Working towards a compromise in Russian oil legislation

Feb 12, 1997 01:00 AM

No more than 20 to 25 Russian mineral reserves will be eligible for development under production sharing agreements, said Vladimir Medvedev, chairman of the small centrist Russian Regions party in the lower parliament State Duma recently. Medvedev, who is also president of the Union of Oil and Gas Industrialists, said shortening the list was the only way to get it passed by the Duma, where opposition to the agreements among conservatives, nationalists and communists is strong. "We have a list of 36 reserves, but opponents say they won't accept anything more than about 15 reserves. So I am looking at something between the two," said Medvedev. The deadlock over laws governing production sharing agreements is holding up billions of dollars in planned Western oil contracts. The Duma is split between those who believe the agreements will help reverse the decline in Russian oil output and those who are reluctant to give away natural riches too cheaply. "The debate (over laws governing the production sharing agreements) is not economic, but political," Medvedev said. He said that a step-by-step approach to the agreements was the best way of getting the projects off the ground. Medvedev said a list of 20-25 reserves would be presented to the Duma, probably in March. "But that won't be the end of the talks. By taking (the process) step by step we will succeed," he said. Medvedev said that passing the laws would bring enormous benefits to the Russian economy. "According to independent experts, just three (of the largest) reserves would generate more than $ 500 bn, and of that over 70 % would remain within Russia," he said. Parliament is also discussing a list of amendments to the basic output sharing law, passed in 1995, to make it compatible with existing Russian laws. The Duma must pass both the amendments and the list of reserves eligible for development under production sharing agreements, which allow Western oil firms to develop oil production by financing projects through exports.

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