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Will Russia's gas and oil giants sacrifice their monopoly?
by Olga Denisova
Moscow (Voice of Russia) Jan 21, 2013

File image.

Russia's government wants the so-called Arctic Shelf to be more thoroughly and speedily explored and exploited. The Arctic Shelf is the bottom of the Arctic Ocean, which, as scientists have proved, is a prolongation of Russia's northern continental territory. Thus, the Russian authorities claim, the shelf's natural riches should belong to Russia.

At present, only 2 Russian companies, both state-owned, have the right to develop the Arctic Shelf's gas and oil deposits - the gas giant "Gazprom" and the oil giant "Rosneft". However, some Russian officials believe that the right to develop the shelf's riches should be given to private companies as well.

Extracting natural resources in the severe conditions of the Far North is a comparatively new kind of activity for Russia. It needs good scientific basement. It needs high technologies. It demands large amounts of money. It needs good long-term planning. And, as Russia's Prime Minister Dmitry Medvedev is convinced, to make these projects more attractive for investments, a thorough and clear-cut system of relevant laws is needed.

At the Russian government's meeting, which was devoted to prospects of developing the natural resources of the Arctic Shelf, Prime Minister Medvedev said:

"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."

"Russia's authorities have already adopted a number of important laws concerning the development of the Arctic Shelf's riches," Mr. Medvedev continued, "in particular, a law about what companies should have the right to develop them. Besides, several privileges concerning taxes have been introduced for companies that develop natural resources in the Far East."

However, the question whether private companies should be allowed to develop the Arctic Shelf's natural resources has not been solved. Russia's government is intending to view it in the nearest future.

The head of the Russian Ministry of Natural Recourses Sergey Donskoy believes that private companies should be allowed to develop the shelf's natural riches.

As it was said, at present, only 2 companies have the right to develop the shelf's resources - "Gazprom" and "Ronsneft". The reason is that a law exists in Russia, according to which only those companies are allowed to develop these resources that are by more than 50% financed by the state and already have at least 5 years of experience in developing the shelf's resources.

At present, only 2 Russian companies meet these requirements - "Gazprom" and "Rosneft". They have already applied for drilling rights - "Gazprom" in 17 places, and "Rosneft" - in 12.

If they receive these rights, this would mean that they will control nearly 80% of the shelf's territory within the next 10 years. In such a situation, private companies will be able to claim only for several small areas which would hardly present much interest to them. Moreover, only Russian private companies will have this right.

The Russian Arctic Shelf is the largest continental shelf in the world. Its area is 6 mln square kms. The Russian Agency of Subsurface Resources Management has already given 107 licenses for developing the shelf's deposits, including licenses given on state contracts. However, unfortunately, is cannot be said yet that the development of these deposits has moved very far.

Russian Minister of Natural Recourses Sergey Donskoy says that the shelf's resources have not yet been examined by scientists well enough.

"From 2008 to 2010, 11 gas and oil holes were drilled on the Russian Arctic Shelf, and 4 new deposits were discovered," Mr. Donskoy says. "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."

The Ministry of Natural Recourses is planning to hold auctions, where licenses for developing the deposits of the Arctic Shelf will be sold to private companies.

"Gazprom's" and "Rosneft's" heads don't hide it that they are very dissatisfied with these plans. "Gazprom's" head Alexey Miller says that his company won't sacrifice its monopoly for developing the shelf's riches to anyone. In his turn, "Rosneft's" head Igor Sechin says that his company is going to invest 1.2 trillion rubles in geologic explorations on the Arctic Shelf.

"Gazprom" is also carrying out a large-scale program of developing the shelf's deposits, which is outlined up to the year 2030. According to Alexey Miller's forecasts, the amount of gas in the deposits that will be discovered on the Arctic Shelf by 2030, will be more than 11 trillion cubic meters. This will allow "Gazprom" to extract more than 210 bln cubic meter of gas in a year, Mr. Miller believes.

In fact, among all Russian companies, only such giants as "Gazprom" and "Rosneft" can operate with such big sums or carry out such large-scale programs. However, as if this is not enough for them, they are inventing new ways to impress their competitors.

"Rosneft" is going to start drilling the bottom of the Kara Sea in the autumn of 2014, which is even earlier than the initially appointed date. Igor Sechin says that the place for this drilling has already been approximately determined.

Source: Voice of Russia


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Russia eyes private boost for Arctic energy
Moscow (AFP) Jan 20, 2013
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