Drilling for oil in Russia

International energy majors face a host of problems in Russia: prohibitively high oil taxes, a strengthening rouble, project costs that double from their first estimates, hard-to-access deposits and flagging output at mature fields. And that is before you get to politics.

Yet a plethora of joint ventures between IOCs and Russia's 'national champions' -- Gazprom and Rosneft -- shows that the former are still keen to get their hands on a chunk of the Russian energy market, and that they are undeterred by the huge pressures the Kremlin has brought to bear on some of them.

And with good cause. The case of Shtokman, a gigantic field in the Barents Sea containing enough gas to supply the entire world for a year, suggests that the Kremlin has no 'blanket policy' of excluding IOCs.

In July, Gazprom and French giant Total inked a framework agreement to set up a special company to organise the construction and operation of the Shtokman phase-one infrastructure. Gazprom owns 51% of the shares, Total took 25%, and  Norway's StatoilHydro was given the remaining 24%.  Chevron was excluded on the back of deteriorating relations with the United States and President Vladimir Putin's promise to send Shtokman gas to Europe rather than North America, as originally envisaged.

Spirits have certainly not been dampened at TNK-BP, which earlier this year sold its stake in the Kovykta gas field in Eastern Siberia to Russian state-controlled firm Gazprom, having been muscled out of the deal. It is now planning to spend millions of dollars on expanding control over its retail business across the country.

Foreign investors console themselves with arguments that Russia is not the first country to nationalise its resources and demand higher profits for the state. After all, Russia did not technically confiscate assets from either TNK-BP in Kovykta or Shell in the Sakhalin-2 project: it paid what appears to be the market price (perhaps less a few million dollars).

Moscow has also postponed passing the widely anticipated subsoil law, which would formally prohibit foreigners from owning controlling stakes in its strategic oil and gas deposits. This, however, is something of a mixed blessing, since it means that informal rules rather than strict codes still prevail in the energy game.  But many companies have accepted that that is the price of dealing with an energy superpower. There is nowhere else for them to go.