To all:
By Dominique Magada LONDON, Nov 4 (Reuters) - The autonomous Russian region of Khanty-Mansyisk has introduced legislation to allow foreign companies to have complete ownership of production from its oilfields, a leading official told Reuters.
Khanty Mansyisk in Western Siberia holds about 60 percent of Russia's oil and gas reserves. Its oil reserves are estimated at about 40 billion tonnes, of which 6.5 billion tonnes have been recovered.
It is also the third largest gas producer amongst the Russian regions.
The new law, enacted in 1996, applied to the sixth round of tenders, Tender VI, in which 14 fields are to be awarded in April 1998. Previously, foreign companies could only do business in Russia through a joint-venture with a local companies.
"We want to enable foreign companies to feel confident when they do business and help develop our huge resources," Vladimir Karasev, Deputy Governor, of Khanty-Mansyisk Autonomous Okrug Administration said in an interview.
But Khanty Mansyisk's initiative has not generated unbridled enthusiasm from potential investors, analysts said.
"The new law would be more attractive to western companies.
It's better to own 100 percent of field, it's one problem less to worry about, but they are still major obstacles to overcome,"
said Stephen O'Sullivan, oil and gas analyst at MC Securities.
Only a small part of the region's reserves have been developed because of the difficulties foreign investors have encountered in dealing with Russia, particularly its legal framework.
So far, Canadian company Canbaikal Resources Inc <CBQ.AL> is the only foreign company to own 100 percent of a field in the region.
Canbaikal was set-up in 1996 to participate in the fifth oil tender in Khanty-Mansyisk, in which it was awarded in March 1997 a production license and a title to the reserves in a 400 square kilometres Block in the Surgut region.
Since then, the company has entered into a Protocol Agreement with Russia's giant Yukos Oil Corporation in which Canbaikal has made arrangements to market its oil at a Yukos pipeline pumping station, 10 km from its licence block.
The law on exports has not changed -- oil exploration companies in Russia can only export up to 30 percent of their production, under Russian federal law.
However deputy governor Karasev told Reuters that this was only "a guideline," and that in practice, "more oil could be exported, depending on pipelines' capacity."
He did not elaborate.
Under Tender VI in Khanty-Mansiysk, the level of royalties ranges from six to 16 percent of revenues from oil production, similar to the federal government royalty regime.
"If a field requires a lot of investments for the infrastructure, then the royalties won't be high, it is negotiated when we award the licence," said Karasev.
The region keeps 30 percent of royalties, the federal government takes 20 percent and the rest goes to the larger regional administration.
In addition to the royalties, a foreign investor has to pay an asset tax fixed at three percent of current assets value per year, a corporate tax equivalent to 35 percent of corporate profits, road taxes, social taxes, and a mineral replacement tax based on gross production.
Karasev said access to pipeline capacity did not offer an obstacle to investors.
"The pipelines are not running at full capacity at the moment. Out of a capacity of 450 million tonnes per year, only half is being used, so access to the export pipelines should not be a problem," said Karasev.
He added that under federal law, a Common Carrier Act is in the process of being introduced. The act will give equal access to all companies to the crude pipeline network, owned and operated by state-owned company Transneft. The network itself will remain state-owned.
"The problem with Russia is that even if the local government enacts new laws, are you sure you won't have to deal with the Federal government as well?" said O'Sullivan.
According to analysts, it is still unclear whether the Khanty-Mansyisk regional government has the power to award freely its fields to foreign companies, or whether the new legislation on Production Sharing Agreements that is slowly being discussed in the Duma, Russia's parliament, will not override local governments laws.
REUTERS
18:21 11-04-97
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