WATCHING GOVERNMENT A CONGRESSIONAL BOOST FOR C.I.S. OIL

Oil production in the Commonwealth of Independent States is getting help from unusual quarters these days, the U.S. Congress.

Twenty-one members of the House of Representatives have formed a caucus, the Congressional U.S.-Former Soviet Union Energy Institute, to promote energy trade between the U.S. and what once was the Soviet Union.

Formed nearly a year ago, the caucus is pressing the U.S. government to devise a strategy for more effectively penetrating the former Soviet Union (FSU) energy market.

Congressmen will travel to Moscow this spring to meet with key Russian energy officials. U.S. lawmakers have scheduled a March meeting in Washington to review the FSU investment climate and explore options for energy project financing.

TRADE PROSPECTS

Reps. Greg Laughlin (D-Tex.) and Curt Weldon (R-Pa.), cochairmen of the caucus, outlined prospects for U.S. energy trade with the FSU during a U.S. International Trade Commission (ITC) hearing. ITC is to issue a report by June 23 on the subject.

Laughlin told ITC, "Energy holds the key to successful transformation of the FSU from a socialist to a free market economy."

He said development and export of FSU oil and gas is in the U. S. interest because it will ease world dependence on Persian Gulf oil.

"Unfortunately, at a time when oil export earnings are most crucial for economic recovery in the FSU, oil production has fallen from 12.5 million b/d in 1988 to less than 9 million by the end of 1992.

"FSU exports have fallen from a high of 4.1 million b/d in 1988 to less than half that amount during 1992. The value of this lost production could offset about half of the FSU's current foreign debt.

"Experts predict oil production will fall another 14% in 1993, meaning oil production levels will have dropped to about half of the peak 1988 production levels. Never in the history of the oil producing world has any nation's oil production fallen so rapidly. This precipitous decline is due to underinvestment, poor management, and a deteriorating infrastructure. 11

He said American companies have the technology and expertise necessary to reverse that decline by reworking existing fields, finding new ones, and improving the pipeline infrastructure.

"Unless the FSU energy sector is able to attract billions of dollars of American capital soon, FSU energy production may very well continue to plummet and hopes of economic recovery in the FSU will collapse. This will only increase the FSU's need for additional U.S. foreign aid."

SOME PROBLEMS

Laughlin said there are many barriers to investment.

"The FSU energy producing republics generally seem to be cautious in entering into ventures with U.S. and other foreign energy companies and often do not appear to believe they need western energy technology or assistance.

"They also seem to expect foreign companies to provide them with multimillion dollar feasibility studies without incurring any liability to pay the companies with either cash or oil. All of these developments have contributed to a very unstable investment climate in the FSU energy sector."