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. Last Updated: 07/27/2016

Energy Ministry Losing Important Responsibility

As a sign that the authority of the Energy Ministry may be fallling, the regulation of production sharing agreements may be moved from the Energy Ministry to the Economic Development and Trade Ministry, Deputy Prime Minister Viktor Khristenko announced Thursday.

PSAs are used to encourage investment mainly to companies developing oil, gas and gold resources by offering tax breaks.

Until recently, it seemed that the announced reorganization of the energy departments meant little more than changing the sign from the Fuel and Energy Ministry to the Energy Ministry.

Last month, a resolution was approved that kept all of the ministry’s previous functions. It included the resolution of issues connected with PSAs, which the Natural Resources Ministry had tried unsuccessfully to win over.

The Energy Ministry has been under fire since.

At the end of July, the government department for energy and natural resources sent Prime Minister Mikhail Kasyanov a proposal for transferring the interdepartmental committee for access to pipelines and terminals from the Energy Ministry to the government’s jurisdiction. This was provoked by the fact that the export of oil and oil products is unregulated and partially contradicts state interests.

The export of oil under state programs was cited as an example, which the interdepartmental committee has allegedly permitted without the necessary governmental approval and in contradiction to a presidential decree.

A few days later, the Energy Ministry recommended that Transneft eliminate three of its state export programs aimed at financing the 55th anniversary of the World War II victory celebrations, new technology under a UN program and a radiation center for the Emergency Situations Ministry.

The Energy Ministry’s press center explains this as the need to increase seasonal fuel deliveries to the northern regions. However, the question arose as to whether this was officials’ worried reaction to the prospect of being cut out of the export quota distribution process.

PSAs are another tasty morsel that may be taken away from the Energy Ministry. It is not a secret that companies are spending huge amounts of money on promoting their projects within the corridors of power.

President Vladimir Putin may sign a decree in the near future whereby PSA issues are transferred to the jurisdiction of the Economic Development and Trade Ministry, Khristenko said Thursday.

A working group, to be headed by German Gref, has already been set up to handle PSA issues, said Khristenko. Its job is to create a plan of action for completing the PSA legislative base to speed up implementation of existing oil-refining projects. On Aug. 31, the issue is to be discussed at a government meeting.

The Energy Ministry’s weakened influence does not worry the oil companies.

"The fact that Gref is taking PSAs under his charge is actually a good thing. He has more political weight than [Alexander] Gavrin and can get things moving faster," said a representative of one of the major oil companies.

He also suggested that "Gavrin takes too long getting into the swing of things," and his department suffers as a result.

The manager of another company said that the Energy Ministry is of no use to anyone in its present form and the process is under way whereby it will be used as a center for compiling oil companies’ balance sheets."

Yukos chairman Mikhail Khodorkovsky said at a news conference soon after Gavrin was appointed that the best thing he could do would be to "prepare the ministry for liquidation."

After an assessment like this, transferring the PSA to another department seems to be a half measure.