Our Arctic Neighbors: Russian investment climate needs a boost

Russia needs to make itself more attractive to investment from foreign energy companies, the country’s minister of natural resources, Yuri Trutnev, said in an interview with the newspaper Vremya Novostey Dec. 9. The level of foreign investment in the energy sector declined considerably this year, he said. The newspaper attributed this to the high political risks in Russia and the fact that current oil prices make the development of new fields uneconomic.

“The whole world is working on the search for energy resources, including alternative energy, and we’re now putting our fields in a bag and not giving them to anyone,” Trutnev said. He proposed liberalizing access to Russian prospects for foreign companies. “This is in the interest of the Russian economy, not foreigners,” Trutnev said.

Another problem is that the biggest state-owned Russian companies, Gazprom and Rosneft, which have a monopoly on licenses for offshore Arctic deposits, can do anything they want after being awarded a license for a field. “It’s all at their discretion,” Trutnev said. “Whether they form a consortium to develop it or don’t form one, whether they invest in opening it up or don’t invest — we can’t influence that.”

Large-scale projects in the offshore Arctic will require the participation of foreign companies, investment analyst Dmitri Alexandrov told the newspaper. “If we’re talking about drilling, then these could be Halliburton, Schlumberger or Baker Hughes. If we’re going to form consortiums, the experience of Total or Norsk Hydro could be used,” Alexandrov said.

Risks in Russia for foreign companies include the lack of transparency in legislation relating to the energy sector, possible problems with Russian partners, the Russian government’s slowness in awarding licenses and delays with subcontractors, the newspaper said.

—Sarah Hurst