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. Last Updated: 07/27/2016

State Readies Oil Law Changes for Duma

Russia is drafting amendments to its oil production-sharing law, but the changes will not reflect all the recommendations made by foreign oil firms waiting to invest in the sector, a top oil official said.

Andrei Konoplyanik, chairman of the government advisory committee in charge of preparing the changes, said the Russian cabinet could present the amendments to parliament for discussion next week.

"Our approach is to find a balance of interests between the federal government, the regions, and foreign and Russian investors," he said Wednesday. "Nobody should expect to get 100 percent of what he wants in terms of changes. Each has excessive demands."

Russia's current production sharing law -- signed into law last December after having undergone significant revisions to appease conservative deputies -- is both a blessing and a burden to foreign oil companies that are ready to invest up to $60 billion in current and proposed oil deals across Russia.

While the law provides a legal framework for investment, most oil majors consider it flawed and have said they will not proceed until it is changed.

Konoplyanik said the most significant draft changes included measures to iron out inconsistencies between the production-sharing law and Russia's law on subsoil resources.

Another draft change seeks to eliminate a requirement that approval by the State Duma, the lower house of parliament, be obtained for each individual foreign investment in so-called strategic and offshore areas.

"There are too many people, including the government, who understand this is an unworkable condition," Konoplyanik said.

He said various ministries and the cabinet were working with the Moscow-based Petroleum Advisory Forum, a lobby group of Western oil companies, on drafting the amendments.

Western oil companies also object that the current law allows Moscow to renegotiate production-sharing agreements should world oil prices move sharply or force-majeure conditions arise. It also limits foreign investors' recourse to international courts should contract disputes arise.

Most Western oil firms are worried that the Duma, with a heavy Communist presence that is often hostile to foreign investment, could block deals planned in these areas.

Russia's conservative deputies say they do not want foreign oil companies to lock in deals on huge oil reserves and squeeze cash-strapped Russian oil firms out. "Our major task is to show a step-by-step, definite trend toward improving the law regardless of any possible political changes," Konoplyanik said, referring to the upcoming June 16 presidential poll.

"It will not matter whether the State Duma ... votes on the changes before or after the election."