The newly-approved Energy Strategy of Russian until 2020 pays attention to the integration of our country into the world system of energy resource circulation and exploration of new energy markets. In order to strengthen Russia’s positions in the world energy arena this document provides enlarging the activities geography of the Russian companies in the international markets and developing new forms of international cooperation in the energy sector.

The State Enterprise Russian Foreign Economic Association “Zarubezhneft” was established in 1967 and its activities have always lied along the governmental strategy within the fuel and energy complex. Since its establishment the main tasks of “Zarubezhneft” have been development and implementation of complex exploration and facilitation project for oil and gas bearing fields abroad on land and offshore, organization and rendering technical assistance in the development of the oil industry in foreign countries, including exploration and geologic survey for oil and gas and complex equipment and material supplies for the oil and gas entities under construction abroad.

For the past years “Zarubezhneft” has become one of the leading state-owned oil and gas enterprises within the energy system of the Russian Federation, full and authoritative member of the world oil community. It’s worth mentioning here, that in the last several years the input of “Zarubezhneft” into the federal Russian budget amounts to over half a billion US dollars. Though “Zarubezhneft” international activities are not only an effective instrument of supplying the funds for the Russian federal budget, but also stimulates establishment and strengthening of our state’s authority in the exploration of oil and gas fields in different regions of the world, having the strategic importance for out country.

During its 35-year long work “Zarubezhneft” has gained a unique experience of implementing oil and gas projects abroad, has established its own scientific and production ‘school’ and trained more than one generation of oil specialists. During the FSU times “Zarubezhneft” very actively worked in 23 countries of the world, including Algeria, Iraq, Iran, India, Syria, Yemen, Cuba, Vietnam and others. . In some of these countries the foundations of the national oil industry were set up with “Zarubezhneft” direct participation and playing a coordinating role.

Due to the recent and current political circumstances, including the USSR collapse, the levels of cooperation with different countries and statuses of projects are different. In some countries the enterprise hasn’t lost its positions and is increasing its participation, it is trying to revive the partnership with some others, remembering old traditions.

“Zarubezhneft” partnership with Vietnamese oil and gas structures is developing most dynamically. Successful long-term cooperation (over 21 years) between “Zarubezhneft” and the General Petroleum and Gas Company of Vietnam “Petrovietnam” within the framework of the “Vietsovpetro” Joint Venture, which was established on the basis of the USSR-Vietnam intergovernmental agreement, undoubtedly has great importance for ensuring Russia’s strategic interests in the Pacific region, which was mentioned by Russian President Putin during his visit to S.R. Vietnam in 2001. Speaking in front of the personnel of the JV, Putin stressed, that “joint activities of such Russian and Vietnamese structures as “Petrovietnam” and “Zarubezhneft” may and will, no doubt, establish a very good base for promoting Russia’s and Vietnam’s in the Pacific.

JV “Vietsovpetro” has become the core, practically the foundation for the development of the national Vietnamese oil industry. Russian and Vietnamese oil specialists have created a strong production - technology complex for oil and gas production, including one of the best in South East Asia bases for construction on land and offshore of hydraulic units. Russian specialists, attracting more than 15 leading oil and gas scientific organizations of Russia (All-Russian Interbranch Scientific Technological Complex “Nefteotdacha”, Academician Krylov All-Russian Oil and Gas Scientific Research Institute (VNIIneft), All-Russian Gas Scientific and Research Institute (VNIIgas), VNIPImorneftegas, VNIPIneft, All-Russian Scientific and Research Institute for Drilling Technologies (VNIIBT), All-Russian Scientific Research Oil Institute on Gathering, Treatment and Transportation of Hydrocarbons, VNIPIshelf, Institute for Design and Research in Oil Industry “Giprovostokneft” and others) managed to find successful pioneer solutions for a number of complex technical and technological issues of reserve exploration on the continental shelf of Vietnam. Thanks to these methods oil production has increased from 3,9 million tons in 1991 up to 13,5 million tons in 2002. During 21 years of work on the continental shelf of Vietnam the JV has produced over 116 million tons of oil.

Two state companies– “Zarubezhneft” and “Petrovietnam” – being parties to the JV allows to ensure strong high economic and political efficiency of the project.

The activities in the oil and gas industry in Vietnam are getting a new scale and opening new prospectives. The enterprise continues exploration works at several more blocks of the South-China Sea. Thus, “Zarubezhneft”, “Petrovietnam” and Japanese company “Idemitsu” signing a contract in January 2002 on joint resource exploration of Block 09-3 on the continental shelf of Vietnam became an important event in the expansion of cooperation between “Zarubezhneft” and “Petrovietnam”. The newly-established company “VRJ-Petroleum C.”, where “Zarubezhneft” owns a 50% share, is planning to spud this year already.

Another important event of 2002 can be marked when Russia and Vietnam signed an Intergovernmental Protocol on expanding the scope of cooperation in the oil and gas sector on the continental shelf of Vietnam. This Protocol also ceased the effect of the Intergovernmental Agreement on cooperation in construction and operation of an oil refinery on the territory of Vietnam, signed on August 25, 1998, the format of “Zarubezhneft” participation in the construction process was changed as well. The Russian Federation withdrew from JV “Vietross Oil Refinery” due to its low economic effectiveness. All the invested funds were received back with the incurred bank interest rate, total of over 235 million US dollars. At the same time the Vietnamese party assured “Zarubezhneft” of continuation of works on construction of oil tanks and tank farms of the oil refinery.

Another important and actively developing activity field of “Zarubezhneft” is cooperation with oil producing companies of the Middle East and Central Asia – first of all, with Iraq, Syria and India.

Starting from the 1970-s “Zarubezhneft” has been directly taking part in the establishment of the Iraqi fuel and energy complex. Practically all large oil fields in this country were explored with the participation of “Zarubezhneft” specialists, who also took part in the organization of the oil production process.

When sanctions were imposed on Iraq, this became a serious loss for Russia as the government lost a traditional and rather profitable Iraqi market. After 1991 the work of “Zarubezhneft” in Iraq was largely reduced, nevertheless, the Enterprise continues the performance of the supplies and service contracts within the framework of the UN “Oil for Food” Program. For the past years “Zarubezhneft” has annually supplied Iraq with equipment, spare parts and materials for the total amount of about 100 million US Dollars. During the same period the Ministry of Oil of Iraq has several times offered the Enterprise projects on the exploration of large oil fields, though signing this contracts was not possible due to the economic sanction regime against Iraq. Shortly before the US military acts in Iraq the Iraqi party offered “Zarubezhneft” and Oil Company “Rosneft” to start the implementation of the project on exploration of Ben Umar oil field - one of the largest oil fields in Iraq with the estimated reserves of about 3.5 bln. Tons of oil.

The war in Iraq was a 11-million dollar loss for “Zarubezhneft” – due to terminating the contracts alone, among which there was a contract on drilling 45 wells, approved by the UN Security Council.

At the same time within the framework of the UN Security Council Resolution N 1483 (2003), which resumed the validity of the “Oil for Food” Program for 6 months, “Zarubezhneft” is implementing the contracts, signed before, on the supplies of different types of equipment,. These contracts were defined as having the first priority. The enterprise is also considering cooperation with international financial organizations in preparation and implementations of plans and programs and the Iraqi economy reconstruction after the sovereignty of the country is reinstalled and the legitimate government is elected.

Beside Vietnam and Iraq “Zarubezhneft” maintains good partnership relations with other countries – first of all Syria and India, where “Zarubezhneft” is implementing real projects. This year the enterprise and the Syrian Petroleum Company (SPC) established a joint Russian – Syrian venture “Oil and gas company “Amrit”, which will be dealing with geophysical, drilling and other service works of full cycle in the oil and gas sector, including oil recovery enhancement. “Zarubezhneft” together with the Institute of Oil and Gas at the Russian Academy of Science is working on the contract, signed with SPC, for the implementation of complex basin surveys and development of the complex technological project for Alian oil field development. In 2003 “Zarubezhneft” has won a bid on works for oil recovery enhancement at the wells of Teshreen oil field in the north of Syria.

After the long break in the business relationship the talks with the Indian Oil and Natural Gas Corporation became specific. Within the framework of cooperation with the Eastern branch of ONGC the Enterprise is workinf on the contract for kick-off in 4 temporarily shut-in wells in the state of Assam, performing supplies of spare parts for Russian-made machinery for well capital repairs. The enterprise is also negotiating new contracts within the framework the Memorandum of Understanding, signed on September 15, 2003 between “Zarubezhneft” and ONGC.

As for “Zarubezhneft” activities in the CIS countries, the Enterprise has started active work in the Caspian states – Turkmenistan and Kazakhstan. In order to implement projects on oil and gas resource exploration in Turkmenistan “Zarubezhneft”, company group “ITERA” and “Oil Company “Rosneft” established a CJSC “ZarIT”, which already started work on the Caspian shelf. “Zarubezhneft” is also considering a number of proposals to participate some projects at oil and gas bearing blocks of Kazakhstan. Part of these projects will be implemented by a joint venture “Nestro - Nuraly”, established by “Zarubezhneft” and Kazakh oil company “Nuraly Munay”.

Another important field of “Zarubezhneft” activities is participation in the process of preparation of oil and gas projects, based on production sharing agreements. In 2001 the Government of the Russian Federation appointed “Zarubezhneft” an authorized organization for rendering assistance in securing Russia’s interests in preparation and implementation of production sharing agreements on subsurface and hydrocarbon field exploration.

Naturally, all these results cannot satisfy the staff of “Zarubezhneft” or let them at rest, the results are considered only as the beginning of the process of turning “Zarubezhneft” into an enterprise, which will take a worthy place among the leading oil companies of the world.

At the same time, it should be noted here that “Zarubezhneft” as any actively developing company, has some difficulties. First of all, they are connected with financing of its new investment projects, as almost all the revenues of “Zarubezhneft” – and as it’s been already mentioned, they are considerable – go into the federal budget. The enterprise has only those funds left that are necessary for its survival. In this realm “Zarubezhneft”, being a state-owned enterprise, has all grounds to expect positive decision from the federal authorities on financing the important for Russia projects, that are meant for the implementation by the enterprise.