Tuesday, January 20, 2009
Texas wildcatter tussles with Russian bear
17 January - Houston Chronicle by Loren Steffy - FORT WORTH — As a scion of one of Texas’ most famous wildcatting families, Dick Moncrief has seen his share of Oil Patch squabbles. Nothing, though, prepared him for the battle he’s been waging for more than a decade over a stake in one of Russia’s most prolific natural gas fields. It’s an epic saga, part Dallas and part Dostoyevsky. Moncrief’s grandfather, W.A. “Monty” Moncrief, made a fortune in legendary Texas oil plays like the East Texas field, and the Moncrief name is ensconced in the pantheon of Texas legends alongside the Hunts, the Basses and the Waggoners. Now, the family’s wildcatting prowess is being tested in state district court here, the latest in a series of legal battles over whether the Russian natural gas concern Gazprom violated a 1997 agreement that Moncrief claims granted his company, Moncrief Oil International, a 40 percent stake the Yuzhno-Russkoye Field in western Siberia. The field produces 2.5 billion cubic feet of gas a day and has reserves of as much as 40 trillion cubic feet. Moncrief estimates his stake may be worth as much as $16 billion. “It’s one of those dream fields,” Dick Moncrief said. “That’s why we’ve fought so hard for it.” Moncrief’s company began operating in Russia in the mid-1990s, helping oil companies obtain financing for drilling projects. Moncrief claims his 1997 deal with Gazprom gave his company an exclusive and direct ownership interest in the Y-R Field, as it’s commonly known in exchange for a plan for developing the field and distributing its gas. At the time, Russia was looking for foreign expertise to bolster its domestic energy industry. It seemed a bold opportunity for U.S. companies. “People had high hopes for Russia,” Moncrief said. “It seemed like we understood each other.” That understanding crumbled. Gazprom’s management surreptitiously transferred Moncrief’s stake in the venture, including its development plan, to another Russian-controlled company, according to Moncrief’s suit. After Vladimir Putin’s election as Russian president in 2000, Moncrief hoped his company’s interest would be returned. Putin, after all, vowed to eliminate corruption. Although Gazprom officials assured Moncrief they would reinstate the Y-R Field venture, that never happened, Moncrief claims in the lawsuit. Instead, in 2005, Gazprom announced it had reached agreements with two German companies to develop the field and build a huge pipeline to it. Michael Goldberg, an attorney with the Houston office of Baker Botts, which represents Gazprom, disputes Moncrief’s claim of an ownership interest, noting that documents from an earlier case show the oilman was merely one of several potential investors. Gazprom is the primary natural gas supplier to Europe, and, as its recent showdown with the Ukraine demonstrates, it’s not afraid to hold the continent hostage to get its way. “Gazprom plays very rough,” said Craig Pirrong, a professor and director of energy markets for the Global Energy Management Institute at the University of Houston who also writes frequently on Russian politics and business. “Contracts are something they interpret in their own interests, and as options rather than commitments.” Moncrief’s battle is yet another cautionary tale for U.S. companies doing business in Russia. In recent years, larger companies lost struggles with the Russian government over control of oil ventures in Russia. Moncrief’s search for justice has been, so far, fruitless. He had little chance of winning a lawsuit in Russia because Gazprom is largely controlled by the government, and a case in Germany has stagnated. The earlier case in federal court in Fort Worth was dismissed over a lack of jurisdiction. In April, he filed suit in state court in Fort Worth, and although Gazprom appealed to the federal level, the case was returned in mid-December. Moncrief filed in state court because Gazprom opened a Houston subsidiary in 2006 to develop liquefied natural gas terminals. The LNG program, Moncrief said, was part of the development plan his company submitted for the Y-R Field. “Moncrief’s frivolous story changes every time he files the case,” Goldberg said. With the case cleared to proceed in state court, Moncrief’s attorneys could begin gathering depositions as early as this month. In an unusual twist, Moncrief has pledged $500 million of any judgment he gets to the University of Texas, his alma mater. Goldberg points out that federal Judge Terry Means in Fort Worth cited “persuasive arguments” by Gazprom even though he returned the case to state court. “We are confident that the state court will take this message from the federal judge and dismiss the case,” Goldberg said. Even if Moncrief wins, though, he may not be able to collect because Gazprom is likely to ignore a state court ruling, said Bruce Misamore, the former chief financial officer for Yukos, a private Russian oil company. Yukos filed for bankruptcy in Texas in 2004 to keep the Russian government from seizing and auctioning off the company’s major division, but the Kremlin ignored the filing. In other words, even all the determination of a legendary Texas wildcatter may not be able to overcome the lawlessness of Russia’s Wild West.