Dow Jones Business News
Fmr Ambassador: Russian Landscape Open For US Energy Cos
Thursday October 9, 9:22 am ET
By Roy R. Reynolds, Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Rapid changes in the political climate in Russia have opened a myriad of inroads to the country for U.S. energy companies, according to a former U.S. ambassador.
"I think the opportunities for those kind of industries in Russia are immense, " said James Collins, ambassador to the Russian Federation from 1997 to 2001 and currently an adviser for Houston-based law firm Akin, Gump, Strauss, Hauer & Feld.
Akin Gump opened an energy-related office in Moscow in 1994 to capitalize on the recently privatized oil and gas industry following the collapse of the Soviet Union. The firm became an adviser to Lukoil the following year.
Collins and other members of the law firm's Russia/Commonwealth of Independent States team met with reporters Wednesday to discuss aspects of September's U.S.- Russian energy summit in St. Petersburg.
During the summit, the business world waited for confirmation of reports that U.S. companies Exxon Mobil Corp. (NYSE:XOM - News) and ChevronTexaco Corp. (NYSE:CVX - News) were pursuing a stake in Russian oil giant YukosSibneft, formed Friday by a merger of Yukos and erstwhile rival Sibneft .
The fact that such reports were taken seriously marks a big step for the Russian energy industry, said Rick Burdick, Akin Gump's chair for business transactions on the Russia/CIS team.
"The environment has completely changed," Burdick said. "For Yukos to be the target of western companies five years ago would have been unthinkable."
Government reform, though, has begun to push changes in the country's oil and gas industry.
"(Russian President Vladimir) Putin is a modernizer," Collins said. "He's going to have five more years, and we're all probably fortunate for that."
The U.S., in an effort to diversify oil supplies after the terrorist attacks of September 11, 2001, began tugging on the sleeves of Russian officials. The push for Russian oil has brought American technology and influence into the country's oil sector, Collins said.
"When people looked around (to diversify supply), the only place that seemed very operative was in Russia," Collins said.
That, in part, has led to U.S. companies seeking corporate-level investment in the Russian energy sector.
"The valuation model for those companies is a fraction of those for western companies," Burdick said. "They're about an eighth or a tenth of what they are for western companies.
"But a barrel of oil sells for about the same price all over the world, essentially."
A decade ago, he said, foreign companies wouldn't have dared think of acquiring a stake in a Russian company.
"At the beginning, western companies didn't know much about Russia, so they looked for asset-level investments," Burdick said.
But Russian companies are now starting to hew to the same corporate responsibility roles adopted by western companies, which makes investment more desirable, said James Langdon, Akin Gump's senior executive partner on the Russia team.
"It takes transparent accounting and good management to encourage the investing public," Langdon said. "Those are very powerful incentives to do the right thing."
-By Roy R. Reynolds, Dow Jones Newswires; 713-547-9208; roy.reynolds@dowjones.com
**********************************************************
Once Teton Pete gets to, say, 5,000 bopd net production, they would provide a great takeover target for the larger US companies that are looking to kick-start a Russian play. They are at about 1,800 bopd now. |
