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FT: Small oil operating ‘below the radar’: big beasts of the energy world stalked by the Russian authorities

By Ed Crooks, Energy Editor
Published: October 4 2006 03:00 | Last updated: October 4 2006 03:00

While the big beasts of the energy world are being stalked by the Russian authorities, some of their tiny competitors are making a living in niches out of sight of the Kremlin.

Several Aim-listed companies are involved in Russian oil and gas, including Imperial Energy, Victoria Oil and Urals Energy.

The Russian moves against Shell and BP have unnerved investors in the smaller companies. Shares in Urals Energy, for example, an explorer and producer with operations in Sakhalin Island off Russia’s far eastern coast and across the country, fell by 17 per cent last month.

The companies argue, however, that the issues of energy security and politics that are important for, say, Shell’s $20bn (£10.6bn) Sakhalin-2 project are irrelevant for them.

Bill Thomas, Urals’ chief executive, said: “From our perspective, we’ve never had it better. Russia is a fantastic situation for us.”

Phil Corbett, an analyst at Oriel Securities, said life could be easier for small oil companies that operate “below the radar” of the Russian government.

“These smaller companies provide employment opportunities, pay taxes, and should help sustain overall production growth through the development of fields deemed non-core by larger Russian players.”

There can be traps for the unwary, however. Sibir Energy, the first Russian oil company to float on Aim back in 1997, is mired in a legal dispute over the ownership of a gas field first developed in 2002-03.

Peter Levine, chairman of Imperial Energy, stresses the importance of being a “good corporate citizen”.

“You have to have respect for Russian history, for Russian ways, for the Russian mentality and for the Russian people.”

Copyright The Financial Times Limited 2006

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