The world oil industry's biggest challenge must be to reorganize Russia's oil sector.
As taxes, export bans, complex laws, and lack of money strangle production, it appears someone will take up the challenge.
Boston Consulting Group Ltd., London, has rolled up its sleeves for the chore. The consultant has won a Ministry of Fuel & Energy contract to provide recommendations on the future structure of the Russian oil industry.
"The decisions taken about the future structure and regulation of the Russian oil industry will have major repercussions, not only for the Russian oil sector, but for the whole economy."
That is the opinion of Vladimir Nossov, head of the ministry's department in charge of oil industry restructuring. Companies that have pumped money into Russian ventures hope Nossov is right.
BIG QUESTION
Boston's main brief is to advise on whether to form more vertically integrated companies along the lines of Lukoil, Yukos. and Surgutneftegaz or set up independent oil producing and refining enterprises.
The consultant also will advise on restructuring of oil equipment manufacturing and services sectors, as well as industry research and geophysical institutes under state oil company Rosneft.
Charbel Ackermann, vice-president of Boston, leads a restructuring project team of 14 consultants, seven western and seven Russian, based in the company's Moscow office.
"A number of fundamental decisions have to be made," Ackermann said. "While proposals for new privatized, vertically integrated companies have been made, there are still proposals for new state oil companies on the table.
"Among the decisions will have to be Rosneft's transitory function and whether it will have a residual role. Then there are the production associations and refineries. These could be grouped or privatized individually."
Also under review is the future of Russia's retail gasoline network, which is operated under regional monopolies. These could be broken up and sold partially, said Ackermann, which could interest foreign investors.
TIMETABLE
Ackermann said Boston expects to complete its recommendations in August and September so the ministry can make its major decisions by October. However, policy decisions also are needed by Russia's parliament, which is in recess until September.
Among crucial government rulings Ackermann lists ownership of regional crude and products transportation facilities, approval of production sharing contract regulations, and, above all, an updated oil and gas law.
"The ministry is very keen to establish legislative stability before putting the existing machine to sleep," Ackermann said.
He reckons government's request to the ministry for submission of draft legislation this summer could lead to most legislative reforms being completed by November.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
