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. Last Updated: 07/27/2016

BP CEO: It's Unwise Not to Invest in Russian Oil

bloombergBP CEO John Brown
NEW YORK -- Russia may be a risky place to do business, but the CEO of BP says major Western oil companies have no choice but to build a presence in a nation so rich in oil and natural gas.

"There is no other country in the world where more hydrocarbons are being produced and with as many hydrocarbons yet to be found as Russia," John Browne said in an interview in New York on Friday.

"If you are in the oil and gas business it would arguably be unwise not to be in Russia. And if you're a big oil and gas company, you probably can't be one unless you're in Russia," he said.

In August, Britain's BP wrapped most of its existing Russian assets into a 50-50 joint venture with Russian firm TNK. The deal created TNK-BP, Russia's third-largest oil producer, at a cost to BP of more than $7 billion in cash and shares.

The transaction also has sent rivals such as ExxonMobil and ChevronTexaco of the United States scrambling to accelerate their own plans for the country. Recently, Russian officials confirmed Exxon was in talks to purchase as much as 40 percent of recently merged YukosSibneft, by far Russia's largest oil company.

Still, officials at ExxonMobil and ChevronTexaco have expressed serious reservations about Russia and observed that the nascent free-market economy carries political and corporate governance risks for foreign companies. These risks, Browne said, are no less manageable than in other parts of the world.

"All risk is relative. There is risk in every country, whether that is in the Middle East or Nigeria," he said. "Secondly, every country is in transition and so, third, you have to assess the transition. Russia seems to be a country that's had a massive transition."

Browne also maintained that Russia has made significant progress in improving the environment for foreign investors.

"No other country has come so far from so far back in such a short space of time," Browne said. "Over 18 years you can see the construction of a body of law, see construction of enforcement technique, see the changes led by a president who says the country has got to get modernized.

"We look to the future to see where hydrocarbons are and where we can add value to them and get them to market." he said. "We think Russia is clearly the place to be."