Here is the introductory paragraph from the report:
"This report is intended to provide an introductory overview of the Russian oil and gas sector, in particular,and the structure of Russia�s capital markets in general. Its aim is to provide a summary of the most important companies operating in the sector in Russia and to explain the main factors which will drive industry investment,both internal and external, and profitability. Specifically,the issue of corporate governance is addressed on a company specific basis,as well as how the perception of this being a higher risk n Russia than elsewhere affects investment flows and valuations.For an industry which is used to investing in often hostile and unstable parts of the world,uncertainty over ownership rights and legal enforcement have acted as major obstacles to attracting foreign investment into Russia. Adjusted for emerging market standards,the value of quoted equities in Russia is estimated to be currently $52 bln less than �fair value� and the clearly dentifiable reason for this s investor concern over current corporate governance issues.The bulk of this $52 bln is accounted for by just four companies,ncluding Gazprom and LUKoil. The oil and gas sector has,in recent years,been the scene of most of the major battles over shareholder rights,such as BP�s dispute over SIDANCO and the restructuring of YUKOS.The resolution of the current issues concerning LUKoil�s unwillingness to release audited US GAAP financials and,particularly,the restructuring of Gazprom and the disclosure of its relationship with Itera,will not only drive the valuation of these stocks but also of investor attitudes towards the whole market. Investors have shown that,despite cheap valuations and obvious potential,even $1 invested in an environment which cannot guarantee protection on at least that $1 of value,is a risk which is unacceptable. And it is clear that Russia needs both capital investment and technology upgrades in its oil and gas industry.In the closing days of the Soviet empire,Russia was producing over 12 mbpd of oil. By the time of the 1998 financial crisis,this had collapsed to just a trickle over 6 mbpd.Russia�s plans to develop a broadly based economy over the next ten years are very dependent on the liquidity provided by oil and gas exports.This explains the push to raise production and exports and try to revive the PSA program. Russian enterprises are continuing to spend on production and export capacity,but to make a real difference,foreign participation will have to increase.This is the challenge facing the government and the industry right now."