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. Last Updated: 07/27/2016

Oil Firms Look Beyond Russia

Russian oil companies have set their sights on oil fields in other countries, complaining that mounting bad debts and high taxes make it unprofitable to operate in Russia, according to Russia's top energy official.

Fuel and Energy Minister Yury Shafranik told a press conference Thursday that Russia's oil companies are looking to boost their production in Azerbaijan, Vietnam and Kazakhstan because it was just not worth doing business in Russia.

Shafranik's comments echo the concerns of Western oil companies who have complained that high export and excise taxes coupled with export restrictions are deterring investment.

Russian oil firms also suffer from bad debts owed to them by local customers. Shafranik put these debts at 10 trillion rubles ($6.7 billion), more than half the nonpayments in the country. He described the situation as "catastrophic" and called on the government to take action.

Shafranik said, however, that major Russian oil companies are moving to expand operations outside Russia where payments are prompt and the tax regime is better.

"We are already active abroad and we will develop our operations outside Russia, when such projects are effective and profitable for our companies," he said.

Russia's biggest oil producer, Lukoil, has recently acquired a 10 percent stake in an international consortium seeking to pump two Caspian Sea fields in Azerbaijan with estimated reserves of 3 billion barrels of oil.

The consortium led by British Petroleum Co. in partnership with Norwegian state oil company Statoil hopes to sign a final agreement on the project before the end of this month.

Lukoil, which accounts for almost 15 percent of total Russian oil output, is also involved in a prospecting project in Egypt and Tunis in partnership with the French company Agip, a pipeline construction project in Lithuania and a gas exploration project in Uzbekistan, according to Andrei Kochetkov, an expert with Lukoil's consulting department.

He said that projects outside Russia were profitable for the company because of a better tax regime.

"We come up with a good offers and they give us some tax breaks -- that's normal," Kochetkov said. In addition, he said, oil companies overseas did not have to worry about getting paid. Lukoil is owed 1 trillion rubles by customers in Russia, he said.

Kochetkov also said there was growing competition between the biggest Russian oil producers over international contracts. He said that another giant oil company, Yukos, is also working on several projects outside Russia.

Shafranik said Thursday that Russia plans to expand its operations in Vietnam to increase output to 20 million tons a year from 7 million tons.

He also said Thursday that Russia intends to have a greater impact on stabilizing world oil prices.

"We are going to undertake certain measures to raise the price of oil in Europe," Shafranik said. He did not say, however, if Russia planned any special moves to cut exports or output.

Oil exports grew by 13 percent to 78 million tons in 1993 from 65 million tons in 1992, according to Fuel and Energy Ministry data.