Gore becomes pro-oil

At a recent economic summit in Moscow between Vice President Al Gore and Russian Prime Minister Viktor Chernomyrdin, the main issue was difficulty that U.S. oil companies face trying to invest in Russia. Last month the Nenets auton- omous region annulled a tender Exxon had won to develop Khoreiver field in the Timan-Pechora basin. Meanwhile, talks are stalled between Amoco and Yukos to jointly develop huge Priobskoye field.

Oct. 6, 1997

3 min read

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

Last month the Nenets auton- omous region annulled a tender Exxon had won to develop Khoreiver field in the Timan-Pechora basin. Meanwhile, talks are stalled between Amoco and Yukos to jointly develop huge Priobskoye field.

Gore told reporters, "I expressed deep concern about the recent withdrawal by Russia of the Exxon bid and reports about Yukos's problematic relationship with Amoco. I believe that the prime minister clearly heard our view. I'm more optimistic after the discussions than when I arrived."

Chernomyrdin said a new commission on investor rights, created to ensure foreigners get fair treatment, would look at both cases and report in 2 months.

"The government and the commission will do everything to remove these problems. We give this great importance," he said.

Nemtsov optimistic

Energy Minister Boris Nemtsov warned that the Priobskoye case is a dispute between two companies, and the government cannot intervene.

Nemtsov told Reuters news service, "I am absolutely a supporter of foreign investment in the oil sector. It's also our aim to introduce competition to the gas industry, because this leads to lower prices and more reliable deliveries."

He said Russia's oil and gas sector is poised for growth. Oil production seems to have bottomed and in the first 8 months of this year rose 1% to 5.93 million b/d from the same period last year.

Nemtsov said two huge oil projects on Sakhalin Island in the Far East would help production rebound, and the Duma has approved seven hydrocarbon and mineral projects for production-sharing agreements with foreign firms.

He said, "New pipelines are what we need now in Russia. I think proposals by big businesses will soon appear for new pipelines, and we will support that, because it raises our economic potential."

Problems remain

But a U.S. background report for the Gore-Chernomyrdin meeting said weak legislation, government corruption, and bureaucracy continue to hobble the country's oil potential.

It said many deals have been thwarted by frequently changing taxes, regulations, and laws.

For example, the government let special excise tax exemptions and export pipeline access for three established joint venture companies expire Aug. 31.

The JVs now face excise tax increases of more than 250%, and their pipeline access has been slashed to 30% from 100% of production.

The government said if they want to be reinstated, the JVs must petition the economics, energy, and finance ministries and show they have not yet recovered their capital investments.

If Russia's dichotomy between words and actions is ironic, so was Gore's advocacy of Exxon and Amoco.

At home, Gore is the chief advocate within the Clinton administration for a tough global warming proposal that would restrict fossil fuel use, hurting companies such as Exxon and Amoco-as well as many smaller ones.