Legal forms for attracting foreign investment into Russia’s oil and gas industries

Abstract

The article analyzes legal forms for attracting foreign investment for the development of hydrocarbon deposits and identifies their advantages and disadvantages. The lack of domestic resources for investment necessitates attraction foreign direct investment into the oil and gas industries, characterized by high capital intensity. However, subsoil users with foreign capital participation take serious risks during the geological subsoil investigation. The main factors behind the Russia’s energy sector stagnationare primarily the imperfections in Russian investment legislation and the absence of well-functioning contractual instruments protecting the interests of each participant in subsoil user legal relationships: the government, subsoil users, operators, and investors. The author analyzes foreign experiences in applying contractual instruments to attract foreign investment for developing oil and gas fields, and explores recent legislative initiatives designed to modernize Russian oil and gas legislation, including the draft federal law “On the peculiarities of joint activities in the subsoil use and on making changes into separate legislative acts of the Russian Federation”. To improve investment attractiveness of Russia’s energy sector, the author estimates new forms of investment agreements, proposes the introduction of amendments to the 1992 Subsoil Law concerning easing existing restrictions on admitting foreign companies to the development of offshore hydrocarbon fields, and to clarify the terminological basis of Russian oil and gas operating agreements to bring it into line with international standards.