PSA CONCEPT GAINS SUPPORT AMONG KEY RUSSIAN COMPANIES
Russia's three flagship Western-led production-sharing agreement (PSA) projects continue to mark major milestones, slowed but not derailed by chronic disputes between PSA consortia and political authorities. One critical signpost of the first PSAs' further progress is timely implementation this year of the project cost reevaluation mechanism agreed upon by the Russian government and Sakhalin-2 after cost overruns announced by the consortium in 2005. Meanwhile, a second generation of Russian PSAs, led by Russian companies, could materialize over the next few years:
- The first PSA projects have proven the value of a PSA-type regime in Russia, generating unparalleled investment in frontier Russian oil and gas fields.
- But political opposition to the Western-led PSAs remains strong and is likely to intensify on the eve of 2007-08 parliamentary and presidential elections, jeopardizing enactment of much-needed reforms to Russia's overly bureaucratized PSA approval process.
- Increased lobbying for PSAs by Russian companies-who themselves have been active PSA users in their own projects in Central Asia-may nevertheless lead to exceptions for various projects, particularly those of interest to companies perceived as national champions and their foreign partners.
