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Experts: Russia’s private companies should be allowed to drill for Arctic oil offshore

June 03, 2015, 16:42 UTC+3 Zamyatina Tamara
© ITAR-TASS/Sergey Savostyanov

MOSCOW, June 3. /TASS/. The more than twelve-month-long dispute if private Russian companies can be allowed to drill for Arctic oil offshore should be resolved in their favor, polled experts have told TASS.

Discussions over whether state-run companies should be stripped of their monopoly on Arctic shelf projects have been underway in the government and inside the expert community for quite some time now. The natural resources management commission under Deputy Prime Minister Aleksandr Khloponin is expected to meet in session on June 11 to make a fundamental decision whether private economic entities should be allowed to explore and develop offshore oil inside the Arctic circle. To be allowed to start operations in the Arctic private applicants are to meet a number of criteria, such as a previous record of operating offshore projects in Russia or elsewhere. Also, no less than 51% of the company’s capital must belong to Russian investors. Under the licenses issued so far 60 exploration and prospecting wells are to be sunk offshore and $45-50 billion worth of seismic exploration works carried out in the Arctic in 2015 through 2020.

The critics of proposals for opening the Arctic to private companies argue that private capital is interested in nothing else but in maximizing profits, the way it has happened at the Vostochny spaceport construction site. The president of the Academy of Geopolitical Problems, Konstantin Sivkov, has told TASS he shares this viewpoint. And nature conservation campaigners keep saying that private companies operating offshore oil production projects do not care at all about ecology and permit frequent oil spills.

"As the foreign economic situation gets worse and world prices of energy resources fall to new lows, it is important to establish cooperation with new partners, first and foremost, the companies that boast cutting-edge technologies, the experience of implementing technologically complex projects and portfolios of promising solutions and ideas. There may be private Russian companies among them," lecturer at the public economic administration chair at the presidential academy RANEPA, Olga Malikova, told TASS.

"The reproaches private companies are irresponsible in their attitude to the environment cannot be regarded as justified. Practically all companies, irrespective of the type of ownership, encounter such problems as oil spills. Quite often they play the "ecological card" as a means of ousting competitors. At the same time it is important to tighten ecological requirements all upstream companies are expected to meet and to establish a robust ecological monitoring service in the Arctic," says Olga Malikova, a member of the Russian Academy of Natural Sciences.

"One of the private oil majors that is contesting a role in Arctic shelf development - LUKOIL - has a rather good reputation, and it is run by professional oil managers. Two other private companies - Tatneft and NOVATEK - have shown remarkable performance. Since 2008, in an adverse environment NOVATEK managed to considerably increase its capitalization. Their participation in developing the Arctic shelf might be rather useful," Malikova said.

The head of World Energy Studies at the energy sector of the research cluster Skolkovo, Tatyana Mitrova, believes that the Russian government’s key ministries related to the fuel and energy complex have decided to revise their attitude to the participation of private companies in Arctic development under the influence of foreign economic factors.

"Apparently, Rosneft’s grave financial position and its decisions to postpone the development of new fields have played a role. It became clear that a company exposed to the effects of foreign sanctions can hardly hope to achieve noticeable growth in oil production in the Arctic. In the meantime, the Arctic should be explored and developed not just for the sake of extra millions of tonnes of oil, but also for asserting Russia’s presence on the Arctic shelf," Mitrova said.

And the deputy director of the Economy and Industrial Production Organization Institute at the Siberian branch of the Academy of Sciences, Valery Kryukov, believes that the discussion of involving private businesses in Arctic exploration has a direct bearing not just on the energy industry, but also on Russia’s whole economic policy. "While until just recently the private sector had enjoyed no credibility in Russia at all, private companies are very successful in operating offshore projects around the world," Kryukov, an expert at the Russian Oil and Gas Producers’ Union, has told TASS. "In contrast to private businesses state-run companies are too slow and have fewer borrowing opportunities due to the current foreign policy factors. For this reason it would be a right and proper thing to do to invite private businesses into Russia’s Arctic projects from the standpoint of adjusting the national economy to the current situation in the world," Kryukov said.

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