Putin meets with oil head honchos to promote oil investment in Russia

Russia’s Head of State, Vladimir Putin recently held a 3-day economic forum with oil leaders spearheaded by oil giants Royal Dutch Shell, Eni, and ConocoPhillips. During this meeting, he took the opportunity to ask various oil heads to allow Russian firms gain access to foreign assets. At the same time, he invited the firms from Europe and the U.S. to invest in oil exploration in Russia’s vast virgin resources.

Just this year, oil firms, such as Exxon Mobil Corporation, Statoil, and Eni, agreed to team up with Russia’s state-run OAO Rosneft, allowing the latter to hold key stakes in foreign energy ventures. In lieu of this, Russia opened its oil-rich energy resources for possible exploration.

Energy expert and Pulitzer Prize-winning writer Daniel Yergin wrote that countries with a robust local energy sector would naturally want to extend their reach beyond their territory, and that is what Putin is aiming for right now.

During the event, Putin affirmed Shell’s JV deals with Russian-based oil firm, OAO Gazprom and went on to express his support for foreign firms investing in oil ventures in Russia.

Statoil and Eni have each signed a deal with Rosneft. Under the agreement, Rosneft may gain access to the refinery business and other assets in North Africa. Statoil and Eni on the other hand, were granted rights to explore Russian reserves.

Pavel Fedorov, Russian Deputy Energy Minister said that acquiring information, technology, and resources from another country or entity requires integration.

Foreign energy firms have been looking for opportunities to gain access into Russia’s hydrocarbon deposits, and ConocoPhillips is just one among companies seeking for non-traditional energy resources.

Russia’s current outlook on accepting foreign oil investment is a far cry from its previous stance 10 years ago. In the past, only government-run firms are allowed to explore offshore reserves. It came to a point where Shell was pressured to turn over control of oil and gas assets to Russia’s Gazprom.

Now, Russia is clearly trying to lure foreign investment as it aims to maintain its oil production at 10 million bpd within the next ten years. It introduced tax cuts on crude oil exports late last year. This year, the country intends to reduce taxes further. Tax benefits are granted to investors interested in Russia’s energy reserves that could be quite challenging for oil explorers.

Bob Dudley, BP’s CEO, disclosed that “The energy industry takes enormous risks and needs to work with partners, and that’s not only in Russia but outside of Russia.”

In Russia’s case, new technology is key to successful oil exploration and production. Putin needs this technology and he seems ready to reciprocate.