U.S. Will Fund Oil Study in Siberia

The United States will fund the exploration of oil and gas fields off the Arctic coast of eastern Siberia, the first show of energy partnership with Russia since the May presidential summit, U.S. Energy Secretary Spencer Abraham said Thursday.

"Russia will play a pivotal role in ensuring global energy security," Abraham told reporters Thursday after meeting with Russia's largest oil companies. "It is reflected in the growing strength of Russia's energy sector."

Abraham also reiterated Washington's opposition to Russia building nuclear reactors in Iran, saying it "remains an issue of utmost concern to us." (Story, page 2.)

The United States will fund a study to explore four basins in eastern Siberia and estimate their oil and gas reserves, Abraham said. U.S. and Russian geologists will pinpoint the best candidate for commercial development, after which extraction could begin.

Abraham declined to say how much the study would cost and said some details have yet to be worked out.

The Arctic analysis is part of the U.S. Geological Survey's Arctic Resource Assessment, an ongoing federal study.

A quarter of the world's undiscovered oil and gas resources are in the Arctic, Spencer said.

Many international energy companies attempted projects in Russia's Arctic offshore in the mid-1990s but were stymied by the State Duma's slowness in approving production-sharing agreements, provisions necessary for large-scale foreign investment. Foreign oil companies deem the Arctic basin lucrative because hydrocarbons could be transported to North America via the North Pole on icebreaker tankers.

The U.S. government has made energy security a top priority since the Sept. 11 attacks, which led to a shift in the relationship between the United States and its No. 1 oil supplier, Saudi Arabia. And if U.S. plans to attack Iraq materialize, the Organization of the Petroleum Exporting Countries, an oil cartel made up of mostly Arab states, could cut back production in solidarity, causing the oil price to skyrocket.

"The more diverse the sources of energy are, the less likely it is that disruption on one part of the planet will interrupt supplies," Abraham said.

For U.S. policymakers, Russia, with enormous reserves but relatively little investment, was a logical choice. In May, Presidents George W. Bush and Vladimir Putin signed a joint declaration on energy sector cooperation, which Bush characterized as a "major new energy partnership."

Yukos, Russia's second-largest oil company, took these intentions seriously enough to send the first-ever tanker of Russian crude to the United States in June. Although traders say transportation costs make the crude too expensive for the American market, Yukos sent another tanker last month and has chartered several more shipments.

Energy Minister Igor Yusufov on Thursday recommended that representatives from Russian oil companies such as Yukos be included in the U.S.-Russia working group on energy, the Energy Ministry said.

Both Yusufov and Abraham said U.S. companies may be interested in aiding the expansion of Russia's oil transportation network, which is barely keeping up with increasing production. Russia last year produced about 350 million tons, 16 percent more than 1996 levels.

Yusufov said Russia needs to ramp up its export of oil products as well as crude oil.

"We should focus more of our energy on delivering more oil products," he said.

Russia can also learn from the United States' experience in deregulating the gas market, Yusufov said. While America began liberalizing its gas market in the 1950s, Russia is to begin drafting long-delayed reforms of the gas industry by December.

Abraham also met with Gazprom deputy CEO Alexander Ananenkov on Thursday.

Russia's oil and gas firms need an inroad to U.S. financial markets, Yusufov said, calling such access a "blueprint for equitable and mutually beneficial cooperation in the energy sector."

Abraham said he has been asked to be an "indicator for investors" who are ready to invest in the industry.

Russian and American industry representatives are scheduled to hammer out several new energy corporation projects at a U.S.-Russian conference scheduled for early October in Houston.