MOSCOW PLANS TO BOLSTER PETROLEUM INDUSTRY

The U.S.S.R.'s problem plagued petroleum industry is likely to be given unprecedented leeway to rectify policies that have pushed it and the entire Soviet economy close to collapse.

But the window of opportunity to improve horrendous conditions in oil and gas production, pipelining, refining, and petrochemical manufacture may be open for a relatively short time-less than 2 years.

If definite improvement is not achieved in that period, the U.S.S.R. could reembrace much of the rigid, supercentralized, command system that has prevailed for so long.

Under radical market based reforms endorsed before the Supreme Soviet by President Mikhail Gorbachev, the U.S.S.R. would attempt to stem the steepest oil production slump in its history and reinvigorate a natural gas industry that has recently experienced the slowest production growth since World War II.

WHAT'S POSSIBLE

Aided by foreign loans, expansion of joint ventures, and perhaps increased purchases of equipment and advanced technology from the West, the U.S.S.R. can hope to at least patch its shoddily constructed pipelines and obsolete refineries and petrochemical plants that frequently break down or explode.

Opponents of perestroika (economic restructuring) have made it abundantly clear they will cooperate only reluctantly with Gorbachev's proposal to give more economic authority to the U.S.S.R.'s 15 constituent republics, regional and local entities, and industrial managers outside of Moscow.

Even before Gorbachev outlined his latest reforms, old line Communist officials and bureaucrats, a vocal segment of disgruntled petroleum industry personnel, and a general population still inclined toward xenophobia were critical of the modest changes that have taken place.

OIL EXPORTS TO RISE

Gorbachev implicitly pledged to reverse declining oil exports to European countries able to pay for such deliveries with hard cash. Speaking at a Moscow press conference, he said the Soviet Union can't pull itself out of its economic depression without earning more of the currency that increased exports, especially of oil, would provide.

"Our domestic needs and our domestic interests will push toward raising exports," Gorbachev said. "We have the capability to broaden and increase exports, and we will do so."

Gorbachev's statement was in response to a question of whether deliveries of oil to eastern and western European countries will have to be reduced further because of the U.S.S.R.'s domestic economic problems.

While the Soviet president was specifically asked to comment on oil exports to European nations, his reply was directed more toward raising total sales abroad. Because the Soviet drive to gain markets for other Russian goods, especially machinery, has faltered badly, higher energy deliveries seem to be the only way for the U.S.S.R. to hike exports substantially in the near term at least.

Soviet oil exports tumbled from a peak of more than 4.1 million b/d in 1988 to less than 3.7 million b/d in 1989. This year's foreign sales are expected to be the lowest since the 3.33 million b/d reported for 1985.

The U.S.S.R.'s crude and condensate production fell from 12.48 million b/d in 1987 to 12-45 million b/d in 1988 and 12-14 million b/d in 1989. Production during the first 7 months of this year was about 11.7 million b/d.

AN OPPOSING VIEW

Some Soviet economists and oil industry personnel argue that the U.S.S.R. does not need to raise oil production, especially if that can be achieved only with foreign help.

The Moscow newspaper Sovetskaya Rossiya, an official organ of the Russian republic's Council of Ministers, has taken a leading role in publicizing discontent regarding high oil exports by the U.S.S.R. While not directly opposing Gorbachev's policies, the paper recently published two letters that not only deplored Soviet dependence on energy sales for most hard currency revenue but also criticized purchase of "excessive" volumes of foreign equipment to modernize the U.S.S.R.'s petroleum industry.

A letter to Sovetskaya Rossiya from V. Petrov, an engineer engaged in handling foreign made equipment for the big Astrakhan gas producing and processing complex on the southern Volga River, charged that the U.S.S.R. has bought French and other foreign equipment that is too complex for Soviet conditions, unreliable, and difficult to repair. He said domestic petroleum equipment manufacturers could meet all of the nation's needs if Moscow did not surrender the market without a fight.

Petrov insisted that by giving foreign interests access to Soviet raw materials and labor, Moscow is depreciating the ruble to the advantage of the dollar, mark, and franc. "Selling our raw materials is extremely unprofitable," he wrote. "Everyone knows this, but we continue to do so.

"Despite looming domestic unemployment we buy finished products abroad and offer our territory to foreign firms under conditions unfavorable to us."

Petrov said by unwarranted dependence on the West, the U.S.S.R. is selling its freedom, and Soviet citizens are being enslaved.

"It is naive to think that a strong neighbor will be concerned about our welfare. Nobody but ourselves will do that.

"I am in favor of foreign trade, but only as an equal partner. We can become strong only by our own efforts, not by foreign assistance."

The depth of Petrov's antipathy toward the U.S.S.R.'s increasing economic cooperation with the West is illustrated by the fact that the Astrakhan gas complex for which he works has been one of the Soviet petroleum industry's most unsuccessful projects. Gas production and processing are years behind schedule, inefficient pollution control equipment has caused extensive environmental damage and forced shutdown of some facilities, and purchase of foreign equipment to handle the extremely sour gas was urgently required.

A SCOLDING FOR MOSCOW

Another letter to Sovetskaya Rossiya from F. Girfanov, a petroleum engineer in Ufa, a Volga-Ural petroleum center, scolded Moscow for signing an agreement for joint development of supergiant Tengiz oil field on the Caspian Sea's northeast coast in Kazakhstan.

"This deal was presented to us as an achievement of our (new) foreign policy and one that helps solve our domestic economic problems," Girfanov declared. "However, in my opinion this agreement is a continuation of a predatory oil policy that is transforming Russia into a raw material appendage of western nations.

"As a specialist, I believe giving up land in the form of a concession or for joint development-allegedly because of our technological backwardness-is without merit. Our own equipment and technology enable us to do without aid from the West, which is interested only in pillaging our oil fields."

Girfanov described the agreement to build the first large diameter pipeline for long term gas deliveries from western Siberia's supergiant Urengoi field to western Europe as a disaster for the Soviet Union. He said the line was "monstrously expensive" and played into capitalist hands by driving Russia deeper into the international oil and gas race in an effort to lower energy prices.

In Girfanov's view, development of western Siberia's huge oil reserves made the U.S.S.R. dangerously dependent on oil-a dope-like dependency the Soviet Union now needs for survival. He said the price of world oil fell sharply in large degree because of Moscow's unwise export policy, while the cost of domestic oil production rose steadily.

"Our ever more remote oil fields are being placed on production without adequate exploration and substantiation. As a result, we are drilling hundreds and thousands of dry wells costing billions of rubles.

"In our pursuit of the production plan's fulfillment, we are ignoring development technology. As a result, large volumes of oil remain unrecovered.

"it is clear that maintenance of oil production at the present level contradicts Russia's national interest even though we need oil and gas as a source of (foreign) currency."

In direct contradiction to Gorbachev's statements, Girfanov said the "vicious circle" encompassing Soviet petroleum can be broken only by a fundamental change in national policy.

"We must develop a government program to cut oil production and, consequently, reduce its export. Ultimately we must stop exports completely.

"To do this, we must stop development of new fields. We must reduce the amount of development drilling upon which we spend the lion's share of capital investment."

Girfanov said if his recommendations are followed there will be complaints that the U.S.S.R. can't do without oil export revenues.

"In the first place," he said, "we spend a great deal of hard currency precisely to produce oil, buying imported pipe, equipment, and materials throughout the world. We can avoid this expense if we reduce our drilling volume.

"Second, we can expect a higher price for our oil if we lower exports. Third, we can stop importing some consumer goods and can meet consumers' needs without selling oil.

"The capital funds that are freed up must be used entirely for supplying natural gas to Russia's rural areas as well as for switching all possible technology processing from oil to natural gas."