Russia, UK sign landmark oil and gas deals
26 Jun 2003
REUTERS
Oil and gas rich Russia forged closer links with Britain and its international oil firms on Thursday, signing multi-billion dollar deals on future supplies for the energy-hungry West. At a London oil conference attended by Russia's president and top Russian and European oilmen, British oil giant BP agreed commercial terms for a joint venture deal worth over $6 billion that was announced earlier this year. Britain and Russia also signed an agreement to co-operate in the construction of a gas pipeline under the Baltic Sea from Russia into Europe and connecting with Britain. The two moves and a recent $10 billion investment by rival Royal Dutch/Shell off Siberia's coast mark growing western investor confidence in Moscow's economic reforms, as well as the industrialised nations' thirst for Russian oil and gas as worries mount over Middle East supplies. They also signal the closest Russo-European cooperation since the Rothschild family sat down with Tsar Nicholas over a century ago, and tie the world's second-largest oil exporter closer to industrialised consumers. "BP and Shell are ready to invest $17 billion and such a decision is a reflection of the positive trends in Russia's investment climate," Russian President Vladimir Putin said. British Prime Minister Tony Blair added: "The things that bind us together in politics, security and economics are very important... Russia is already producing the same level of oil as Saudi Arabia and the potential is enormous." For natural gas, he said the link was not only commercial but of fundamental strategic importance, since the North Sea and other west European fields are maturing while Russia sits on a third of the world's reserves. Despite the flag-waving, Russia, the world's second-biggest oil exporter, could find its loyalties divided between the West and OPEC if a three-year boom in oil prices that helped drive its recovery starts to evaporate. Russia has promised co-operation with OPEC to keep prices afloat, but analysts said Thursday's summit shows where Moscow's allegiance actually lies. "Russia is now operating a free commercial oil market with westernised oil companies planning to build shareholder returns via production increases," said Geoff Pyne, consultant to trading house Sempra Energy. "They would obviously like high oil prices to continue but there's no evidence they have done anything to help OPEC. Any coordination Russia has with OPEC is almost entirely lip service." Thursday's BP joint venture signing was a largely symbolic affair, since completion of the deal, announced back in February, may still be a month or more away. BP and its Russian partner TNK also have yet to agree on what to do about a 50 percent stake in Russian oil producer Slavneft that TNK bought after the BP deal was struck. Thursday's announcement did include adjustments to reflect the extra debt taken on for the Slavneft acquisition, with BP trimming the amount of cash it would pay to TNK's owners to $2.4 billion from $3.0 billion.BP's $3.75 billion payment in shares was left unchanged. If Slavneft's assets are included at a later date, however, BP said it expected to pay more. Analysts said that additional amount could reach $1.5 billion, but industry sources say BP has baulked at the price being asked by TNK's owners, investment groups Alfa Group and Access-Renova.
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