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Russia Wants Foreigners To Tap Offshore Oil And Gas

ST. PETERSBURG, Russia (Reuters) -- Russia wants foreign companies to help develop its massive offshore oil and gas reserves as domestic firms lack the means to do so alone, Natural Resources Deputy Minister Sergei Donskoy has said.

His comments on September 15 echoed earlier statements by his chief, Minister Yury Trutnev, who in July said Russia should consider changes to legislation limiting foreign companies' participation in tapping mineral reserves.

Russian Prime Minister Vladimir Putin in June offered surprise deals to Royal Dutch Shell and France's Total, which analysts said signaled the easing of resource nationalism.

"There is a question, can [Russian] companies fulfill the large-scale task of offshore development on their own? It should be admitted that these companies don't have enough strength and money to work out these tasks," Donskoy said.

Emboldened by a seven-fold surge in crude prices from 2002 to over $147 a barrel in July 2008, Russia created laws to curb foreign participation in tapping its mineral resources.

It gave exclusive rights to the world's largest gas company, Gazprom, and Russia's biggest oil company, Rosneft, to tap offshore reserves, which account for about one-quarter of the world's hydrocarbon resources.

Foreign companies were also forced out of ongoing projects.

In 2006, under intense government pressure, oil major Royal Dutch Shell ceded control of the vast Sakhalin-2 project to Gazprom, and a year later, BP was forced to agree to sell the rights to the huge Kovykta gas field to the gas giant.

"There is a need to attract modern technologies of private companies, including foreign ones, under conditions of keeping control at the state," Donskoy said.

Russian companies have announced dramatic cuts in investment programs for 2009 after they were hit by the economic downturn and plummeting commodity prices.

Foreign direct investment in Russia fell 2.8 percent last year to $27 billion and it is expected to shrink further this year.

Donskoy said his ministry had set out proposals to stimulate works at offshore fields, including beneficial interest rates for loans from domestics lenders.