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Vasiliy Tarasuyk: Foreign investors should finance exploration enhancement

January 25, 2017/ 07:32

Moscow. Restoring investment activity, including that of foreign companies, is one of the state’s key priorities. That is what RF Prime Minister Dmitry Medvedev claimed in the latest meeting of the Government Committee on Foreign Investment Control. In the oil industry in the end of 2016 – the beginning of 2017 there were two major deals with foreign companies or investment funds: the privatization of 19.5% of Rosneft’s shares and the acquisition of 10% of Sibur Holding’s shares by the Silk Road Fund’s subsidiary. Foreign investors also consider other Russian producing projects. Vasiliy Tarasyuk, the First Deputy Chairman for the Natural Reserves Committee, told the Oil and Gas Information Agency what the active involvement of foreign investments into Russian FEC is fraught with:

- Today in Russia the level of exploration activity is very low, and foreign companies coming here will use the previously discovered and explored HC reserves, basically giving nothing in return, since there are no international laws on the allocation of funds for exploration of mineral reserves. The success of the producing companies in the last 20 years has been caused by the reserves, discovered and prepared for production mainly by the state geological services during the preceding period of planned economy.   In the Soviet times exploration was financed with the target allocations, transferred to the State budget and then via the State Planning Committee to the Ministry of Geology. Hundreds of exploration crews discovered about 200 new fields a year, providing for almost twofold reserves increment compared to the reserves recovered. As a result, by 1990 the mineral reserves base for the country had been formed with the perspective of up to 30 years ahead.      

The situation with Russian oil service companies also causes concern. The long presence of foreign companies in the oil service market (mainly the big four: Schlumberger, Baker Hughes, Weatherford and Halliburton) caused a partial substitution of the Russian oil services. Before the sectoral sanctions imposing their market share was over 65%. They provided both the equipment and the services, which made Russian services less important. So, considering the growing importance of the hard-to-recover reserves, it is important to monitor and develop Russian equipment to satisfy the industry’s needs. 

It is understood that in the current economic situation the foreign investments provide for the money flow into the federal budget, making it possible for the state to fulfil its obligations to the citizens. However, in the current state this cooperation will only lead to the mineral reserves base depletion. Currently there is a reduction of exploration investment. In 2013 it was 63,180,768.9 million Rubles. In 2017 it is going to amount to 50,207.8 million Rubles, in 2018 – to 48,860.6 million Rubles, in 2019 – to 47,472.2 million Rubles. So, in 2019 the reduction of financing will amount to over 15 billion Rubles. What we need is additional investments into the industry, an impulse to its development. 

It is necessary to establish a procedure obliging foreign investors to enhance exploration financing, and to develop old fields using new production technologies and modern equipment. I think the Russian government has to develop and issue laws on the privileges for service companies, to provide privileges for smaller geological companies. This will enable the exploration activity increase and provide for Russia’s mineral reserves base growth. 

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