Watching Government

Patrick Crow
Washington, D.C.
[email protected]

Russia's First Deputy Prime Minister Boris Nemtsov is quickly making his mark on Russia's energy sector.

President Boris Yeltsin appointed Nemtsov, who looks younger than his 37 years, energy minister last Apr. 24.

Yeltsin had brought him into the cabinet in April to reform Gazprom and Russia's other large monopolies (OGJ, Apr. 21, 1997, p. 32).

Nemtsov is one of Russia's most popular politicians and a potential successor to Yeltsin when he retires in 2000.

He has little experience in energy issues. Nemtsov has a degree in radiophysics and was an environmentalist before being named governor of Nizhny Novogorod and the surrounding region. As governor, he pushed privatization and other reforms that brought him to Yeltsin's attention.

Nemtsov was behind a decree Yeltsin signed late last month that would lower gas rates for domestic industrial users who pay their debts to Gazprom by yearend 1997.

Gazprom is having trouble collecting from 40% of its customers, preventing it from paying $608 million in back taxes that Yeltsin's government badly needs.

Other changes

Last week, Nemtsov was named to head a special commission to expedite stalled production-sharing projects involving foreign energy and mineral investors.

But Russia's parliament has been the biggest roadblock to foreign projects, frequently delaying decisions on which hydrocarbon and mineral reserves it will offer for development. It was unclear how Nemtsov would change that.

Nemtsov also drafted a decree Yeltsin signed last week abolishing a program that allowed the state to skim off profits from oil exports.

The action will hurt traders and third parties who handled about 15% of Russia's 2.5 million b/d of oil exports last year. Yeltsin described the decree as "a real blow against banditry."

But it will give oil producers more space in the nearly full export pipelines for their own output, enabling them to pay the government $521 million in back taxes by 1998.

Nemtsov explained there were better ways for the state to raise cash than by using the program to finance pet state projects: "The point of the decree is to scrap the program and to give oil companies the possibility to export independently."

Foreign affairs

Nemtsov also is working to preserve Russia's influence in the Caspian region.

He helped negotiate an agreement with Azerbaijan and Chechnya to transport early Caspian Sea production through the northern pipeline across Chechnya.

He said, "Russian businesses should not be sidelined in the development of the Caspian Shelf in Azerbaijan. A tough battle is under way now for the right to develop new fields on Azerbaijan's Caspian Shelf."

And Nemtsov was in the headlines recently when he signed a $7 billion agreement for Russia to supply Siberian gas to northeastern China.

Under the framework pact, Russia will export 25 billion cu m/year of gas from Kovyktinsky field during the next 30 years.

Before traveling to China, Nemtsov declared he wanted to boost trade between the two nations, which was only $6.8 billion/year.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.