TEXACO MULLING SOVIET DOWNSTREAM VENTURE

Texaco Inc. is considering expanding its joint venture activity in the U.S.S.R. beyond exploration and production into downstream operations. It may install a System 2000 service station, the flagship of Texaco's marketing operations, at a grassroots site in Moscow. Texaco Europe Pres. Peter Bijur said projected demand growth for auto fuels and absence of customer focused service stations in the U.S.S.R. led to the company considering a System 2000 station in Moscow.

Feb. 11, 1991

2 min read

Texaco Inc. is considering expanding its joint venture activity in the U.S.S.R. beyond exploration and production into downstream operations.

It may install a System 2000 service station, the flagship of Texaco's marketing operations, at a grassroots site in Moscow.

Texaco Europe Pres. Peter Bijur said projected demand growth for auto fuels and absence of customer focused service stations in the U.S.S.R. led to the company considering a System 2000 station in Moscow.

Texaco signed a protocol last September that spelled out the basic principles for a joint feasibility study of the Timan-Pechora region of the Soviet Union (OGJ, Sept. 17, 1990, p. 43).

E&D VENTURE DETAILS

Bijur said Texaco expects to sign a Timan-Pechora joint venture agreement with the Soviets after such issues as property rights, repatriation of capital, and contract rights and obligations are worked out.

The Soviets have conducted extensive exploratory drilling in the region and estimate ultimate potential reserves at more than 5 billion bbl, he added.

Texaco plans to develop fields closest to the Pechora Sea first, using cash flow from production to develop fields further inland.

Bijur said agreements have been signed with all levels of government, including the central Soviet government, the republic, provincial, and local institutions.

"Although the relationships among some of these government entities and their specific responsibilities are not always clearly defined and in fact are evolving, we have the support of all the relevant political authorities at this time."

MODULAR INVESTMENT APPROACH

Modular investment techniques will help manage risk of proposed investments in the Soviet Union, Bijur contends.

With this approach, projects are designed to be expanded by increments in line with economic development and growth in the investor's experience.

"Investments should be made with a long term view in projects that are likely to be successful in the host country's environment of 2, 5, and 10 years from today," Bijur said.

He contends the benefits of this approach are obvious, An investor could test the waters, cement business and government relations, extend his reputation in the region, and learn to operate most effectively in the new environment.

"Future business opportunities can then be built upon a foundation of strength."