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Fifteen years after Soviet collapse, Kremlin recaptures Siberia's black gold



By Karim Talbi
AFP

VANKOR, Russia
Petroleumworld.com 12 04 06


Two workmen bore through the frozen tundra for the oil that symbolises the re-found ambitions of President Vladimir Putin's Russia on a field that has lived through years of post-Soviet upheaval.

"We drill down 500 to 600 metres," said Yevgeny Popov, the field's director, as he watches the work in temperatures of some minus 44 degrees Celsius (minus 47 degrees Fahrenheit), reeling off figures about his vast frozen fiefdom.

"In the long term, we will produce 33.1 million tonnes of crude per year."

Since the collapse of the Soviet Union in 1991, the oil field at Vankor, 100 kilometers (62 miles) north of the Arctic circle, has passed backwards and forwards between Western majors and upstart oligarchs.

Now, as Russia marks the 15th anniversary of the collapse of the Soviet Union on December 8, the field is firmly back under the Kremlin's thumb, controlled by state-owned oil champion Rosneft.

Exactly who controls the cash flow from Vankor, and the other vast fields that dot the Russian landmass, has been a driving force for change in Russia for much of the last decade and a half.

When the Vankor field was discovered in 1988, there was no doubt that the Central Committee of the Communist Party in Moscow, 2,500 kilometers away, had the last word on cash flows.

But the Soviet empire was already beginning to crumble when the group of geologists found what lay below this 140 square kilometer (54 square mile) patch of icy nothingness.

Nobody then was watching the Communist Party propaganda instructor from Russia's Far East who would eventually take control: the future CEO of Rosneft, Sergei Bogdanchikov, who was 31 years old in 1988.

In the early 1990s, it looked like the giant Western oil majors were best placed to extract the oil and Vankor's first suitor was British-Dutch group Shell, which invested in 1993.

Rosneft is less than charitable when discussing its former rivals. "Shell didn't do much with it, and quickly threw in the towel", a Rosneft official said on condition of anonymity.

But, back in the 1990s, Rosneft was still a big player in the oil industry, far behind rivals Sibneft and Yukos, owned by future playboy Roman Abramovich and ill-fated wunderkind Mikhail Khodorkovsky, respectively.

Khodorkovsky ended up in prison. Abramovich cashed out. Bogdanchikov won.
By the early 1990s, the Vankor field was owned by Anglo Siberian Oil, a small company based in London.

Yukos managed to wrest control of part of Vankor through a complicated financial scheme, but it never managed to get the oil flowing.

In 2002 another Western hopeful, French group Total, signed an agreement with Anglo Siberian for control of 52 percent of the field.

But as has often happened in capitalist Russia, the foreign investor met its match in a well-connected local: Rosneft.

The state-owned company, which was growing at an exponential speed with a little help from its friends in the Kremlin, purchased Total's stake in Anglo Siberian in 2003.

In October 2003, reportedly furious at the alleged political ambitions of Western-connected Khodorkovsky, the Kremlin set loose its foot-soldiers, arresting the Yukos owner at gunpoint on an airstrip in Siberia.

After finding Khodorkovsky guilty of massive tax evasion, the state exiled Khodorkovsky to a Siberian prison, and dismantled his oil company, one well at a time.

Kremlin-controlled Rosneft took the largest piece of the cake.

Its control of Vankor secured, Rosneft began the task of transforming this patch of Arctic into a well-oiled extraction machine aimed at transporting millions of tonnes across a continent to its future consumers.

Luckily for Rosneft, many of the employees inherited with the field, and other former
Yukos assets, had been developed for years by Yukos and others.

They are "often excellent technicians and engineers", a Vankor employee said on condition of anonymity. "The company doesn't like it if you speak too much about Yukos", he said.

The original plan was to direct a pipeline to Dixon, a Russian seaport on the Kara Sea, near the Arctic sea. But Siberian geography got in the way.

"Crossing a nature reserve and the need for ice-breakers made the port of Dixon impractical," said Popov.

Meanwhile, Russia's shifting geopolitical allegiances made the potential of Asian oil guzzlers China and Japan preferable to those of Europe and the United States.
So a section of pipeline of more than 500 kilometers (300 miles) will connect Vankor with Pur-Pe, another Russian town, and from there join the 4,130-kilometre (2,565-mile) long Siberia-Pacific pipeline to Asia.

In anticipation of first oil, due in 2008, the town of Vankor is starting to swell.
"We will build a village that allows our men to move everywhere without putting their noses outside, like those planned by the Americans in Alaska", Popov said.

To help him with the task, Rosneft has recruited industry specialists like French-US group Schlumberger, America's Halliburton and Canada's SNC-Lavalin.
With the oil firmly under its control, Rosneft no longer has any qualms about looking to the West for a helping hand.

"These guys know their job... For Western standards, it's a lot more comfortable than what we had there," said Jerry Dorfmann, who works for Veco Engineering, based in the US state of Alaska, sitting the local canteen.

"I understand that scares some of us in the West," Dorfmann said.

AFP 04 0927 GMT 12 06

Copyright© 2001 AFP
. All Rights Reserved.

 

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