Don't rush

Russia: What a difference a slump makes. Chief executives of the big western oil and gas companies met a kinder, gentler Vladimir Putin Thursday in Salekhard, Western Siberia. The Russian prime minister had invited them to a town with a population of 36,000, right on the polar circle, to highlight the promises of the gas fields of the Yamal Peninsula, and to throw open the doors to Western investment and technology.

No doubt his Western guests salivated at the idea of getting a piece of the action. By the year 2020 Yamal should yield up to 300 billion cubic meters of gas annually, according to estimates. This compares with a total annual Russian production that currently stands at around 550bcm. State-owned Gazprom spends around 25 per cent of its capex on the Yamal fields.

But Gazprom is running late, and it’s running short – of both technology and money. It needs both from foreigners. The aim is to use the Yamal resources to become a major player of liquefied natural gas – which can be exported anywhere without the need for pipelines. Hence Putin’s friendly hand.

Needless to say, Western executives rushed to Salekhard when they got the invitation. The meeting was naturally broadcast on Russian TV, as are most things Putinian. The heads of Total, E.On, ExxonMobil or Royal Dutch Shell, among others, mingled with Russian engineers and bureaucrats. Who wouldn’t want to be there when Russia opens its natural resources reserves?

But Western companies should pause and think. They’ve been burnt before – as when Shell was bullied out of the Sakhalin-2 gas project three years ago. Since then, the legal framework under which Western companies operate hasn’t improved a bit.

What has changed is Putin’s need for foreign capital and expertise. This would be a good thing if it were accompanied by more than words to reassure investors that their money is safe and that they can plan on staying in Russia for the long term, without the hassle of corrupt bureaucrats and judges. Westerners must seize the chance to extract serious concessions from Russia before they rush head-first into the great gas hope, in what otherwise risks being a triumph of greed over experience.