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Browne Says Majors Will Not Control Resources

BP chief John Browne.jpg

BP chief John Browne said Thursday that international oil companies should not expect to control Russia's natural resources.

"We have learnt about the importance of oil and gas for national security," Browne said Thursday at the EU-Russia Industrialists' Round Table in Helsinki. Russian assets "will remain predominantly Russian assets."

British Petroleum's TNK-BP venture, the second-largest privately owned oil company in Russia, has started to become an anomaly as President Vladimir Putin increases state control over the energy industry to build the country's global political and economic power. The government is tightening control over projects led by foreign companies, including BP and Shell.

While international investment can be "welcomed" to develop the resources, the issue of security means they will remain mainly Russian, which may not be understood internationally, Browne said.

"Some people still seem to think that national assets in Russia will be sold off," Browne said. "That represents a profound misunderstanding of the Russian view of its precious resource base."

The country's energy industries will generate one-third of national income this year and hundreds of thousand of jobs, he said.

"We are delighted to have made these investments and to have been welcomed as international partners," he said.

Browne also praised Russia's role in "stabilizing" world energy markets over the last four years when the war in the Middle East and civil conflict in Nigeria pushed prices up.

"Without Russia, the world market would have been much more volatile, potentially causing great damage to the international economy," he said. "That important preeminent role looks set to continue" because of its oil and gas reserves and scarcity of cheaply producible resources elsewhere.

Browne on Wednesday met with the heads of state-run Gazprom and Rosneft in Moscow. Browne and Gazprom CEO Alexei Miller discussed cooperating on projects and sales of liquefied natural gas, or LNG, Gazprom said Wednesday.

BP and Rosneft will spend $700 million over the next five years to develop fields under the Sakhalin-4 and Sakhalin-5 projects through a venture they set up in 2003, Rosneft said Wednesday after a meeting between Browne and Rosneft CEO Sergei Bogdanchikov.

Gazprom has been buying tankers of LNG from companies such as BP and selling to customers in the United States to gain experience in the market. Gazprom does not yet produce LNG itself. BP is now bidding in a tender to join Gazprom's proposed Baltic LNG plant near St. Petersburg.

TNK-BP formed a venture earlier this month with Gazprom's petrochemical arm to refine associated gas.

TNK-BP has been lobbying Gazprom for the right to build a pipeline and export natural gas directly from its $18 billion Kovykta gas field in eastern Siberia to China or Korea, a plan Gazprom opposes.

"Understanding of the context in which you are working is always vital to business success," Browne said. "That is particularly true in a country such as Russia."

© Bloomberg

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