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State May Ease Rules For Offshore Energy

The Natural Resources and Environment Ministry is proposing to loosen the rules that allow just two state-controlled industry leaders, Rosneft and Gazprom, to explore and develop oil and gas riches off Russia's coasts, deputy minister Sergei Donskoi said Tuesday.

The proposal, intended to boost investment in the technologically challenging sea shelf areas, will likely win cheers from Russian and foreign energy companies that have complained about increased difficulty in getting access to new reserves.

“By and large, the Natural Resources and Environment Ministry, as before, believes that the resources of only two companies — Gazprom and Rosneft — are insufficient to develop sea shelf,” Donskoi said at a government meeting dedicated to Russia's marine policy, RIA-Novosti reported.

If the plan gets government approval, Gazprom would share access to the fields with its subsidiaries, Donskoi was quoted as saying in a ministry statement. Any of them could also join forces with foreign partners, giving them up to 50 percent ownership.

In the oil industry, the proposed changes would allow Rosneft's subsidiaries and other Russian companies, provided that they have adequate money and technology, to work offshore alone or in international partnerships.

In addition, Donskoi suggested lifting the ban for foreign companies to explore offshore areas, saying the government must guarantee that companies — domestic and foreign alike — will have the option to become junior partners of the two state-run industry champions in developing any newfound reserves.

“It's necessary to help our state companies share the risk of offshore operations,” Donskoi said, according to the ministry's statement.

It remained unclear Tuesday, however, whether the ministry had officially submitted the proposal to the Cabinet. Calls to the ministry's press office went unanswered Tuesday afternoon.

Gazprom said it did not mind the part of the idea that would expand the list of authorized offshore operators to cover its subsidiaries.

“At the same time, the issue of including foreign companies on that list appears untimely,” Gazprom said in an e-mailed statement.

A Rosneft spokesman said the country's biggest oil producer did not comment on proposals by government agencies.

Jim Mulva, chairman and CEO of ConocoPhillips, suggested last week that the privileged position of Russia's state-controlled firms might have been the reason why the U.S. company didn't grow as fast as it hoped after buying a 20 percent stake in LUKoil, Russia's biggest private oil producer. ConocoPhilips recently decided to sell half of the stake.

Rosneft and Gazprom exclusively meet the requirements of the 2008 legislation that reserved the right to work at offshore fields for Russian-registered companies in which the government owns more than 50 percent. Eligible companies must also have at least a five-year record of operating at such fields.

The most promising fields lie off the Arctic and Pacific coasts, officials said.

At the rate the two companies spend on offshore exploration and development, they will take 165 years to meet the ministry's targets, instead of the 30 years that ministry officials believe is necessary, the ministry said in a statement.

Rosneft and Gazprom cumulatively invested 56.4 billion rubles in offshore work in 2008, the year when energy companies reaped some of their highest profits on the back of a prices surge before the global economy collapsed into a crisis, the statement said.

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