British Official Praises Energy Ties

VedomostiOil and gas industry officials visiting Gazprom's pipe-like stand at an exhibition at an energy conference Tuesday.
A British government official on Tuesday touted energy cooperation with Russia if investor rights were protected, but he did not explicitly refer to BP's ongoing struggle with its Russian partners at TNK-BP.

"It is true that British companies want to invest in Russia, but they need to feel welcome and be confident that their interests will be protected," John Neve, director for energy at U.K. Trade and Investment, which helps British investors work abroad, said at an oil and gas conference.

Neve said Britain looked at President Dmitry Medvedev with hope when it comes to foreign investor rights. "We very much welcome President Medvedev's focus on building a strong Russia committed to law and order and to international norms," Neve said.

He did not mention TNK-BP by name. BP has said its Russian partners want to wrest away control in the 50-50 joint venture. The Russians accuse BP of operating the company inefficiently.

Neve praised British energy companies as having some of the world's leading production techniques. "We are especially keen that our companies ... should have the opportunity to share their expertise and experience with Russian producers," he said.

Another European official at the conference vented frustration over a link between natural gas prices and soaring oil prices. Europe now pays three times as much for Russian gas as it paid five years ago because the price closely follows that of oil, said Christian Cleutinx, director of the European Commission's department for energy and transportation.

"This relationship is, to say the least, unclear," he said. "High gas prices will inevitably have an effect on future gas demand."

Commenting on South Stream, Russia's latest proposed pipeline to Europe, Cleutinx said it did not compete with Nabucco, a project that European governments hope will diversify supply away from Russia. Europe will need much more gas than both pipelines could deliver, he said.

"I can tell [you] that there's no competition at all," he said. "You can imagine that there is room for two pipelines ... and even for more pipelines."

Cleutinx said Gazprom must work harder to bring more gas on line. "What we would also like to see is more active work being performed, for example, in Yamal and also to see the Shtokman project starting in a practical way," he said.

Russian officials, including Rosneft vice president Sergei Kudryashov and Yury Lipatov, head of the State Duma's Energy Committee, spoke of the growing challenges of producing oil, because new fields lie deep at sea or hold reserves of poorer quality.

The Duma earlier this month gave preliminary approval to a slew of measures that would reduce the tax burden on oil producers in an effort to help them increase production.

Lipatov said his committee was considering several new proposals, including one allowing a lower mineral-extraction tax for oil that companies intend to sell in Russia rather than export.

Vladimir Khristenko, head of oil field services company Rimera and the son of Industry and Trade Minister Viktor Khristenko, predicted that the services market -- including pipe production and pipeline construction -- would grow to at least $65 billion in 2010 from last year's $40 billion.