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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Mike from La. who wrote (40683)	3/23/1999 5:29:00 PM
From: JungleInvestor	Read Replies (4) \| Respond to of 95453

Greywolf has not posted the API data yet, but the following interesting article on Russia. It seems that Russia will not have any problem making their promised cuts. "Greywolf note: This does make the Russian's decision to cut exports rather stalwart. Yet the mess is their own in as much as they made the bed.... MOSCOW 23 March The Russian oil industry, once the world's largest, is shrinking dramatically as it fails dismally in its bid to attract foreign investment. Energy remains Russia's main source of dollar earnings, providing up to half the total, but oil output slumped to six million barrels per day last year from over 11 million bpd in 1987, when total Soviet output peaked at 12.5 million bpd. Economy Minister Andrei Shapovalyants has forecast 1999 oil output will match 1998, but many analysts believe lack of investment will cause it to fall. ''This is almost inevitable because the time lag on investment means it's very hard to catch up,'' a Moscow-based official from a major western oil company said. Without foreign capital, the industry cannot regenerate itself. The cash-strapped Russian government, whose total projected budget revenues for 1999 are just $US22 billion, simply does not have the funds to prevent a further slide. Frustrating paceAlthough Russian oil has theoretically been open to foreign investment since before the break up of the Soviet Union at the end of 1991, in practice progress has been painfully slow. Potential investors in the sector face a mountain of obstacles. They are still waiting for legal and tax reforms which they see as a precondition to entering, and which Russian lawmakers have failed to implement. ''If these much-needed laws pass through parliament so slowly, it is not because of a sinister plot, but because their necessity has never really been taken seriously in this country,'' said Yevgeny Khartukov, head of Moscow-based oil consultancy GAPMER. ''In Russia, law is never respected.'' The tax regime in particular has made operating in Russia all but impossible for many western joint ventures. One high profile project, White Nights, operated by US Phibro Energy Production Inc, pulled out of Russia in November after failing to produce oil profitably since starting in 1990. ''The Russian government absolutely strangled the life out of every nascent joint venture right at the beginning,'' a senior White Nights executive, no longer with Phibro, said. He said the number of taxes applied to the venture rose from three at the start to over 20, adding a combination of taxes, low oil prices, high costs to Phibro's Russian partner and high technical production costs had finally finished it off. ''There weren't enough dollars left in the barrel, we were completely under water with no real hope of emerging the other side,'' he said. Phibro has now sold its share to Croatia's INA. Assuming companies can pay their taxes, they must make sure their investment is safe. Western firms have held out for Production Sharing Agreements (PSA) as the best protection. These are contracts with the Russian government, which allow companies to settle disputes by international arbitration. But amended PSAs were only passed this year, and have yet to be harmonised with existing laws. Unattractive lawsRichard Freeman, President of Timan Pechora Co, a group of western firms exploring in northern Russia, said the amendments were only passed after currency devaluation and debt default last August, because Russia realised it could only count on foreign direct investment in the near future. Even so, he said, the new laws left much to be desired. ''The PSA legislation is not calculated to act as a vacuum cleaner to international investment capital in the oil industry. Russia could have done a good deal more to make itself attractive by comparison to other places in the world,'' he said. Another investment option is equity participation. But following BP Amoco's 1997 purchase of 10 per cent of the Sidanko oil company (now undergoing bankruptcy hearings) for $US571 million, few will be tempted to follow that route. BP chief executive John Browne met Russian Premier Yevgeny Primakov before Sidanko's first bankruptcy hearing, and stressed if the court did not show BP was getting fair treatment, prospects for other foreign investment in Russia would suffer. The hearing went against the recommendations of BP Amoco and almost all Sidanko's creditors. BP described the outcome as ''a sad and damaging day for foreign investment in Russia''. "