Duma Balking at Production Sharing

Conservative deputies in the State Duma made it clear Tuesday they will continue to oppose proposed changes to Russia's production-sharing legislation when they are voted on in mid-February.


The package of amendments includes changes to the production-sharing law and tax legislation along with a scaled-down list of oil, gas and metals deposits to which the law would apply.


One of the main opponents of the bill, deputy head of the auditing chamber Yury Boldyrev, proposed rejecting the bill on grounds that it had not passed economic scrutiny last year and that the list of deposit sites had not been scaled down enough.


The number of sites on the list is unchanged from the previous draft, rejected last year, at 127. But in the new draft, the sites are split into two groups, one of which outlines 49 priority projects that could be started this year, with remaining sites pending approval.


"We don't want more controversy like with the loans-for-shares auctions," he said, referring to a series of privatization auctions in 1995.


Alexei Mikhailov, head of the Duma's natural resources committee and a member of the liberal Yabloko faction that initially introduced the bill, said amendments were unlikely to get past the conservative majority in the Duma.


"I do not expect a positive result," he said. "The Communist faction and the rest of the opposition will come out very strongly against the list again."


Russia's current production-sharing arrangement, signed into law in December 1995 after undergoing significant revisions by conservative legislators, is contingent upon the parliament adopting a list of locations, to which the law can be applied.


Viktor Orlov, minister of natural resources, appealed to the opposition's nationalistic sympathies, urging deputies to support the bills in order to boost "energy production to a level that guarantees national security."


The overall worth of the deposits listed is estimated at about $200 billion, and massive foreign investments and technology are vital for their exploration, Orlov said.


"It is clear that such funds simply do not exist in Russia," he said.


At the moment, Russia has signed production-sharing agreements with Western investors on the development of Sakhalin-1 and Sakhalin-2 oil projects in the Far East and the Kharyagino oil field in the Far North.


"I can reassure you that despite the popular opinion by some ill-informed opponents, we're not talking here about selling off Russia. On the contrary, we see a rebirth of the Far East," Igor Farkhutdinov, governor of Sakhalin, told the deputies.


While the Agrarian faction indicated it could still support the bill if the list of sites is further reduced, the powerful Communist faction made it clear there would be no concessions.