Since then American oilmen have cast cold water on the dramatic deals pulled off by the British competition. "As far as we can tell [Russian energy companies] are focused on building empires, not on developing oil and gas reserves," said Charles Pitman, Amoco Corp's top executive in Russia. "Will the Russian oil industry really open to western investment? Shell and BP obviously think so. Others of us will wait and see."
In the next few months, Amoco and others will show just how sceptical they are of the British strategy as the Russian government sells Rosneft, producer of 5 per cent of Russia's oil and the last remaining major oil company to be sold. Shell and BP have already said they are interested.
The rift is unusual in an industry where most players move in step with their rivals. It reflects years of frustration with multi-billion dollar projects such as Amoco's in the Ob River basin of northern Siberia and Texaco's work in the Timan-Pechora region - both now stalled.
For oil companies the world over, the reserves of the former Soviet Union are one of the last big untapped prizes since Russia first opened the industry to foreign investment in 1987. Russia alone has 49 billion barrels of proven oil reserves.
Until the separate Shell and BP ventures were announced last week, only Atlantic Richfield had taken a stake in a major Russian oil company. It promised $5bn over 18 years to Lukoil in February after paying $340m for bonds that convert into a 7.99 per cent equity stake in the Russian company.
The preferred American way to develop fields has been to form a production- sharing deal and a pact to develop a particular field. But none of the projects is yet producing much oil.
Exxon and Texaco, for example, agreed last December to invest $20bn in the Timan Pechora fields north of the Arctic Circle about 1,100 miles from Moscow. That plan has yet to win approval from the government.
The Sakhalin Island project, north of Japan, won't pump until 1999, but has the benefit of being offshore and near markets."We still have hopes that both those projects will proceed," said Robert Black, Texaco's senior vice president in charge of oil exploration. "They have not proceeded as quickly as expected."
Earlier this month BP chief executive John Browne said BP would buy 10 per cent of Sydanco for $750m and invest perhaps $3bn over time. "When we started investigating Russia [in 1990], it wasn't clear the way industry was going to work. We waited until there were real companies in Russia with whom you could do business."
BP's venture with Sydanco, which will tap the Kovyktinskoye gas field near Irkutsk, appears to have political backing. About 2,600 miles from Moscow near the Mongolian border, the field is well-placed to feed rising hunger for energy in the region.
"It gives us the chance to participate in the quickly developing markets of China, Japan and South Korea, as well as the rest of the Pacific region," said Russia's first deputy prime minister, Boris Nemtsov.
The government has done much to make Russia a more attractive place in which to work. The Duma approved production-sharing legislation, and President Boris Yeltsin lifted a 15 per cent cap on foreign ownership of new companies to be privatised. Shareholder rights have been codified in law and - recent weeks aside, when developing economies suffered speculative attacks linked to turbulence in Asia's markets - the rouble has been stable and inflation quelled.
Despite this more optimistic outlook, many oil companies remain wary, preferring to adopt a steady approach.
Copyright: IOS & Bloomberg