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. Last Updated: 07/27/2016

U. S. Agency Guarantees Polar Lights Oil Project

A U. S. government agency agreed Tuesday to give its first loan guaranty to a private commercial venture in Russia.

The U. S. Overseas Private Investment Corp. , in a move said to be a direct outgrowth of the Vancouver summit last month, signed a commitment letter for a $50 million loan guaranty to the Polar Lights oil project, a joint venture of Conoco Overseas Oil Co. and the Russian state exploration company Arkhangelskgeologia.

Robert Barnett, presidential representative of OPIC, said in an interview that Conoco's project was picked because "it was ready to go and had a potential of creating jobs both for Russians and Americans".

The loan guarantee by the U. S. government will allow the joint venture to gain more financing from outside sources, said John Gehbauer, public affairs manager for Conoco.

Foreign investment in the Russian oil industry, the country's largest hard-currency earner, has fallen by 40 percent since 1988 because of the uncertain legal and financial system as well as potential political dangers. But government loan guarantees are seen as one way to foster private sector investment in the industry.

The Polar Lights joint venture was set up in December 1991 to develop the Ardalin oil fields in the Timan-Pechora basin, west of the Ural Mountains near the Arctic Circle with an estimated recoverable resources of about 100 million barrels.

The total cost of the Ardalin project is estimated at $300 million, which will include the drilling of 24 wells and building a central processing facility and an oil pipeline.

Gehbauer said that the joint venture intends to finance $250 million of the cost. The loan guaranty should enable the company to secure $50 million of that, and he said the European Bank for Reconstruction and Development had agreed in principle to grant about $200 million for the project.

According to Yury Tyustin, deputy general director of Arkhangelskgeologia, Polar Lights has already started drilling on two wells. This year the joint venture will build 26 kilometers of pipeline, Tyustin said. OPIC support of the project was announced at the Vancouver Summit between presidents Boris Yeltsin and Bill Clinton.