Russian oil chief attacks Shell over project delay
Sunday 13 August 1995
Vladimir Tokarev, general director (the equivalent of chief executive) of Khantymansiyskneft- egasgeologia, admonished the companies for lack of progress on the two big fields in Western Siberia. "Neither Shell nor Amoco have done anything in the two years they have been involved in these projects," he said in London last week, through an interpreter .
Khantymansiysgeologia, as it commonly known, was recently privatised by the state. Its shares are now controlled by the workforce and management. Before the dissolution of the Soviet Union, oil exploration and production was controlled through separate administrative functions. When these groups had to survive independently, production companies retained their existing assets, while exploration entities were given all proven reserves not yet passed over to the production arms.
Khantymansiysgeologia has proven reserves of about 20 billion barrels of oil, all located in and around Khanty Mansiys in Siberia, almost 6 per cent of Russian oil and gas reserves. By comparison, Shell's global reserves total just over 17 billion barrels.
Mr Tokarev's outburst was prompted by frustration at the slow pace of development in the region. His company has interests in Shell's West Salym field through its shareholding in Shell's joint venture partner Evikhon.
Analysts in the City say there has been delay in developing the fields because of legitimate concerns over the legal framework in Russia governing foreign oil partnerships. Shell would like to have developed the field more rapidly but was concerned the legal requirements were not in place to guarantee stability of the project over the long-term.
Ray Lewis, a vice-president of Amoco Eurasia Petroleum, responsible for the Priobskoye field, said all foreign oil companies required a stable regime. Priobskoye will require US$30bn (pounds 19bn) or more in capital investment, and has proven reserves of 4 billion barrels. Amoco is working to a 30- year timetable. "We are as anxious to develop the fields as he [Mr Tokarev] is," he said, adding the situation is slowly improving. "We have been gratified by the changes we have seen over the last five years."
One obstacle to progress, the absence of a strong legal framework, seems close to resolution. Two weeks ago, the Duma, Russia's parliament, passed a Production Schedule Agreement Act. The Upper House should ratify it by early October.
Pressure in Russia for action has grown with a sharp drop in oil production, which fell 25 per cent between 1989 and 1994. The reasons include maintenance and pipeline problems in the ageing infrastructure.
Mr Tokarev was in London being introduced to institutions by Bula Resources, the quoted Irish oil independent. Mr Tokarev was recently appointed to the board of the company, which successfully won a tender last year to develop the Sredne Shapshinskoye oil field, adjacent to the Salym field.
Bula now has a majority stake in a Russian production company, which it owns with Khantymansiysgeologia. The joint venture licence area has proven and probable reserves of 500 million barrels of oil.
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