Our Arctic Neighbors: Russia reopens for Arctic energy business

Government acknowledges need for international partners in remote regions but will maintain firm control of selection process

Sarah Hurst

For Petroleum News

Russia needs international expertise and technology to develop its vast Arctic oil and gas resources, and in return for that the country invites foreign companies to participate in projects, Prime Minister Vladimir Putin told Western energy bosses Sept. 24. The chief executives of ConocoPhillips, ExxonMobil, Shell and other majors received this welcome news from Putin at a televised meeting in Salekhard on the Yamal Peninsula.

The announcement marks a turnaround from Russia’s previous policy of hindering foreign companies and awarding all large projects to state-owned Gazprom and Rosneft.

“I can assure you that you have not made this long trip to the end of the earth in vain,” Putin said. “Many of you have been working with Russian companies in many parts of Russia successfully and for a long time. Many others are our marketing partners. Together we have done a lot, but there is still much more we can do.”

The Yamal-Nenets Autonomous Okrug accounts for about 90 percent of Russia’s gas production, Putin told the executives. It has an estimated 4,414 trillion cubic feet of gas, according to the prime minister, compared with 106 trillion to 123 trillion cubic feet in the Shtokman deposit in the Barents Sea, which itself is considered huge.

“I would like to draw your attention to this figure, because it shows that Russia is certain to remain the absolute leader in gas production and sales for the next few decades,” Putin said. “And, of course, we can resolve our domestic energy problems and honor all of our export commitments,” he added.

“The fact that we have met here today, and that we invited you here, is evidence of our respect for the technology and production standards at your companies. It is also evidence of our respect for our joint achievements of the past few years,” Putin said. “It is evidence of Russia’s commitment to remaining an energy power with an open and liberal market economy. We invite our main partners to take part in joint projects. We hope to find solutions, even in the most challenging projects, which will be acceptable and interesting to us and to our partners.”

Russia’s deputy minister of natural resources and ecology, Sergei Donskoy, made a similar announcement Sept. 16 at the RAO/Offshore oil and gas conference in St. Petersburg. Noting that Russian law currently permits offshore exploration only by companies with at least 50 percent state ownership and at least five years’ experience working on the Russian continental shelf, Donskoy said that only Gazprom and Rosneft meet those criteria.

“We are convinced that in order to work in the harsh conditions of the Arctic seas we must attract advanced technologies and significant financial resources, including from private Russian and foreign sources,” Donskoy said. The way to do this is to create consortiums with state companies having a controlling interest but with private companies participating, he added. The government should play a key role in selecting consortium partners and in balancing the companies’ commercial interests with Russia’s strategic development and national security concerns, Donskoy continued.