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In instances where the state decides not to allow a foreign investor to develop a strategic deposit, the company will be compensated for 100 percent of its expenses on the exploration licenses, as well as "all documentarily verifiable" spending on exploration and appraisals of the resources.
The additional compensation will vary depending on the type and location of the find, according to the document.
For the most difficult-to-access regions with hydrocarbon reserves -- including the Sakha, Kamchatka, Sakhalin and the Irkutsk regions -- as well as any deposits of uranium, diamonds, quartz and yttric-group metals, the finder's fee will be 50 percent of the total expenses.
All other fields will net the company a 25 percent to 40 percent fee, depending on the type of raw material and the region. For example, a hydrocarbons find in the country's biggest oil-producing region -- the Khanty-Mansiisk autonomous district -- would only garner a 25 percent bonus.
Rules of the Game |
Under a law passed last spring, foreigners' access to strategic deposits is limited, and investors from abroad that find strategic resources must be approved by a state commission before receiving development rights. Foreign participation in such projects cannot be more than 10 percent, except with permission from the state commission on strategic deposits. Such fields include:
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| (MT, Vedomosti) |
A spokesperson at the ministry declined to comment on why some of the resources had been valued less, saying only that the ministry had tried to take into account investors' interests. The Cabinet's press service declined to comment.
The government's initiative is generally laudable, particularly since the rules allow for compensation of interest on loans obtained to develop a field, said Ilya Rachkov, a partner at NЪrr Stiefenhofer Lutz.
Here, too, the reward will only be partial, however: On ruble-denominated loans, the reimbursement will be limited to 110 percent of the Central Bank refinancing rate, while for loans in foreign currencies it will cover interest of no more than 15 percent.
Rachkov said he was concerned by another shortcoming in the rules, namely that a time limit for compensation is not specified and that the money itself will be dependent on how much funding is allocated in the federal budget. Accordingly, he said, it appeared that there was a risk that payments might not be made in a timely manner.
The discovery of a major natural resources deposit is not a very common occurrence in Russia.
The most recent example was a discovery by British firm Timan Oil & Gas of 100.1 million tons of oil at the Nizhnechutinskoye field. That field does not fall under the limitations, because Timan had started exploration and development work there before the law on foreign investments took effect, said Alexander Katalin, the company's managing director.
Just in case, Timan has hired consultants to look into the changes to the legislation and to offer their conclusions, Katalin said.
An executive at a company with a foreign partner, who requested anonymity to speak frankly, said he was disappointed with the rules. The government is only offering to cover expenses for those fields where a strategic deposit is found, even though companies have to explore many more sites to make such discoveries.
As a result, he said he thought that foreign companies would simply leave the Russian market for geological exploration.
Spokespeople for BP, TNK-BP and Shell -- some of the country's big foreign investors -- declined comment.
