Volumes Spoken

This from a Russian who, surprise surprise, lives in the USA:

Preserving national honor and dignity is more important than the two or three measly billions of dollars extra in GDP that simplified Russian visa provisions would bring.

That’s always been Russia’s problem: they’d rather starve than bear any perceived slight to their national pride.  And of course, it’s an awful lot easier if it is somebody else who has to do the suffering on behalf of your ego.


Corner Turned

I’ve now been in Nigeria for just over two months, and am eleven days short of my first leave, which will take the form of a two week trip to Phuket.  Since I’ve been here, things have changed quite a bit.  Not the place, of course.  That is unlikely to change in the next millenium, never mind over the course of my assignment.  But things for me have got a bit better.

Firstly, I’ve started meeting people and forming a bit of a social life, which was non-existent in the first five or six weeks of being here.  There appear to be a few young(ish) fellows here in a similar situation to myself and gradually we’re all meeting each other and starting to get stuff organised, stuff which invariably involves drinking something somewhere.  This is probably the most important thing, and it was the area which had me most worried when I first mobilised here.  The social life in Sakhalin was spectacular, and in truth will probably never be matched again, and Lagos having few of the factors that made Sakhalin good, I was concerned that I might end up being pretty bored here.  One of my chief concerns was that I had no idea what the French were like socially, my company being French.  I had heard dire warnings from British and Australian colleagues that they are as cliqued and unwelcoming as far too many of the Shell Dutch proved to be on Sakhalin (with notable exceptions), but to my considerable surprise they turned out to be nothing of the sort.  It appears that the French, or at least the ones working here, like to attend large parties which involve lots of drink, music, food, and more drink followed by dancing and more drink in which everybody – even a lonely Brit like me, able only to babble in English – is made to feel very welcome.  Your rank within the company, it appears, counts for nothing at French parties.  Your ability to dance counts for something, an area in which I score as well as a British Eurovision entry, but I make up for that on the drinking and telling of tales, mostly about Russia and, usually once I’ve been given a prompt in the form of a nudge and a wink, specifically about the Russian women.  These are Frenchmen, after all.  I recently went so far as to show up to the St. Barbe’s party, an annual event which celebrates the French patron saint of mine workers (a definition which the oilmen have expanded to include themselves) wearing a Union Jack tie.  The French loved it, more so than the dour Scotsmen who grumbled when I wore it in Dubai.  The French seem confident in themselves and their nationality and don’t feel threatened by a Brit who comes in wearing a flag.  Quite the opposite, in fact.  It must be a confidence born of colonial success, something which few nationalities enjoy.  You hear that, Aussies?  We don’t need to be good at cricket, etc. etc.

Where was I? Ah yeah.  The French are a good laugh, and intelligent to boot, more so on average than I have seen in other oil companies.  They all speak a minimum of two languages – French, and a comedy version of English which is grammatically perfect but with an accent so thick I reckon they are taught to speak it that way deliberately – which makes me realise that I’d better start learning French maintenant! I will start once I return from Phuket, having collected the textbooks I had sent there last month.  Indeed, being able to converse in two languages is almost a minimum requirement.  I know an Italian who is fluent in French and English, a Norwegian who is fluent in English and Portugese, a Dutchman who is fluent in English and French, and an American who I discovered was fluent in French, Russian, and Mandarin before I thought better of asking her what other languages she knew.  It makes me pretty glad I learned Russian, and I’m now to the point of conversational fluency (in a social setting), which is a bit of a get-out-of-jail-free card when surrounded by those who are multilingual.  I would hate to be a Brit here who doesn’t speak another language, especially as all the other British staff members I’ve met speak French (learned whilst in the company).  The social events here can therefore involve a bewildering array of languages being spoken by an even more bewelidering array of nationalities, something I’ve always thought was great about working in the oil business.  The choice of places to go seem somewhat limited, ranging (from what I’ve seen so far) from fairly mundane clubs through reasonable bar-restaurants to bars that should a bunch of viking raiders land in after a successful pillaging of a village or two, they would leave in disgust at the state of the place and its patrons within a matter of minutes.  And at least one of them would lose his axe.  But whereas the choice of places to go might be limited, the choice of people to hang out with seems to be pretty good, which is much better than (and the complete opposite of) my situation when I lived in Dubai.

Another reason why things have improved is I am finally mobile.  I took delivery of my car, a basic Japanese 4WD, last week and hired a driver who was recommended to me by somebody who recently left.  Being able to get around is essential in a place with no public transport, no taxis, no pavements, and only a twice-daily shuttle bus to and from the office. Unfortunately, whoever built Lagos (who I suspect was the same person that designed Russian airports) originally thought parking spaces were not necessary and then later decided that pavements should be parked on.  Some other dickhead then decided to build office blocks with no parking except for the pavement outside.  What this means in practice is you need a driver primarily to drop you off and then take your car to some point, usually some distance away, and park up and sit there until you need him again.  True, it helps to not have to negotiate Nigeria’s roads, which are a better described as a collision of misplaced egos more than anything else, yourself but a driver’s job in Lagos consists mainly of sitting about waiting all day.  If there was anywhere to park close to where you actually want to go, you’d not need one.  Personally, I’d be much happier driving myself about but it’s practically impossible.

But my driver is already giving me trouble.  You end up in a bit of a no-win situation here.  You have to hire them privately, and there are many available but few decent ones.  There is a market rate per month which is well known.  If you pay them at the low end, they will be rubbish.  If you pay them at the top end, they think you’re a soft touch and take the piss.  I decided to pay the top end – which is about 25% more than the low end – and pay on-the-spot bonuses for any extra hours.  I was told that what I was paying should be more than enough for my driver to be pretty damned happy with what he was getting and not complain.  I bunged him the equivalent of 3 days pay for helping me collect the car from the garage, and even though he only started work on the 9th I said I’d consider his employment as having started from the 1st, meaning he would get 8 days’ pay for nothing.  I also said I’d pay him his December salary before Christmas.  Having worked for a week, he asked for Saturday off (he is paid to work Saturdays, but not Sundays).  He didn’t offer to work the Sunday instead, he seemed to be asking for a paid holiday.  I wasn’t going anywhere on Saturday, so I said he could do what he wanted, but I needed him for a few hours after work on Friday.  On the Friday, he drove about 3km and sat for an additional few hours in the car, for which I paid him a bonus equal to about a third of his day-rate, an amount everybody I’d consulted with said was about right.  Immediately he started complaining that it wasn’t enough.

Which pissed me right off, because he’d obviously taken me for a mug, which unfortunately is common amongst people in lots of places when they meet somebody who doesn’t act like a complete arsehole.  I’ve seen it in the Middle East, Thailand, and in some scenarios in Russia, where acting with the slightest generosity, kindness, or compassion is seen as a weakness to be ruthlessly exploited at the very first opportunity.  By showing this man I would treat him reasonably well in comparison to others, all I did was invite contempt.  Had I whacked the bastard with a stick and made him crawl around on the floor for a while, as the Nigerians do with their drivers, he’d probably not have made a peep.  One of the reasons I was keen to get out of the Middle East was because the place forces you to act like a twat just to avoid everyone you deal with on a daily basis taking the piss.  Contrary to what some people might say, I’m not an arsehole by nature and generally believe in doing someone a good turn.  Having to be a ruthless bastard goes against my nature, and having to haggle, hand out tips which then get sneered at, and argue money on a daily basis goes against the nature of most Brits, me included.  But sadly, I’m finding already I’m having to resort to being a ruthless bastard in my daily life in Nigeria, and I was pretty much one of those when I dealt with the situation with my driver.  Stupidly, he thought he’d try arguing the point with me, obviously judging there would be some mileage in doing so.  Had he just shut up and done his job for a while, he’d have found me a lot more forgiving.  He’s still in my employ, just.  But I doubt he’ll be with me long, and frankly I couldn’t care less what happens to him afterwards.  Such is life in Nigeria.  But I’m going to have to work pretty damned hard at knowing when to be an arsehole and when to stop being one.  This is stuff they don’t tell you in the interview.

But enough of that.  Things are also looking up on the accommodation front, and in the next week or so, or maybe once I’m back from holiday, I’ll be moving into an apartment and out of the Best Hotel in Lagos, where they don’t bother to clean the floors and the staff at every level expect you to tip them before they’ve lifted a finger.  This will make a big difference as I’ll be able to ship some of my personal effects over, stuff which wasn’t contained in the two suitcases I’ve been living out of the last two months.  It will also mean I won’t be on trial for murdering one of the useless cretins who work in my hotel.  The apartment is nice, of a very high standard, and comes with a huge communal pool and a decent gym.  The downside is that it is located quite far from the office and, with the Lagos traffic being what it is, this can be a bit of a trial each day.  But this is the best place to be living, there are a few bachelors there and it’s where most of the French live.  The social scene there is supposedly quite good, and weekends should be quite nice.

I’m hoping that the most difficult phase of my Nigerian assignment is over and I can start to get into a balanced routine.  I’m not sure if it came across in my writings on this blog, but the first few weeks I was here were a lot tougher than I’d expected, and it’s not a period I’d want to revisit any time soon.  With the people I’ve become friends with here so far, I’m fairly certain I won’t have to.  And that’s worth ten good drivers.


The MTV African Music Awards

Last night the MTV African Music Awards were held in the enormous function hall which forms part of our hotel, allegedly the largest such venue in the whole of west Africa.  Which admittedly is a bit like being the best German comedian, but is impressive nonetheless.

The first indication the hotel’s unfortunate guests had of the impending event was a stampede of South Africans and an invasion of Brits cluttering up the restaurant at the evening buffet, and the internet packing up.  Preparations for the event had been going on all week, a period of which every second was required as half the kit was unsuprisingly seized by customs for four days before being released, meaning, as with most things in Nigeria, it was hurriedly finished at the very last minute (“finished”, in this part of the world, means just over the threshold where something is functional).  The South Africans were in town presumably because MTV Africa thought it a good idea to maximise the African content in the production of the event, especially as the united Africa message was being pushed quite heavily throughout.  Unfortunately, every one of the South Africans was white, and every lackey being bawled at to put this carpet over here or lay that cable there was black.  This theme also applied to the camera operators and other technicians on the night itself.  The influx of  additional guests, all of whom work in media production and hence have Youtube as their homepage, meant the already shaky hotel internet collapsed under the weight, meaning none of us lot could phone our wives, resulting in turn in us being forced to go to the bar instead.  It was whilst we were drinking at the bar, mourning our inability to converse sweetly with your wives and girlfriends, that we spotted the tickets for the event on sale and, not being blessed with a full itinerary of scintillating activities on offer that Saturday night, a few of us bought some.

So Saturday night arrived.  However, the problem was…

Actually, there were a few problems.  The first came in the form of somewhat misleading information on the ticket to the effect that:

Doors Open: 19:00
Doors Close: 19:30
Show Starts: 20:00

So having bolted our food and making our way all bright-eyed and bushy-tailed into the venue itself at 19:20, minutes before the door would slam behind us making us sigh in relief that we have not found ourselves locked out of the best night in African history, we discovered that actually the place was almost empty, people were still setting up, and there would be at least 2 hours before anything meaningful would happen.  This is Nigeria, where being two hours late is considered being on time.  Only when a calendar is employed does the term late apply.  So we decamped down to the hotel bar, waving wristbands at the security guards – who were backed up by what looked like half a platoon of the People’s Liberation Army of The Democractic Republic of West Basketcase but were in actual fact Lagos police guards – so that we could gain re-entry whenever the organisers got themselves organised.  The hotel bar was pretty busy with many guests – obviously wiser to the Nigerian system of event timings than we – hanging about and enjoying what looked to be a warm-up party by the swimming pool.  Clearly everyone who was anyone in Lagos’ media industry was attending this event, and they’d all donned their most fashionable clothes for the occasion, making the gaggle of oilfield workers in their jeans and scruffy t-shirts (or in my case, Hawaiian shirt) look somewhat out of place.  Nevertheless, this was an event of some importance to the kool kats of Lagos.  At 7,000 Naira ($46) per ticket for the standing area, and 15,000 Naira for the seats, those in attendance were drawn from the lucky few of the city’s 15m (or whatever) inhabitants.  The minimum wage in Nigeria is 18,000 Naira per month.

Two beers each later – which, at the pace of the service in the hotel’s bars, equates to about an hour and a half – we sauntered back upstairs to the venue which had by now filled up considerably, but was still noticeably only two-thirds full.  Up until an hour before they had still been selling tickets, and it now looked as though either they’d priced them too high, overestimated the importance to be seen at this event, or the hotel management had entered their third decade of being unable to organise simple car parking and traffic management.  Anyway, we stood around for a further half an hour trying to work out how the bar system worked (it involved tickets and separate counters, which led me to believe at least one of the event organisers had majored in Soviet Retailing).  Then at some point some music started, two hyperactive African young men leaped onto the stage wearing sunglasses, accompanied by what looked to be a slightly retarded 15 year old boy who, judging by the reaction of the crowd when he was identified, was somebody pretty well known, and the show, as they say, got on the road.

And thereupon began what was less of the MTV African Music Awards as the MTV Africans Copying American Hip-Hop Music Awards.  If anyone was looking for originality, or an insight into the deep roots of African culture as expressed through the medium of music, they were to be sorely disappointed.  Muscially, you’d find more diversity watching the band at a neo-Nazi rally.  First up was a fellow called Rick Ross who, from what Wikipedia tells me, is an American rapper who took his stage name from a convicted drug trafficker and took to the stage in the same way that a rodeo bull takes to its arena.  Only Rick Ross did not have a cowboy on his back.  Instead he had on a massive coat which would probably have been more suited to December in Chicago than December in Lagos.  I noticed that he took it off after the first song.  His travel coordinator, like those in the oil business, obviously took the attitude that it’s better for people to find out essential information about the place you’re going to all on your own.  Anyway, the crowd went nuts, and they were so excited that they all got out their mobile phones and held them over their heads.  This phenomenon must be sending the executives of cigarette lighter companies back to the drawing boards.  Then a lady called Eve turned up, who spoke like she was from Baton Rouge but is actually from Philadelphia, but was quite famous.  Actually, I had no idea who any of these people were.  Unless there is a banjo playing, or Chuck Berry, I take little interest in music and I admit I was probably a tad optimistic to expect to see either at this event despite the obvious links each has to the continent of Africa.  And once more artists started coming on stage and performing I found each act both visually and aurally indistinguishable from any of the others.  I only kept up with the proceedings because I had a Norwegian friend explaining stuff to me, although if you require the assistance of a Norwegian to understand the goings-on in a hip-hop concert then you are probably in the wrong place.

Anyway, the crowd in the venue – still one-quarter empty – didn’t share my opinions or my ignorance and was lapping it up.  At one point the MC called for the introduction of some “gangland” into the proceedings, but I suspect the “gangsters” who emerged from stage right made sure their heavily armed police escort stayed with them right up until their plane left the tarmac at Lagos airport.  The gangster theme was threaded throughout the whole event, which was probably a good thing, because Nigeria needs nothing more than an injection of lawlessness, violence, and a live-fast die-young mentality as personified by the role models (or at least, their alter-egos) that were leaping about on the stage.  The highlight of the night was a chap called Chuck D, former front man of Public Enemy, who came on to perform.  Unfortunately, he is 50 and looked like somebody’s dad.  But he turn out a reasonable performance which made sense to seemingly everyone but me right up to and including where he urged everyone in the place to “fight the power”.  There is something highly ironic about an American rapper urging a concert crowd made up entirely of Nigeria’s wealthy elite to fight the power.  Or maybe he was talking about the miserable electricity supply that residents of Lagos have to endure?  On that point, I’m with him.  I was also surprised to see the swearing kept to a reasonable level, I suspect because the Nigerians, being deeply religious, don’t take as kindly to it as your average herbert walking the streets of LA with his trousers hanging below his arse.  Or maybe these rappers had exhausted their supply of expletives dealing with the service in the hotel during the day?

These events might look pretty slick on TV, but the live production was a bit disjointed.  The organisers probably made a mistake by putting the autocue in the middle of the audience, which included fake American expressions such as “y’all” and indications of when to laugh, which enabled the audience to see it a lot better than the dimwits who were supposed to be reading from it when presenting the awards.  The awards themselves were fairly predictable, with a noticeable bias being afforded to the Nigerian acts.  MTV’s idea of Africa seems to equate to sub-Saharan Africa, because there was not a single Egyptian, Morrocan, Algerian, or Tunisian act featured or even nominated.  And the One Africa concept was dented somewhat when one successful act, on collecting his award, shouted “God Bless Kenya” and was greeted with boos from some quarters.  The award for best international artist went to Eminem who, perhaps predictably, didn’t bother to show up to collect it but did afford us a two-minute video of him slouched in a chair in his studio thanking us in, erm, where is this?  Ah yeah, Lagos.  Yeah, thanks Lagos.  Wherever that is.

Other than Eminem, the only other presence of a white face in the proceedings came in the form of a South African rock band who, having seen their opening song which featured chords, rhythm, and a tune go down like a lead balloon, hastily dragged some rapper onto stage to take over lead vocals and switch their style back to hip-hop.  I thought the whole thing was a pretty sad state of affairs, personally.  I appreciate this was organised by MTV which is by no means all-encompassing, but given the enormous cultural variation across Africa and the incredible depth of its music, that all but one or two acts were a poor imitation of the now highly-commercialised and manufactured American hip-hop acts was pretty pathetic.  Is this really what Africa wants its identity to based on, an imitation of one of the more negative aspects of American popular culture?  The event could have been composed by a piece of software so predictable was its form and content.  I’m not sure exactly what it was that I witnessed last night, but I am fairly sure that it wasn’t African.  And if it was, then God help it.


How to buy an aeroplane ticket in Nigeria

1. Visit website of desired airline.
2. Select flight, date, etc.
3. Proceed to payment page.
4. Observe large red warning notice to the effect that, thanks to your country of origin being infested with dickheads who would defraud their unborn children, paying online is not an option.
5. Choose a good book.
6. Walk up one flight of steps to the airline office, which just so happens to be situated above yours.
7. Hold your nose and try to avoid retching too loudly. Wonder aloud why some people cannot wash.
8. Have an inane conversation with a brain-dead security guard who is playing receptionist for the day.
9. Write your name on a piece of paper and collect a ticket.
10. Sit in the pre-waiting area, which is where people wait before being admitted to the waiting area. Get your nose in the book. Read 10 pages.
11. Wait until the security guard calls you into the waiting area proper.
12. Take a seat and get your nose back in the book. Read 10-20 pages.
13. When sign displays your number, go to appropriate desk.
14. Ask bloke behind the desk how you can pay for your recently booked ticket.
15. Absorb advice that payment in the office is possible but will not include the 5% online purchase discount, if you want that you will have to pay in a bank.
16. Go back downstairs to office, call a driver to take you to the secure bank in the company offices.
17. Sit in traffic for three quarters of an hour.
18. Get to bank, hand over company cheque made out in your name and handed to you in your first week for reasons which were never made clear.
19. Hang about whilst the bank clerk does some pointless administration exercise crucial to the cashing of your cheque. Where did I put my other book? I’ve finished this one.
20. Hand over passport copy.
21. Write your name, address, date, and signature on the back of the cheque.
22. Hand cheque back to clerk, who stamps it right next to where you have just written.
23. Write your name, date, and signature where he has stamped.
24. Hand cheque back to clerk.
25. Wait for a while, polishing off chapters 1-3 of your next book.
26. Accept massive pile of reeking Nigerian bank notes the size of a breeze block. Stuff them into rucksack.
27. Wander the streets for a while trying to find where your driver has parked. He’s not allowed to park in the security of the office compound, so employees carrying huge piles of cash must roam the back streets with it immediately after half the company has just seen you withdraw it.
28. Find driver, sit in traffic whilst he pretends to take you to the next bank.
29. Get to bank, approach counter.
30. Ask dimwit behind counter where you can pay for tickets.
31. Get directed to another counter.
32. Get directed to side door.
33. Go through side door and down tatty corridor to prison cell door.
34. Thump on door.
35. Present mug for inspection when sliding hatch opens.
36. Go through door into stinking strong room with what looks to be a freedom fighter of a peasant army holding an AK-47 guarding the door.
37. Go to desk at the back, explain to clerk sitting beside the biggest pile of money you’ve ever seen that you want to pay for an airline ticket.
38. Go to other desk, fill out name, telephone number, amount, and airline on the left-hand page of a ledger.
39. Go back to first desk, fill out triplicate form with name, telephone number, amount, and booking reference.
40. Hand form to clerk. Get your book out.
41. Dig into rucksack and pull out massive pile of cash. Hand over thickness of notes that you think is within 10% of the ticket price.
42. Watch clerk spin the notes through a counter, pay the shortfall.
43. Watch, or read, while clerk stamps your form and scribbles stuff on bits of paper.
44. Go to ledger, write name, telephone number, amount, and form serial number on right-hand page.
45. Take form to another counter and hand it to clerk.
46. Return to seat in the corner and read your book.
47. Clarify pretty much every piece of information on the form, one at a time, when the clerk asks.
48. Wait for clerk to manually type details into computer.
49. Receive pieces of paper, accompany clerk out of strongroom and into main part of bank.
50. Hand pieces of paper back to clerk, who disappears somewhere.
51. Enjoy your book for a while.
52. Receive pieces of paper, now decorated with various stamps.
53. Sign and date pieces of paper.
54. Watch whilst clerk tears them in half and gives you your portion.
55. Leave bank, sit in traffic for 45 minutes on return to office.
56. Check email and receive e-ticket.

I just can’t figure out why Nigeria isn’t prosperous.


The Cost of the Cup

There are reports that Russia’s hosting of the 2018 FIFA world cup finals will cost $50bn.

People might think this is an awful lot of money, which it is, but it is worth remembering that $50bn spent on infrastructure in Russia will only get you about $12bn worth of infrastructure.  For the reasons I went into here, projects cost about four times as much as they should in Russia.


A Positive Step for Chinese International Relations

This, on the other hand, is good news:

Two Chinese oil companies operating in Ecuador said they could seek international arbitration if they do not reach agreement over new contracts, saying negotiations so far were characterised by pressure and a lack of transparency, a letter from the companies said.

Andes Petroleum and Petrooriental sent the letter last month to state officials involved in negotiating new contracts with foreign oil companies to express their concerns over how the talks were progressing.

“The initial phase of the negotiations has been marked by a lack of transparency — in terms of take or leave it, confiscatory measures and pressure to accept conditions,” according to a letter dated 19 October and signed by executives, Reuters reported.

As the Chinese get more involved in international affairs, of which oil and gas is but one, they are going to find themselves increasingly exposed to the trials and tribulations which have plagued the Americans in their dealings around the world, and the British before them.  How the Chinese react to these will be worth noting, but it is inevitable that they will have to rely on international cooperation to a greater extent than they have previously needed.  The two small Chinese companies seeking arbitration against Ecuador might not amount to much in itself, but it signifies that the Chinese appreciate the benefits of international cooperation.  This can only be a good thing.


What strategy would that be, then?

At first glance, this article seems to be reporting good news:

Russia is working on a host of new legislation and framework changes to allow foreigners to more easily explore for oil and gas as Moscow moves to unlock its vast Arctic hydrocarbon resources.

The initiatives are intended to simplify the process of applying for exploration licences and allow international companies a greater opportunity than before while at the same time keeping state control over offshore projects.

Here’s why I think it isn’t.

What is said in Russia by government officials and what actually happens are two entirely separate affairs.  We are forever hearing about the grand plans of the Russians to develop their vast oil and gas resources, and there is no shortage of bold announcements and lofty ambitions, but these seldom translate into action on the ground and the tough decisions required to make them happen don’t get made.  There are probably several reasons for this, and identifying all of them would require substantial guesswork as to the murky machinations of those holding the levers of power in Russia.  But whether these plans are genuine but fail in the implementation, or are merely words for which there is no intention to follow up with action, doesn’t really matter.  What matters is that Russia’s oil and gas developments are progressing at a snail’s  pace, and nobody can say with any certainty what the actual situation is in Russia at any given time, let alone predict what is going to happen.

I wrote in August of this year about the Russian government’s flip-flopping over the Yamal development where foreigners were courted, Total signed a deal with tacit approval from Putin before the Russian party decided it did not need a foreign partner just over a week before they announced they were looking for one.  Then the deal got scuppered anyway by the environmental regulator, who could not be bothered to provide a reason.  This doesn’t tally up too well with this latest announcement, does it?

But that’s probably down to internal squabblings and power struggles, which have always been a root cause of the failure of Russian national policies on pretty much anything.  To view the bigger picture we have to step back to April 2008:

Russian state-controlled giants Gazprom and Rosneft have been handed monopoly rights to all hydrocarbon developments on the Russian shelf.

Two and a half years later, they’re saying:

Russia is keen to get foreign expertise to help explore its Arctic plays where historically there has been little activity. The ministry said that private exploration investments in the country this year would total 28.3 billion roubles ($898 million) but only 100 million roubles was earmarked for the Arctic compared to 21 billion roubles for Russia’s Far East.

So what’s changed?  Did the Russians in 2008 mean they did not want foreigners at all, even minority partners, or were they just looking to safeguard the operatorship?  They didn’t say, but looking at what took place over the previous year would strongly suggest the latter.  And that’s the problem: they didn’t say, and what they’re saying now is unclear.  If the Russians selected a strategy and told everyone what it was and why it was, companies and investors could make decisions of  their own accordingly.  And if the Russians subsequently change their mind on something, they should say why.  In two and  a half years they’ve gone from passing laws keeping foreigners out of their arctic developers to passing legislation aimed at getting foreigners in.  Was it a good idea then but a bad idea now?  Or was it always a bad idea, which is now being corrected?

The Shtokman project is providing a good example of the effects of this failure to communicate:

The operator of the first phase of Russia’s Shtokman gas and condensate field in the Barents Sea, Shtokman Development, hopes its board will rule on the lengthy dispute on the subsea pipeline transportation solution by the beginning of February.

Shtokman Development general director Alexei Zagorovsky said the company expects the results of studies into the matter this month. The studies, ordered by the company, are considering the pros and cons of two different transportation solutions.

The first is the originally approved method proposing to bring gas and condensate to the shore from Shtokman in a single pipeline, the so-called “two-phase approach”. It is heavily backed by first phase foreign partners — France’s Total and Norway’s Statoil — that say the processing of gas and condensate on board the production vessel is hazardous.


At the heart of Gazprom’s optimism on an FPSO solution, is its long held belief, frequently aired in public, that this type of floater would do away with the need for separate 36-inch, 550-kilometre pipelines to take the the field’s gas and condensate to shore as well as an onshore processing plant.

Instead, liquids would be 
processed onboard the FPSO, 
offloaded into shuttle tankers and shipped to markets.

Gazprom’s support for a phase one FPSO was underscored last week when WorleyParsons was handed a front-end engineering and design contract covering an FPSO for phases two and three, that would have to handle 70 million cubic metres per day of gas plus liquids.

Project watchers said switching to an FPSO for phase one would need a lot of the current project to be re-engineered which would 
involve significant costs and 

Aside from re-designing pipelines and risers, a well-placed source said the vessel’s mooring system would also have to be reconfigured while icebreakers would be needed to ensure that ice-class shuttle tankers can 
navigate the Barents Sea safely.

If Gazprom persuades its partners that an FPSO tender process needs to be undertaken, it is 
unclear if the same two consortia fighting to build the FPU would be invited to bid or whether Shtokman Development would go to the market afresh.

One project watcher suggested if little progress is made on Shtokman before Russia’s presidential elections in March 2012, then it would not reflect well on Russian President Dmitry Medvedev, the former head of Gazprom, if he decides to run. One source said the Shtokman FPU is a “very, very expensive” piece of kit, suggesting it would have a price tag of more than $3 billion, but stressing that an FPSO would cost at least as much.

The total weight of the FPU is currently about 110,000 tonnes, including about 40,000 tonnes of topsides. An FPSO would require a bigger deck load and significant safety issues.

From what I can gather (and I am only going off information in the public domain here), the Russians brought on Total and Statoil to provide the technical expertise to overcome the challenges of developing the Shotkman field, which lies far offshore in artic waters.  Statoil was selected particularly for its expertise in offshore arctic environments, about which Gazprom knows next to nothing.  The Total/Statoil solution, which was agreed upon some time ago, is to produce the gas, carry out some basic processing on a vessel, and send the gas down a pipeline to shore for further processing, possible liquification, and export.  Then rather late in the day, Gazprom came winging in with a far more complex proposal which would involve a greater degree of processing offshore and the ability to ship the gas directly from the production vessel.  Total and Statoil now appear to be being pushed into considering this solution instead of their own.  This may be all well and good, but there appears to be no justification why Gazprom favours this different, more complex solution which will cost a lot more and cause considerable delays.  Do they not trust the judgement of the foreign partners they brought in for the specific purpose of providing the technical solutions?  Or is this an ego thing, whereby the Daddy of the project must be seen to be making the big decisions regardless of whether they are sensible ones?  Or is there something else afoot?

Speculation abounds.  One of the more amusing theories you find in the comments of the Russian-centred blogs from the pro-Russian crowd is that the failure to progress any of Russia’s oil and gas developments is a deliberate – and naturally extremely clever – strategy in response to a decline in demand for gas.  Whereas in 2007-8 all the talk was of how Russia doesn’t need any help in becoming the world’s energy provider, immediately the financial crisis hit and the projects ground to a halt the chatter switched seamlessly to Russia realising that it is not in its interests to develop any more fields.  Personally, I’ve always thought this a bit of a convenient excuse.  For sure, it is far easier to pretend incompetence and foot-dragging is part of a deliberate strategy, but I have yet  to hear of an oil and gas development – whose lifespan is a minimum of 25 years, usually up to 40 – being based on the current demand.  Yes, it is quite common for projects to be canned or postponed due to current prices, as  the Canadian oil sands projects are notoriously known for, but never have I heard of a major development of conventional resources being postponed due to the present demand figures.  The whole thing smacks of desperation from those who, having cheered Russia’s resource nationalism when implemented in 2007, now have to explain to themselves why nothing has happened since.

I have two theories as to why Shtokman is being subjected to such indecision, neither of which is substantiated.  The first is what I mentioned already: somebody either in Gazprom or the Russian government does not want a foreigner determining the development strategy.  This might be an ego thing, hardly uncommon in Russia.  It might be that it is always assumed that foreigners will first and foremost be looking to damage Russia, and hence can never be trusted.  Such paranoia is hardly uncommon in Russia either.  More likely, somebody somewhere stands to benefit personally should this new solution be adopted.  Perhaps somebody has an interest in a shipyard somewhere, or a rival has an interest in a pipelaying operation?  Personally, I think a combination of these three is the most likely reason.  But there is another, provided by that ever-reliable source: a Russian bloke I know, who worked for a while in the Shtokman Development Company.  What’s more, I drink with him.  Anyway, he thinks the Russians are turning away from LNG (not that they ever really understood it enough to embrace in the first place) and want to concentrate all efforts on maintaining or expanding their pipeline monopolies.  With LNG, Russians are at the mercy of the spot price and the ability of customers to buy from elsewhere, something they are on record as not being too happy about.  With pipelines, the Russians can switch off the gas or demand higher prices at will, and the customer has far less room to manouevre.  Perhaps realising that its own business practices are not going to favour their competing on the open LNG market, the Russians are now looking to maximise its pipeline market share whilst they still can.  In throwing a spanner in the works of Shtokman by instructing the foreign partners to develop a far more costly and lengthy solution, it is perhaps giving the Russians an opportunity to cancel the project, citing increasing cost projections (which will no doubt be blamed on the foreigners) and thus saving face.

But whatever the reason is, this is not the actual problem.  Indeed, perhaps a good argument could be made for Russians sticking to supplying gas by pipeline and staying clear of LNG.  And maybe an argument could be made that by the time Shtokman comes online, shale gas might have made the project commercially unviable.  No, the problem is that no reasons are given for anything.  No clear strategy is being presented with subsequent decisions being made to reflect that.  It is all announcements which contradict those made earlier, reversing legislation that was only recently passed, vague statements followed by inaction, and the usual threats and unrealistic ambitions dealt out in equal measure.

As a penultimate example, once again from the original article:

Most of Russia’s exploration success dates from the Soviet era, with only six fields having been discovered since 2005 – five of these were in the Caspian and one in Russia’s Far East, [director of the Department for State Policy and Regulation at Russia’s Ministry of Natural Resources, Denis Khramov] told a seminar at Osea 2010.

But who remembers this from my August post?

As part of a plan to feed the energy-hungry economies of Asia and move dependence away from sales to Europe, Russia is trying boost oil production in East Siberia.

But investors in major East Siberian oil producers have been spooked by a tug of war among senior officials over re-imposing an oil export duty on 22 oil fields in the province.

So one senior official is expressing concern over the lack of development progress, whilst another lot are unable to convince investors that they won’t get burnt doing so.

And finally we have this, from last October:

Russian authorities have dealt a further blow to the ambitions of potential foreign investors in the country’s oil sector, despite recent encouraging noises by its leaders that the rules should be fair for everyone.

In a move reminiscent of the rigged privatisation auctions of the mid-1990s, the Rosnedra subsurface agency has rejected applications by domestic players Lukoil, TNK-BP, Gazpromneft and Nord Imperial, representing India’s ONGC Videsh, to participate in the upcoming auction for the Trebs and Titov oilfields in the Nenets autonomous region.

Rosnedra cited errors and missing information in the applications submitted by the four companies as grounds for refusal.

However, industry analysts in Moscow said these reasons are insignificant and cannot justify refusing applications from such established market players.

So how does this tally with what the original article was reporting?

The problem lies not with the oil and gas development strategy that Russia has selected, it is the fact that nobody, including the Russians in charge of implementing it, has the faintest idea of what it is.