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European Bank approves ECU 145.3 million loan to improve oil production in West Siberia
A loan of ECU 145.3 million equivalent in US dollars to the Russian Federation to improve oil production in West Siberia and to enhance exports was approved yesterday by the Board of Directors of the European Bank for Reconstruction and Development.
The loan will enable Purneftegas Oil Producing Association in West Siberia to repair and rehabilitate 300 oil wells over the next three years. This critical support will improve oil recovery and stem production decline, thus enhancing the foreign exchange earning capacity of the Russian Federation. The project also includes investment to reduce environmentally harmful gas flaring.
Mario Sarcinelli, Vice President of the European Bank, said: "In connection with this project, the Russian Government has agreed to encourage the price, tax and legislative reforms necessary to improve the commercial orientation of the sector. These will promote sector investment, help attract private investors into the sector and increase oil production and oil exports."
Oleg Preksin, Director for the Russian Federation, said: "My Government strongly supports this project. We are committed to market-oriented reforms, including oil pricing and taxation. We are keen to develop and strengthen our cooperation with the European Bank and other international financial institutions in this area."
The project includes a technical cooperation component, to be provided in parallel with the loan, for training and reservoir management and oil production techniques, commercial and management accounting, and environmental protection and monitoring.
Total cost of the project is US$ 211.3 million including US$ 174.3 million from the European Bank. The Government of the Netherlands plans to provide 11.4 million Guilders in bilateral financing, and US$ 31 million equivalent will be contributed from the borrower. Several export credit agencies have expressed interest in co-financing with the Bank. The World Bank has a parallel operation under preparation.
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