Siberia's Giant Oil Boom Turns Bust -- World's Largest Field Ruined By Excesses Of Rulers In Moscow Shouting `More!'

SAMOTLOR LAKE, Russia - His hopes of building a socialist utopia have long since turned to dust, but Ivan Rinkovoi still remembers his sense of ecstatic excitement when the heavy black oil first gushed out of the desolate Siberian marshland.

"It took our drilling teams more than a month to hack their way through those marshes. It was 40, 50 degrees below zero. It was a real attack on nature, a kind of military campaign. Only Russians can work in such conditions. But then we found oil, more oil than we had ever dreamed about," said the former drilling director, describing the discovery in 1965 of what was to become the world's largest oil field.

Almost three decades later, Rinkovoi and other Siberian pioneers wonder whatever happened to the billions of barrels of oil pumped from the soggy ground here. And they ponder the lessons of a failed boom, as a virtually bankrupt, post-communist Russia works to revive its most profitable industry.

When production was at its peak in the late 1970s and early '80s, this giant oil field produced almost as much oil as Iraq and Kuwait combined. Every fourth barrel of Soviet oil - the equivalent of the country's entire export surplus - came from this remote corner of western Siberia. But the oil was pumped out of the ground far too quickly, and a new generation of Russians must now pay the price for the misplaced heroism of its predecessor.

"The way in which oil was extracted here was simply barbaric,"

acknowledged Grigory Pikhman, who supervised the construction of the oil city of Nizhnevartovsk, about 30 miles south of Samotlor Lake. "The bosses in Moscow kept shouting `More, more!' They had no interest in conservation."

The 15 billion barrels of oil extracted from the Samotlor field between 1971 and 1986 - worth $450 billion at contemporary world prices - helped finance the Soviet Union's unprecedented military buildup under Leonid Brezhnev.

It funded the Soviet invasion of Afghanistan in 1979 and bankrolled now defunct Marxist regimes across the globe. At home, the oil bonanza enabled the ruling Politburo to underwrite the living standards of Soviet citizens, covering up the defects of a grossly inefficient economy with huge government subsidies.

But the boom is over. At Samotlor, production has been falling by 15 percent a year since 1986. The region is strewn with waterlogged oil wells, leaking pipes and broken pumps. About 2,500 oil wells in the area - one of every four - are out of operation.

Aware that it was plummeting oil revenues that yanked the last financial prop from under the communist regime, Russia's new rulers have given top priority to reversing the decline in production. Improving the exploitation of Russia's huge oil wealth represents the easiest method of increasing the country's hard-currency earnings and softening the transition to a free-market economy.

By U.S. standards, Siberia remains a treasure trove, but the cost of getting the oil out of the ground has shot up in recent years, and investments in new techniques have lagged. Unless Russia can draw heavy foreign investment into the oil industry, most Western experts say an early turnaround seems unlikely.

"If the Russians were able to get the majors in here - companies like Shell and Mobil - they could significantly increase . . . output in two or three years," said Arthur Henuset, president of a small Canadian company that has been laying pipe in the Samotlor region. "But the majors are sitting back and waiting . . . as long as the political situation remains unstable and property rights are unresolved."

While Western industrialists were forced to modernize their plants to cut energy costs, Soviet managers became accustomed to apparently limitless supplies of cheap raw materials. By the 1980s, according to Western economists, the average Soviet factory was consuming two to three times as much raw material as an American factory to make a vastly inferior product.

"What good did we get from all this oil?" asked Pikhman, an energetic 83-year-old who watched Nizhnevartovsk grow from a village of several hundred native Khants to a city of 300,000 in the space of a decade. "It's as if it all went down the sewer."

In their haste to get the oil out of the ground, the central planners constantly cut corners. The extensive infrastructure needed for extracting the oil efficiently - roads, pipelines and gas-processing facilities - was never completed. Even today most of the gas released from the oil bed is simply burned in the air rather than being siphoned off for productive use.

"There is enough gas being burnt here to heat all of Moscow," marveled Henuset, the Canadian oilman, pointing to dozens of gas fires that light the nighttime sky north of Nizhnevartovsk.