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Sep. 19, 2005
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What Putin Brought to the Meeting with the American Oil Execs
// International Cooperation
Russian President Vladimir Putin met with heads of three American energy companies, ConocoPhillips, ExxonMobil and Chevron on Friday during his visit to the United States. On the same day, Gazprom announced the short list of the five foreign companies in the running to become partners in the development of the Shtokmanovskoe natural gas deposit. ConocoPhillips and Chevron were on that list. The Americans were tightlipped about the meeting, but it can be assumed that Russia expects a share of the American market in exchange for their share of the deposit.
ExxonMobil chairman of the board and chief executive Lee Raymond, ExxonMobil president Rex Tillerson, president and chief executive of ConocoPhillips James Malva and Chevron chairman of the board and chief executive David O'Reilly took part in the meeting with Putin.

Raymond did not comment on his meeting with the Russian president at all, unlike the other American businessmen. Nor would his company release any details of the meeting. This is not surprising. The other two American companies had to nothing to do but receive confirmation that their activities in Russia are still looked upon favorably by Putin, while ExxonMobil, the world's largest oil and gas company, still has to mend relations with Russian authorities after they were battered by a difference with the Kremlin over the company's plans to buy a share in the united YUKOS-Sibneft Co. in 2003.

No specific agreements with the American oil companies after have been announced the meeting with Putin. Analysts think that the purpose of the meeting was not to come to any agreement, but to rebuilding energy cooperation between Russia and the United States, which has almost completely ceased in recent years. Vladimir Milov, president of the Institute for Energy Policy, said that the Americans have plenty of reason for dissatisfaction with Russia and motivation to find other energy partners.

УIn 2003,Ф Milov explained, Уwork was stopped on the oil pipeline from Western Siberia to Murmansk, supposedly because there cannot be private pipelines in Russia. That was the only possible way to set up a massive channel for oil exports to the U.S. That project was completely closed down. The end point of the pipe is now in a frozen place [Indiga, Nenets Autonomous District] that can receive tankers with deadweight of no more than 200,000 tons. To ship oil to America, the terminal should work years around and receive ships up to 300,000 tons [as the port in Murmansk would]. LUKOIL is building a port at Varandei and will probable say eventually that it doesn't need the pipe at Indiga, and then work on the project will stop altogether. Liquefied natural gas production could have started five years ago, but it is only getting underway now. The Americans also don't understand the situation with allowing foreign companies access to Russian natural resources. That is the result of the actions of Russian authorities last year, and it couldn't have led to good feelings at the American energy companies. As a result, America has stopped seeing Russia as a promising site for investment.Ф

That situation displeases Russian authorities. It would be practically impossible to implement global projects on the scale of Shtokmanovskoe deposit development without the participation of foreign companies, most particularly the American energy giants. Russia has no experience with liquefied natural gas production and no equipment for it. Russia has understood this and made efforts lately to show its intentions to develop energy cooperation with the U.S. A week and a half ago, the first tanker full of liquefied natural gas to be delivered to America by Gazprom arrived. (The gas was bought from the British Gas Co.)

In exchange for allowing the U.S. to participate in the development of the Shtokmanovskoe deposit, Gazprom is counting on receiving a guaranteed share in the American liquefied natural gas market. The company is pursuing the same strategy on other markets as well. This spring, Wintershall, a subdivision of BASF, and Gazprom established an independent enterprise at Severneftegazprom, which holds the license to develop the Yuzhno-Russkoe deposit, the raw materials base for the North European Gas Pipeline. Under their agreement, BASF received 50 percent minus one stock, and Gazprom increases its share in Wingas GmbH (another independent enterprise with Wintershall) from 35 percent to 50 percent minus one stock. Gazprom head Alexey Miller said that Gazprom will have the opportunity to participate in Wintershall marketing policy in Europe and to enter new markets.

Gazprom has to hurry to enter the American market. While it is compiling its list of developers of the Shtokmanovskoe deposit, its competitors may snatch up the largest quotas for liquefied natural gas delivery to the U.S. Putin's meeting with Iranian President Mahmoud Ahmadinejad is noteworthy in this context. It has direct impact on the distribution of power on the world gas market. Russia andiron have long been trying behind the scenes to come to an agreement on the establishment of an organization along the lines of OPEC, since about 90 percent of the world's gas reserves are located in Russia and Iran. Everyone has been giving their attention to those countries' nuclear cooperation, but the other side of the story is their dialog on natural gas. In the world's current crisis-ridden energy situation, that gas cooperation may prove more dangerous than the atomic cooperation. The Americans are aware of this, of course, and it only increases their desire to participate in Shtokmanovskoe development and the price they are willing to pay for it.
Anna Skornyakova, Vladimir Kirillov

All the Article in Russian as of Sep. 19, 2005

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