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Courting Mother Russia

By Pat Davis Szymczak, Editor of Oil&Gas Eurasia.

Dear Readers,

The Holidays are coming, and with them, Oil&Gas Eurasia's look ahead into 2003. We will wrap up this year's editorial program in December with a cover story on TNK and how this Russian major's IT vice president, an American, restructured that division into a showcase of best practice. As part of its IT restructuring, TNK designed systems to assess its oil field service units for selected divestiture. OGE examined this trend among Russian majors in Andrey Krivorotov's interview in September with Jeff Karfunkle, another TNK vice president (and another American.) In December we'll tell you something about the technologies that will help them carry through on the plan.

And that leads up to our January, 2003 New Year issue - a look at what's in store for the oil field service sector in Russia. We'll do this by looking at the plans, budgets and strategies of the Russian majors, International majors operating in Russia, International services companies and Russian service companies.

Jacek Gawron, vice president, Eurasia at Halliburton, predicts that Russia will be "the largest growth market in the world for service companies" in this decade. You can read his interview in January along with those of his counterparts at Schlumberger, Weatherford and other service companies active in Russia.

A number of factors drive this phenomenon: Russian majors are entering a period similar to what the international majors went through in the 1980s with respect to service unit restructuring. Oil companies shedding units that are not their core business - producing and selling oil. Moreover, there are some drivers that are unique to Russia because of the country's isolation for most of the 20th Century. You will read in this month's issue how Russian majors and the government are concerned that all the "quick money" policies emphasizing enhanced recovery and export in the 1990s neglected exploration. In short, Russian reserves are world-wide second only to Saudi Arabia. But if action isn't taken now, those reserves will remain in the ground even as Russia's current well stock stops producing.

The answer again is the international service companies. Again, because of the problems of Soviet isolation, Russian geophysical companies lack the technology and the know-how to undertake 21st Century asset management on their own. So far in Russia, Schlumberger (together with its SIS GeoQuest subsidiary) has taken the lead in developing this niche - a unique one considering that there is no equivalent situation anywhere else in the world. But Halliburton (and its subsidiary, Landmark) are not far behind. It is no secret that the US Exim Bank is making available next year $300 million in export financing credits - that's $100 million each to LUKoil, Sibneft and YUKOS. And it will be technology and know-how from Halliburton and its suppliers that these three Russian majors will buy with those credits. The reason: Exim Bank requires the credits to be spent on US exports and among the service companies, only Halliburton is truly a US company. Furthermore, Halliburton has a proven track record of managing Exim Bank credits that were allotted to TNK in the late 1990s.

We at OGE hope you'll join us as we pursue these and other just as important topics into the New Year. Our mission is to bring to you, our reader, information and insight into what's happening on the cutting edge in Technology and Business Know How in the Russian oil industry - whatever your language, Russian or English.

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