WATCHING THE WORLD HOW A SMALL PRODUCER SURVIVES IN RUSSIA

Six Russian joint ventures involving western partners won tax breaks on oil exports last October.

Five of the western firms were well known, relatively large companies, but the sixth was small (OGJ, Oct. 24,1994, p. 27).

The sixth, Aminex plc, registered in Dublin but operating from Sevenoaks, U.K., exported 380,000 bbl of crude oil to the West from the Komi Republic last December, when exports from Komi were officially suspended.

How does a small company manage such coups in a country where bigger and much more powerful companies can easily hit insurmountable problems?

Aminex Chairman Brian Hall has the answer: "We have a Russian shareholder. Otherwise, we wouldn't be there. Russians own 38% of Aminex, and 25% of the company is held by government agency Zarubezhneft."

Hall said Zarubezhneft's influence extends into Moscow's corridors of power because of its director-general's political connections.

GOVERNMENT LINK

"Oleg Popov is the boss of Zarubezhneft," said Hall, "and Popov's boss at the ministry was Viktor Chernomyrdin."

Chernomyrdin was energy minister before being promoted to prime minister by President Yeltsin. Chernomyrdin last month signed a resolution lifting oil export ceilings across the board (OGJ, Jan. 16, Newsletter).

Zarubezhneft was set up more than 20 years ago as a research institute in Moscow. Its activities have included turnkey field developments and supply and maintenance of oil field equipment outside the former Soviet Union.

Zarubezhneft had worked on developments in Viet Nam and Iraq. As the FSU oil industry opened to foreigners, Zarubezhneft was in the unusual position of being a Russian oil company with no producing assets in Russia.

Meanwhile, Hall became chairman of Aminex in 1991 after a mass exodus of board members amid onerous debts and work obligations.

"We started to clear up the financial problems," Hall said, "and by the end we had a clean company with nearly nothing in it."

QUICK DEAL

Zarubezhneft approached Hall early in 1993.

"The setup was unusual," Hall said. "Here was a government agency saying it could introduce us to deals in Russia. Zarubezhneft had no production in Russia, so it was looking to get Russian assets. We quickly struck a deal."

Following Zarubezhneft's purchase of an Aminex stake in May 1993, Aminex set up a $4.7 million joint venture with Komineft, one of Russia's largest oil producers.

Known as Amkomi, the venture last year produced an average 1,700 b /d of oil from North Aresskoya, Isakovskoya, and Upper Kosyouskoya fields in the Komi Republic. Amkomi built oil stocks while awaiting removal of the $5/bbl export tax.

"We had 380,000 bbl to put through the pipeline system," Hall said. "But then the Komi spill occurred, causing a shortage at refineries. Komi Republic authorities suspended exports until February 1995. Yet 2 days later Zarubezhneft had fixed for shipment of our oil in December."