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. Last Updated: 07/27/2016

Gazprom, Rosneft to Split Fields

APA worker fixing Gazprom's logo to its booth at a fair in Germany in April 2006.
The state will equally split all new offshore oil and gas fields between Rosneft and Gazprom, further limiting foreign and private access to its energy, Vedomosti reported Monday.

The newspaper quoted sources as saying the decision was made at a meeting of President Vladimir Putin and government officials last week and will be formalized through amendments to the law on subsoil use and the offshore law.

Spokesmen for Gazprom, Rosneft and the Industry and Energy Ministry declined to comment on the report. The Kremlin was not available for comment.

The news came only a day after Putin met German Chancellor Angela Merkel for talks that focused on energy security. Europe is seeking greater access to Russian energy resources, while Moscow is pressing for access to outside markets.

"Our view is that the main rationale behind the government's decision not to allow foreign investors access may be yet another example of Russian energy nationalism," said Pavel Kushnir of Deutsche UFG.

Under Putin, the Kremlin has sought to regain control over strategic economic sectors, a process that started with the demise of Yukos and has brought a virtual renationalization of one-third of oil production.

State officials have repeatedly favored state firms for offshore fields, which are due to replace west and east Siberia in the second half of this century to support oil and gas output growth.

Vedomosti said the meeting chaired by Putin had decided that all undistributed offshore fields would be offered only at closed tenders rather than at open auctions to reduce the chances of surprise winners.

But analysts and industry experts questioned whether this would help open the fields more quickly. Startup dates have already been postponed by over a decade in some cases, such as the giant Shtokman gas deposit in the Barents Sea.

"This counter-market measure could also be detrimental to the speed and quality of offshore development, as well as reducing transparency and budget revenues," said Valery Nesterov of Troika Dialog.

Kushnir also said Gazprom and Rosneft did not have the necessary technologies or expertise to develop offshore fields.

"As a result, the quality of offshore field developments may suffer if private companies, and in particular foreign companies, do not get access to the reserves," Kushnir said.

Gazprom has twice dissolved foreign consortiums to develop Shtokman in the past decade and the field is now expected to come on stream in 2013 instead of the initial deadline of 2003.

Another consortium, comprising U.S. majors ExxonMobil and Chevron, was dissolved after it won a preliminary bid to develop the Sakhalin-3 field, which the state plans to re-auction.

Under the revamped subsoil law, which the parliament has spent years revising, the license holders of Sakhalin-3 and several other big fields will have to be majority Russian-owned. Russia has also been seeking to regain control over existing offshore projects, such as Sakhalin-2, with Gazprom buying half of it from Shell and its Japanese partners for $7.45 billion after months of pressure from state ecological officials.

State officials have said foreign companies could become minority partners of state firms, citing Sakhalin-1 and Sakhalin-5 as examples.

BP has 49 percent in Sakhalin-4 and Sakhalin-5, both led by Rosneft, and has agreed to carry all exploration risks and invest billions of dollars before the start of commercial production. Sakhalin-1 is the last remaining offshore project led by a foreign firm in Russia, with U.S.-based Exxon holding 30 percent and Rosneft 20 percent.