Russia May Revive PSAs For New Oil, Gas Projects - Official

MOSCOW (Dow Jones)

Russia said Wednesday it may revive the practice of production-sharing agreements for new oil and gas projects, like the PSAs it had signed with companies ExxonMobil Corp (XOM) and Royal Dutch Shell PLC (RDSA) in the 1990s, indicating an radical change to the government's current position on partnership deals.

Russia's Energy Minister Sergey Shmatko said the PSAs will likely see a "renaissance" in Russia, because they allow producers to take more risks and "attract the funds needed for geological exploration."

"I think that in the future, PSA projects may move into new areas," Shmatko said. "We need to look at our legislation and international experience in the field."

Exxon signed a PSA in the 1990s to become operator of the Sakhalin-1 project. In 2007, Shell, which signed a PSA to operate Sakhalin-2 project, was forced to give up control of the project to state-controlled gas giant OAO Gazprom (GAZP.RS).

A state commission has approved the 2010 budget for Sakhalin-1 project at $2.7 billion, Shmatko said.

"We have a good basis for developing this project in the future," he said.

(Nadia Popova in Moscow contributed to this report.)

Copyright (c) 2010 Dow Jones & Company, Inc.

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