untapped fields at a time when Russia was in a deep economic slump.

Under a PSA, the government guarantees a company stable conditions in exchange for a profit-sharing arrangement.

However, the company keeps all the profits until the point when it has recouped its costs in developing the field and only afterward does it begin sharing the gains with the government.

In recent years, an increasingly assertive Russia has turned against PSAs and made a series of moves to wrest control of energy projects from foreign companies.

In one well-known case in 2007, a consortium led by British-Dutch oil major Royal Dutch Shell sold a majority stake in its Sakhalin-2 project to Russian state-run gas giant Gazprom after running into major legal difficulties.

Russian authorities had accused the consortium of environmental violations but analysts said the real target of Moscow's anger was the PSA signed in 1994 that allowed Shell to reap profits from the immense oil and gas project.

Many of Russia's energy reserves are in frigid and remote locations lacking basic infrastructure and are expected to cost billions of dollars (euros) to develop.

Sechin's optimistic assertion that Russian firms can develop fields on their own comes at a time when the global economic crisis has slashed the profits of Russian energy companies and threatened their investment plans.

In one sign of slowing investment, Gazprom said Friday that it was delaying the launch of the huge Bovanenkovskoye gas field in the Arctic from 2011 to 2012 because of slumping demand.

"The global economic crisis has caused a negative influence on demand for gas in Russia and abroad, as well as on forecasts for its consumption in coming years," Gazprom said in a statement announcing its decision.

Bovanenkovskoye, estimated to contain 4.9 trillion cubic metres of gas, is part of Gazprom's multibillion-dollar "megaproject" on the Yamal Peninsula in the Russian Arctic. The project is eventually expected to supply gas to Europe.