New oil minister favors Russian firms

New oil minister favors Russian firms

By Lynnley Browning

MOSCOW (Reuter): Russia's new top energy official, Fuel and Energy Minister Pyotr Rodionov, may take a Russia-first approach to deal with foreign oil firms but may also soften the ministry's Soviet style, energy analysts said on Monday.

Rodionov, appointed in August, said in a recent interview that strong terms for domestic oil companies working with Western majors were part of his agenda.

But the minister -- who dealt with transportation and pricing in his previous job as director of Lentransgaz, a unit of natural gas monopoly Gazprom -- may also turn the ministry into more of a Western-type regulatory body and less of a Soviet-style, heavy- handed planner.

Rodionov, who has no direct expertise in oil matters, is a mystery to Western energy executives, and analysts said he was likely to rely on specialist advisers when it comes to oil.

In the interview, Rodionov spoke repeatedly and vaguely of establishing "the rules of the game" for the oil sector, loosely defining them as normal tax and tariff policies and good terms for Russian oil firms.

"The main goal of Russia's fuel and energy complex is to make it so it works to boost the entire economy," he said.

Analysts said Rodionov's approach could be a double-edged sword for foreign oil investors eying multi billion-dollar exploration and development projects in Russia.

Rodionov could produce tougher, more expensive terms for Western oil companies doing business here, they said. But he could also spawn a ministry that is less aggressive about getting involved in the daily running of the oil business.

"There's been a major shift of emphasis for the ministry to being much more of a regulatory body with oversight and policy function and less of a meddler in day-to-day operations," said energy specialist Matthew Sagers of PlanEcon in Washington. "Rodionov will move it in that direction."

Western oil firms, eying tens of billions of dollars of deals in Russia's energy sector, want clear policy signs from Rodionov on everything from natural resource laws and taxes to the pace at which exploration and development should proceed.

Rodionov said no existing contracts would be broken but he called for a case-by-case approach to new deals and said some strategic reserves might not be developed for 20 to 50 years.

"He has made it clear, like any good minister would, that his main concern is improving conditions for Russian companies," said a Western source at a U.S. oil major in a Russian project.

Asked about his attitude to foreign oil investment, Rodionov said: "It in no way hinders things and some ways helps."

He also said Western investors should consider the exploration and infrastructure work done by the Soviet Union -- a point which is one major stumbling block in negotiations between U.S. Amoco and Russia's YUKOS on Russia's largest, $45 billion production- sharing contract.

Western investors may not get help from Rodionov in improving a production-sharing law they say is flawed. The legislation is the key to big-ticket oil deals here.

"The law is in the hands of parliament and is going through a normal, democratic process," Rodionov said, referring to changes being considered by politicians, some of them opposed to terms friendly to the West.

But Rodionov may turn his ministry, which has already seen much of its power devolved to Russia's new vertically-integrated oil companies, into a Western-style regulatory body dealing with transportation and pricing issues.

"Shafranik was much too involved in projects and management and was basically trying to do that old U.S.S.R thing," said Sagers, referring to previous minister Yuri Shafranik.