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The government passed the state program for continental shelf development for finalizing

August 03, 2012, 11:10 UTC+3

The package of amendments to the legislation, which should deprive Gazprom and Rosneft of the monopoly for the development of the continental shelf, was passed for finalizing

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MOSCOW, August 3 (Itar-Tass) — The Russian government considered the continental shelf development program until 2030 on Thursday. The package of amendments to the legislation, which should deprive Gazprom and Rosneft of the monopoly for the development of the continental shelf, was passed for finalizing.

On Thursday discussing the continental shelf development program until 2030 that the Ministry of Natural Resources had drafted, members of the government presidium came to a conclusion that the program cannot be implemented without the active attraction of private capital, the Kommersant daily reported. “The theme is strategic. According to experts, the Arctic continental shelf can contain about a fourth of all shelf reserves of hydrocarbons in the world,” Prime Minister Dmitry Medvedev recalled to the ministers. Only Rosneft and Gazprom operate now on the shelf, the newspaper recalled. The relevant restrictions, which were initiated by the former Deputy Prime Minister Igor Sechin and the Gazprom top management, were approved in 2006.

The prospects that foreign investors will put up with the restrictions and will have to provide special conditions of cooperation in the shelf projects for Gazprom and Rosneft were not justified. Although there are joint agreements in this sphere (for instance, between Rosneft and Exxon) , this is obvious even at the example of constant dragging for an agreement on the conditions to develop the Shtokman deposit.

Minister of Natural Resources Sergei Donskikh said with demonstrative dissatisfaction at a meeting of the government presidium that the activities of Gazprom and Rosneft in geological prospecting on the shelf “are minimal and are obviously insufficient frequently.” Therefore, the Ministry of Natural Resources suggests permitting an estimating geological prospecting on the shelf by private companies specializing in the sphere.

Meanwhile, the already offered level of liberalization seems to the Russian White House insufficient now, the Kommersant daily noted. Minister of Natural Resources Andrei Belousov noted that the scheme initiated by the Ministry of Natural Resources does not sound quite attractive for private investors. “It is absolutely clear that for investors such procedure poses too high risks, because it is unclear whether a state-run company will agree to go halves with him in the deal and at what price. Therefore, it is evident that some mechanism should be developed that brings down these risks for private investors,” Belousov noted.

Since 2008 under the subsoil use law only the state-run companies with five years of experience of operation on the continental shelf can work on the offshore shelf, the Vedomosti daily recalled. Only Rosneft and Gazprom match these criteria. Those companies that intend to get the access to the continental shelf should create a joint venture with them. The private companies, primarily Lukoil, stated repeatedly that such division of the natural resources for the development is unfair.

To boost the exploring and development of the offshore shelf, the Ministry of Natural Resources proposed an innovative scenario to the government that is to permit private companies to engage in geological prospecting (but not in the development of the natural resources) without the participation of the state-owned companies, and to change the tax and customs burdens depending on the complexity of the deposit.

However, Prime Minister Dmitry Medvedev passed the program for finalizing. The working group headed by Deputy Prime Minister Arkady Dvorkovich will be elaborating the program. The main claim is the lack of sufficient stimuli for private companies to operate on the continental shelf.

After the meeting of the government presidium Dvorkovich stated that the government can permit to the private companies to develop the shelf without the state-run companies, but the state control will be retained.

The prime minister named the plans to develop the mineral resources on the continental shelf strategic, the Nezavisimaya Gazeta daily noted. According to estimates of the experts, up to 25% of world reserves of hydrocarbons are concentrated on the shelf. However, this enormous potential is not used yet.

The premier named the levels, which may be reached by 2030 in case of a favourable situation. The annual oil output on the continental shelf will grow from 13 million tons to 66.3 million tons. The natural gas production level will make 330 billion cubic meters (57 billion cubic meters now). The economic effect is forecast at the level exceeding nine trillion roubles.

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