Russian and US energy officials will meet in Houston Oct. 1-2 to help solidify an energy cooperation pact made between Russian President Vladimir Putin and US President George W. Bush last month in Moscow. US and Russian oil company executives have also been invited to attend, industry officials said.
The two world leaders detailed a desire "to strengthen our overall relationship and enhance global energy security and international strategic stability," according to a May 24 joint statement.
Investment plans
While in Moscow, Sec. of Commerce Don Evans met with OAO Gazprom officials; he also participated in a signing ceremony of a $140 million rig-conversion contract between ExxonMobil Corp. and Russia's Amur shipyard. The converted concrete island drilling system will be used for development drilling and production in Chayvo field, part of the Sakhalin I offshore project (OGJ, Aug. 13, 2001, p. 35). Oil production from that field is expected to start flowing by December 2005 and will reach 250,000 b/d at peak.
The Sakhalin I project, the largest foreign direct investment project in Russia at $4.3 billion, targets reserves pegged at 2.3 billion bbl of oil and 17 tcf of gas, according to ExxonMobil, which holds a 30% interest and is the operator.
BP PLC, meanwhile, recently acknowledged it is having discussions with Russia' s second largest oil producer, OAO Yukos, to explore and exploit Siberian reserves, but the deal has not been finalized.
More spending from ExxonMobil, BP, and other multinational majors may be coming, although most Russian oil majors and the Russian government have so far been reluctant to encourage the kind of tax breaks and other related incentives that non-Russian oil companies want to see before making riskier investments. That includes building the infrastructure that experts say is desperately needed before Russia can sustain its role as a major oil exporter.
October meeting
The October meeting and future bilateral discussions are expected to highlight ongoing concerns over investment terms and conditions. Other areas of mutual interest include reducing volatility and enhancing predictability of global energy markets and reliability of global energy supply; encouraging more US and Russian investment, including joint projects in other countries, such as those in the Caspian region; and promoting access to world markets for Russian energy, through the commercial development and modernization of Russia's port and transportation infrastructures, the electric power and gas sectors, and oil refining capabilities.
About 2 weeks after the May summit, it became even clearer that both countries are serious about deepening their energy ties. Yukos suggested it may be sending limited amounts of Urals crude into the US East Coast or Gulf Coast, although the firm acknowledged it's unlikely shipments could continue without the addition of new export pipeline capacity. And the Department of Commerce granted Russia market economy status under US trade laws.
"(The) decision officially recognizes the reality that is Russia today and the unprecedented economic transition achieved over the past decade," said Blake Marshall, executive vice-president of the US-Russia Business Council.