Putin calls for clear foreign investment rules in energy sector

Energy Trade

Russia’s president called Monday for improvements to rules for foreign investment in the country’s oil and gas sector, to ensure clarity and transparency.

Russia is currently developing two draft laws to regulate foreign investment in the national economy, one on strategic companies, and one on natural resources. Vladimir Putin told a meeting of Cabinet ministers and representatives of state-controlled oil and gas giants Gazprom and Rosneft, and pipeline monopoly Transneft: “We have consistently aimed to establish transparent conditions for foreign investors. It should be noted that Russia has one of the most liberal regimes for foreign investment in the oil and gas sector. We need procedures to be not only open, but as understandable and transparent as possible, eliminating ambiguities,” the president said.

A draft law on foreign investment in commercial companies of strategic importance to Russian national security envisages limitations on 39 businesses, including arms, aircraft, nuclear, space industries and strategic deposits. The other, a new version of the mineral resources law, has undergone repeated reviews. Natural Resources Minister Yury Trutnev earlier proposed singling out amendments to the mineral resource law into a separate set of laws. He said it was impossible to issue licenses for strategic fields without the amendments, which also hampers economic growth and infrastructure development in the regions.

At the meeting, the president also urged Russian companies to make swifter progress in developing refining capacity. “After exporting crude, Russia then has to purchase much of its oil and gas products, from plastic to chemical fiber. The underdevelopment of our own refining industry leads to substantial economic losses,” he said. Putin said he had earlier given instructions to develop measures to encourage refining of crude in Russia. He also said more active measures should be taken to tackle associated gas recovery. “The most conservative estimates suggest that over 20 billion cubic meters of associated gas is burned annually,” Putin said. “Such squandering is inadmissible.”

Among possible procedural changes, the president highlighted auditing, more severe environmental fines, and tougher requirements for oil and gas companies. Following the president’s comments, Trutnev said that a decision had been made to develop an action plan for the recovery of 95% of associated gas until 2011. He said his ministry, along with the economics ministry, would develop instruments for increasing payments for flaring associated gas, which should be banned by 2011. Associated gas is a by-product of oil production. Gas flaring, while wasting potentially valuable fuel, also releases huge volumes of carbon dioxide into the atmosphere. Potential uses for the gas include supplies to power plants, and conversion to condensate to be sold as cooking fuel or used for gasoline production. (

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