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Russia declassifies information about its oil and gas resources

February 15, 2013, 18:28 UTC+3
The Russian president urged to work out a new classification of natural resources based on international standards
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MOSCOW, February 15 (Itar-Tass) – Russia is ready to declassify information about its hydrocarbon resources. Experts however say that this information is secret to no one. Nonetheless, when it is officially put into the public domain, Russia’s investment attractiveness will only benefit from that – western investors, who are used to absolute transparency, are now rather discouraged.

At a recent meeting of the commission for the development of the country’s fuel and energy sector, President Vladimir Putin urged to declassify the balance of Russian natural resources. “I believe that it is high time to consider the question of declassification of our natural resources,” he said. “Now when foreign investors work in the Russian sector and our companies pass international audit, this state secrecy status is an obvious anachronism. There is nothing secret in this issue,” he stressed.

Apart from that, the president called for adopting a new classification of natural resources in Russia, which would be as close to the international one as possible. “Our resources are underestimated because of the archaic appraisal system,” Putin said.

Russia has inherited the practices to classify information about natural resources from the Cold War era. The subject vanished from public sight after the collapse of the former Soviet Union. It was not until 2002 that the Russian government passed a resolution approving the list of natural resources that constitute a state secret. These included oil, associated gas, nickel, cobalt, pure quartz, tantalum, niobium, beryllium, lithium, and rare earth elements of the yttrium group.

“All Russia’s reserves, including those of the Khanty-Mansi autonomous area, are classified information,” electronic newspaper Gazeta.ru cites Rustam Tankayev, an expert from the Russian Union of the Oil and Gas Industry. Any oil and gas market expert however will be able to calculate the current reserves with a five-percent accuracy based on the production curve in the past 20-25 years, he noted.

“But since, in formal terms, information about Russia’s natural resources is classified, international experts underestimate the reserves by about 30 percent,” he added. Declassification of this information will help attract more interest from foreign investors.

According to Alexander Popov, the head of Russia’s subsoil resources agency (Rosnedra), Russia ranks eighth in terms of recoverable oil reserves. He also said that western auditors tended to underestimate Russian reserves by 30 percent.

Thus, if we accept BP’s estimations of oil reserves in Russia of 88.2 billion barrels, it turns out that Russia’s real oil reserves total at least 114 billion barrels.

When Russia’s reserves are estimated based on a new classification, it will go up from its eighth place in the global oil reserve rating to the third.

Most of experts welcome the declassification initiative. “The state secrecy status complicates the analysis of the structure of reserves, including the assessment of the potential of hard-to-recover reserves and the efficiency of economic stimuli,” Grigory Vygon, the director of the energy centre of the Skolkovo school of business, told the Rossiiskaya Gazeta daily. “Declassification will make it possible to improve the quality of reserve analysis and state decisions.”

Foreign companies lamented to the RBC daily that such secrecy hinders their work in Russia. First, foreign companies are invited to Russia but then they are told that some information cannot be disclosed, a source in one of foreign companies operating in Russia told the newspaper. According to the source, it will be much easier to forecast oil reserves when this information is declassified.

The mere fact of declassification is unlikely to prompt a surge of interest of foreign companies to Russian projects, since there are few of them, according to Andrei Ivanov, the director general of the Geonedra research and analysis centre.

The Russian president urged to work out a new classification of natural resources based on international standards. Thus, Russia’s existing oil resources management system takes into account only the oil reserves as such in a particular field, while foreign systems reckon cost-effectiveness of the field’s development as well.

Thus, in line with the western Petroleum Resources Management System, or PRMS, resources cannot be classified as recoverable if they have not been justified for development and are not meant for development in the next five years, Vygon said. In Russia however, such nuances are not taken into account.

A new classification based on the cost-effectiveness of development will make it possible to make more objective forecasts of hydrocarbon production in Russia, and systemize the system of tax preferences.

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