Russia’s Mission to Access Arctic Oil and Gas

Russia will undertake an expensive and challenging venture into its Arctic region amidst declining production from several of its major oil and gas fields, states a report by business intelligence providers GlobalData. According to the new report, Russia’s oil field production has been in decline over the last few years, and as the Arctic has hydrocarbon reserves that could last the country well over a century, a mission north has been deemed a necessary undertaking.

Surgutneftegas, one of the largest oil fields in Russia, produced around 472 million barrels of oil equivalent (MMboe) in 2006, but this fell by about 8% by 2011, with a total of 433 MMboe. Equally, the Urals Federal District produced 18,509,040 million cubic feet (MMcf) of gas in 2006, with this figure falling by 6% to approximately 17,362,550 MMcf in 2011.

From the 142 oil fields and 35 gas fields in operation in Russia, hydrocarbon production levels dropped from 7,641.53 MMboe in 2006 to around 7,200.23 MMboe in 2009. Since 2010, the country has been compensating by employing advanced oil recovery technologies.

While speaking at the sixth media forum of the United Russia Party in September 2011, Russian Natural Resources Minister, Iury Trutnev, claimed that hydrocarbon resources in Russia’s Arctic shelf could last 100 to 150 years. Yet, to capitalize on these massive reserves, oil and gas firms will have to brave hazardous conditions and freezing temperatures in what is certain to be a highly expensive project.

To meet the challenge, the Russian National Oil Companies (NOC) have partnered with foreign firms in a move liberalizing the country’s laws on offshore oil and gas exploration. In addition, a proposal made to Parliament last October would, if passed, abolish export duties on offshore oil projects for between five and 15 years. There are also plans to lower other related taxes, such as the mineral extraction tax.

Russia’s NOC Rosneft has already entered into major deals with International Oil Companies (IOC). In May of this year it entered into agreements with Statoil and Lukoil, and in April announced plans to partner up with Italian multinational, Eni, to develop exploration licenses in the Black Sea and the Barents Sea.

Rosneft has also made deals with India’s NOC, ONGC Videsh, and China’s China National Petroleum Corporation, CNOOC, and Sinopec to begin exploration in Russia’s hydrocarbon rich Arctic region.

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