Russia to End State Monopoly on Arctic Oil?
The Russian government will debate this week on whether to allow private energy companies to begin exploring for oil and gas in its Arctic Shelf, reported AFP on Monday, in the hopes of expediting energy developments in the region, which are presently conducted by just two state-owned companies.
According to AFP, Russia's Arctic Shelf may hold as much as 550 billion barrels of oil, or nearly eight times the nation's current proven reserves. Yet with just two companies - Gazprom and Rosneft, the state's main gas and oil providers respectively - currently surveying for resources, some Russian politicians now believe that exploration is taking too slow, delaying the government's ability to fully exploit said riches.
"From 2008 to 2010, 11 gas and oil holes were drilled on the Russian Arctic Shelf, and 4 new deposits were discovered," said the head of the Russian Ministry of Natural Recourses Sergey Donskoy, as cited by The Voice Of Russia. "For comparison: within the same period, in Norway, 110 gas and oil holes were drilled, and 44 new deposits discovered."
"If Russia continues to examine and explore the Arctic Shelf with the same tempo, large-scale development of its riches will start not earlier than somewhere in 2030," Donskoy warned."
Part of the problem rests in the fact that the area's harsh terrain makes it difficult for energy companies to operate. Extracting arctic resources is also a comparatively new kind of activity for the nation, said Prime Minister Dmitry Medvedev, who is convinced that these projects can be more attractive to investors if a thorough and clear-cut system of relevant laws is implemented.
"Investors - whoever they may be - will readily invest in these projects if they see that the state's policy concerning these projects is stable and predictable," said Medvedev, during another energy meeting last week.
"Russia's authorities have already adopted a number of important laws concerning the development of the Arctic Shelf's riches; in particular, a law about what companies should have the right to develop them," he said.
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Gazprom's and Rosneft's heads however rebuffed the idea that they could not develop the shelf's energy resources by themselves.
Alexei Miller, Gazprom's chairman, for instance, vowed that "we are not giving up the shelf to anyone," while Rosneft's" head Igor Sechin promised to invest a further 1.2 trillion rubles ($39.65 billion) in geologic explorations on the Arctic Shelf. The two companies presently own 80 percent of all exploration contracts in the region, with the remaining contracts set to be given out after talks have concluded.
Sberbank Investment Research analyst Valery Nesterov told AFP that the government will eventually have to figure out how it can get private companies to boost Arctic development without the state losing control of what it views as a strategic reserve.
In the end, we will either have to develop the Arctic or find ways to raise oil production at existing wells," Nesterov noted, adding that"Gazprom and Rosneft have got everything they have asked for, 80 percent of the (Arctic) shelf, [but] ...are now are sitting on them."
"There must be a procedure for taking back these licenses, and that it what the ministry of natural resources is trying to do," he said.