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. Last Updated: 07/27/2016

Trutnev Urges Oil Majors to Come Back Onshore

Itar-TassNatural Resources Minister Yury Trutnev
Natural Resources Minister Yury Trutnev on Friday urged oil companies to move their holding structures out of offshore tax havens if they want a chance to tap into Russia's mineral wealth.

Trutnev said Thursday that only entities in which Russian companies have a controlling stake would be allowed to participate in auctions of strategically important oil and gas deposits.

When asked Friday whether Russia's No. 1 oil producer LUKoil and Roman Abramovich's Sibneft oil company — whose owners are largely located offshore — would be allowed to bid, Trutnev answered that it posed a problem.

"It wouldn't hurt for these companies to back away from offshore ownership," he told reporters, according to Dow Jones Newswires.

The pending ban underscores Russia's desire to tighten control over the nation's vast raw material riches, and would apply to the oil and gas fields around the Far Eastern Sakhalin Island, in the Barents Sea and the giant Trebs and Titov fields in Russia's Arctic.

In addition, foreign-controlled companies would be kept out of the auctions of Russia's largest gold deposit, Sukhoi Log, and the East Siberian Udokan copper deposit, the Natural Resources Ministry said.

Trutnev noted that foreign companies would not be kept out all together. "We are just saying that these deposits must be controlled from the Russian territory," he said.

"It's a worrying intention," said Andrei Machanskis, oil and gas analyst at the Brunswick UBS.

"It will have a bad effect on the investment climate."

If foreign companies participate in a joint venture in which 50 percent plus one share is owned by a Russian company, as Trutnev proposes, they would still have to invest nearly as much as for majority control, he said.

As for the effect on oil firms owned from offshore, Machanskis said he expected that the regulations would be ultimately finessed to allow their participation.