Arctic shelf access liberalization laid down in Energy Strategy

08.10.2019

Arctic shelf access liberalization laid down in Energy Strategy

The Energy Strategy of Russia for the period until 2035, which the government has been discussing for several years, will provide for liberalization of access for the private oil and gas companies to the Arctic shelf. Now only Gazprom, Rosneft and their subsidiaries can work on the shelf in the Arctic.

The Energy Strategy will provide for “creating long-term investment conditions for accelerated development of deposits in the Arctic zone and the continental shelf of the Russian Federation”, as well as “expanding the access of Russian companies with the necessary experience and financial resources to potential users of federal subsoil areas located on the continental shelf of Russian Federation». This refers to the liberalization of shelf access for private companies.

Recently, Deputy Prime Minister Yury Trutnev, who oversees the Far East and the Arctic, has taken the initiative to liberalize shelf access. At the end of July, he wrote to President Vladimir Putin a letter stating that the Arctic shelf «does not work for the economic development of Russia." According to Trutnev, since 2012, when only state-owned companies with five years of experience gained the right to access the shelf, the government issued 69 licenses for exploration and production of oil and gas in the Arctic, requiring companies to drill 86 wells in 20 years. But in seven and a half years, by the summer of 2019, only five wells were drilled and the initial shelf development dates were disrupted.

Trutnev explains such slow development by the lack of competition. The lost profit from this in the growth of Russia's GDP by 2035 is estimated by experts at 18 trillion rubles. The Deputy Prime Minister suggested that foreign and Russian investors could be allowed into unallocated shelf areas in a consortium with a state-owned operator specially created for this purpose. This will not only provide an increase in oil and gas reserves, but also activate other industries - from shipbuilding to exploration.

In August, Trutnev and Deputy Prime Minister Dmitry Kozak held a meeting; they instructed the ministries to prepare a bill on incentives for the development of the Arctic shelf, including the possible access of private companies to it. «Yesterday at the meeting with Kozak, the most important thing that happened was that all departments wanted to expand the subject composition of companies working on the shelf», —Trutnev said. Only Energy Minister Alexander Novak, in fact, opposed the access of private oil and gas companies to the Arctic shelf, proposing to consolidate control over consortium for Russian state-owned companies that could obtain shelf licenses.

The representative of Trutnev refused to comment on the Energy Strategy, the representatives of Kozak and the Ministry of Energy did not respond to RBC requests. RBC sent requests to Rosneft, Gazprom and the largest private oil company LUKOIL, whose head Vagit Alekperov has repeatedly advocated liberalizing access to the shelf, but they have not yet answered.

Rosneft opposes the access of private companies to the shelf. Firstly, the Arctic shelf is a strategic territory; liberalizing access to it is impractical and simply dangerous. Foreigners can get into such projects in consortiums with state-owned companies, but they are in no hurry to invest or share technologies.


Back to the list