Russia’s energy monopolies find room to grow

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Russia’s energy monopolies find room to grow
By Guy Chazan And Gregory L. White
The Wall Street Journal Europe
06 Jul 2006

MOSCOW—When President Vladimir Putin hosts the Group of Eight leading nations in St. Petersburg next week, he is expected to sign an energy action plan bristling with pro-market rhetoric about improving the investment climate, encouraging competition and increasing access to energy markets.

But in recent months, Moscow has imposed strict limits on foreign investment in its oil and gas fields while entrenching the dominance of big state-owned monopolies like natural-gas giant OAO Gazprom.

Russia passed a law yesterday enshrining Gazprom’s exclusive right to export Russian gas, weeks after the European Union called for Moscow to open its pipeline network.

The disconnect shows how differently Russia and other G-8 members view energy security—a topic Mr. Putin has put at the top of the summit’s agenda. (See related article on Page 18.)

“Call it the Sinatra approach,” said Marc Franco, head of the European Commission delegation to Russia, in an interview. “The Russians have assured us they’ll work on issues [like market access], but they’ll do it their own way.”

Though it alarms some governments, the Russian approach hasn’t fazed many of the major international energy companies desperate for access to Russia’s vast reserves.

Big oil companies from Asia and Europe are showing strong interest in buying shares in the initial public offering of state oil company OAO Rosneft. The IPO could be valued at as much as $12 billion.

“The only way you’re going to get access to…resources in Russia is if you have good relationships with” Rosneft and Gazprom, said oneWestern oil executive.

People close to the situation said BP PLC and Royal Dutch Shell PLC have expressed interest in participating, as have China National Petroleum Corp. and Malaysia’s Petroliam Nasional Bhd., or Petronas. Each could buy $1 billion or more in stock, with industry buyers potentially takingmore than half of the shares on offer, these people said.

For BP, which invested $7 billion in a joint venture in Russia in 2003 and joined with Rosneft in a project in Russia’s far east, ensuring good relations with... read more...