Russia's energy and fuel minister traditionally uses his yearend statement to defend the nation's oil companies, but Pyotr Rodionov used the occasion to direct a few veiled barbs at the petroleum firms.
Rodionov, the former head of Gazprom's St. Petersburg subsidiary who became energy minister in July, chose his words carefully but left the clear impression that the oil sector was a weaker sister to the reviving gas industry.
He said, "The tendency toward stabilization of production is noted in all sectors of the (energy) complex except for the oil and refining sector."
He said, "Our oil output has dropped by more than half over the past 5 years, and this year, incidentally, we are more than 5 million tons below last year's output."
Rodionov indicated he favors tighter government control over the industry, including possible federally mandated price cuts, and sided with state-controlled Rosneft holding and Transneft pipeline operator over their respective business interests.
He said Russia's top privatized oil companies' production had dropped and their financial situation had worsened since the government sold them in loans-for-shares auctions last year, referring to oil majors Yukos, Sidanko, and Sibneft.
Production sharing law
Gazprom, Russia's largest firm, also is its largest debtor, owing more than $2.7 billion.
But Rodionov said that's because consumers, including the government, owe Gazprom even more. He rejected suggestions to break up Gazprom.
Unlike his predecessor, Yuri Shafranik, Rodionov expressed little concern about the protracted debate in parliament regarding reform of Russia's production-sharing legislation.
"This is how democracy works, and this is normal," he said, promising no early action on a bill that foreign companies say is critical for unlocking tens of billions of dollars in investment for the cash-strapped oil sector.
Rodionov suggested greater state regulation of the fuel and energy complex could help lift the country out of its economic crisis, including enforcing cuts of 15-30% in tariffs for gas, electricity, and rail transport.
"We tried to do something in the hope that the free market will regulate everything," he said. "But such things simply do not happen."
Tax changes coming
Rodionov said the fact that energy enterprises will contribute 70% of this year's federal tax revenues shows "something is wrong with the economy."
"I should probably feel proud that my industry generates 70% of the total tax revenue, but God forbid that I live to see the energy sector account for 100% of tax collection. This would mean economic collapse," he said.
He said oil executives met recently with Prime Minister Viktor Chernomyrdin and won a number of new tax benefits, including lower oil excise taxes and a lower transportation tax. The measures are incorporated in the draft federal budget.
Rodionov also indicated his ministry would support state oil company Rosneft, which is locked in a court battle with another oil major, Sidanko, over ownership of producer Purneftegaz.
"Given the production results of Rosneft and Sidanco this year, I don't think Purneftegaz should be part of it. I think the case will be decided in a proper way," he said.
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