RUSSIA DRAFTING LICENSING PORTION OF EXPLORATION BILL

RUSSIA DRAFTING LICENSING PORTION OF EXPLORATION BILL

U.S. and Russian experts are nearing completion of a draft of part of a bill dealing with oil and natural gas exploration and production licenses in the former Soviet republic, a project leader said.

The drafting effort is being coordinated by the University of Houston in cooperation with Russian officials and Western oil companies. It involves energy and legal experts on both sides.A final draft of the entire bill is expected by late February or early March, at which point it would be introduced in the Russian Parliament.

The section dealing with exploration and production licenses is described by the project leader as "very standard," covering both non-exclusive licenses for exploration and exclusive licenses for exploration and production.

The draft of the licensing part of the legislation contains six sections, according to the project official:

* A general section outlining the principles of licensing. This section also defines terms used elsewhere in the licensing part of the bill.

* A section dealing with non-exclusive licenses to explore for oil and gas.

* A section covering exclusive licenses for exploration and production. This section specifies how licenses would be granted through competitive bidding or negotiations with individual entities and identifies circumstances under which one process would be favored over the other.

* A section dealing with procedures that licensees must follow in connection with commercial oil and gas discoveries and their development. Items covered include minimum exploration expenditures, the definition of development areas and how to modify previously agreed-upon programs.

* A section dealing with administrative matters, such as accounts and records, inspections and reports.

* A miscellaneous section covering project infrastructures, local training activities, the conditions under which licenses may be revoked and force majeure circumstances.

The legislation would give a single Russian authority control over the licensing procedure, according to the project leader.

It also would ensure that licensees - which could be Russian entities, foreign companies or joint ventures involving both - could export oil and gas produced under the licenses, except under special conditions like war.

The flexibility Russia would have in granting exclusive exploration and production rights makes the licensing section of the oil and gas law unique

from those in other nations, according to the project leader.

"Russia has so many different kinds of fields - existing ones which are in terrible shape, and huge expanses of new areas," the official said. "You need to have a licensing system that permits different kinds of granting procedures to those different kinds of fields," because of variations in costs and other factors in their development.

In addition, licensing plans call for the overall legislation to include tax and fiscal matters, conservation and the environment and access to pipeline transportation.

Intellectual property issues such as exclusive technologies also would be covered under the law, the official said.