Soviet Weekly Sees Sellout in Deal With Chevron to Develop Oil Field

MOSCOW — A multimillion-dollar deal involving San Francisco-based Chevron Corp. surfaced as a potentially explosive issue in the Russian presidential campaign Wednesday when a progressive weekly denounced it as a sellout of Soviet natural resources that may be tainted by corruption.

The “deal of the century” to develop the vast Tengiz oil field has terms so poor for the Soviet Union that it is “unprecedented for our times,” Moscow News charged. It traced the agreement’s genesis to decisions two years ago by Nikolai I. Ryzhkov, the former Soviet prime minister now campaigning with Communist Party endorsement against Boris N. Yeltsin for the presidency of the Russian Federation, the largest Soviet republic.

However, Soviet President Mikhail S. Gorbachev himself has been a party to negotiations about developing the oil field in the Central Asian republic of Kazakhstan, and the allegations of misconduct could lead to questions about his role.

According to Moscow News, an independent panel of economists has urged Gorbachev to cancel the agreement, saying that as written it is tantamount to “giving away” what may be the country’s richest oil patch.

Chevron’s chairman and chief executive, Kenneth T. Derr, has compared the importance of the unexploited oil field near the Caspian Sea to Alaska’s Prudhoe Bay. Some estimates put its crude reserves at as many as 25 billion barrels and say that, when in operation, it would provide almost one-tenth of the oil output of the Soviet Union.

Under an innovative arrangement reportedly ready for signing, a joint venture affiliated with Chevron would acquire exclusive rights to develop the 8,900-square-mile field and export all the oil it can pump during the next 25 years, with the right to extend the arrangement for another 10 years.

Moscow News objected that the deal’s cost-benefit ratio for the Soviet Union is unacceptably low. It said the agreement requires the Soviet side to pay $850 million for equipment, plus 1.5 billion rubles (about $890 million at the highly inflated Soviet commercial exchange rate) for prospecting and construction in the isolated region.

Chevron reportedly will put up only $20 million “spent during the conduct of negotiations,” Moscow News said. Its implication was that the money may have been spent improperly.

“We have no documents explaining where these funds have gone, or who might have gotten them,” the author of the Moscow News article, Mikhail Gurtovoy, explained in an interview.

Despite such “fantastic imbalance” in their financial stakes, Chevron and its Soviet partner in the project, Tengizneftegaz (Tengiz Oil & Gas) would split the pumped crude 50-50, Moscow News said. The companies would work through a joint venture they created to handle the project, Tengizchevroil.

To buttress its claim that the deal would be a rip-off, Moscow News said that “current world practice” for awarding oil concessions would require Chevron to hand over 85% of the oil just for the right to do business, leaving only the remaining 15% to divide with Tengizneftegaz.

One clause in the proposed agreement also constitutes an “excellent unpunished form of bribery,” Moscow News alleged. It said Chevron reportedly won the right to obtain building materials and other supplies in this shortage-strapped country on a priority basis, and also would be allowed “duty-free imports” for the joint venture and its subcontractors.

From San Ramon, Calif., Richard H. Matzke, president of Chevron Overseas Petroleum Inc., a Chevron subsidiary, challenged the Moscow News report.

“I don’t know where (those) figures came from,” Matzke said. “We have incurred substantial costs associated with our negotiations. (But) we haven’t spent $20 million. We haven’t been asked to (make), and we haven’t made, any improper payments.”

According to Matzke, among Chevron’s costs in two years of negotiations over the Tengiz field have been wages and travel expenses--at times, as many as 50 full-time employees have worked on the project. Other money has been spent for consultants and on legal costs and technical evaluations of the site, he said.

As for the 50-50 arrangement, Matzke suggested that the Moscow News report failed to distinguish between an oil concession and a joint venture. Under a concession arrangement, a company bears the cost of developing a site; the host government puts up nothing. This deal, he said, is a joint venture, with a Soviet company--not the government--as an equal partner.

The Soviets, he said, “want to be in business with a U.S. company for the learning experience.”

Meeting a group of Moscow correspondents over lunch, Anatoly I. Lukyanov, the chairman of the Soviet legislature, said he knew of the charges contained in the article and that he expects the issue to be discussed in Parliament.