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FSUOGM COMMENTARY FSUOGM

Rosneft returns to the

Arctic offshore

The move comes at a time when prices are low and the outlook is far from clear

RUSSIA ROSNEFT announced earlier this month it had Rosneft and Exxon made the Pobeda oil discov-
resumed drilling on Russia’s Arctic shelf after ery in September 2014, a week before the EU and
WHAT: a six-year hiatus. The company’s return to this US imposed sanctions preventing Western firms
Rosneft has resumed high-cost region is oddly timed, given current from taking part in offshore Arctic projects in
drilling in the Kara Sea low oil prices and the highly unpredictable mar- Russia. The find was assessed at the time to be
after a six-year hiatus. ket outlook. more than 900mn barrels of oil in size.
Rosneft CEO Igor Sechin revealed in a meet- According to the Russian state press, the two
WHY: ing with Russian President Vladimir Putin on Vostochno-Prinovozemelsky blocks may hold
The move is oddly timed, August 18 that its rigs were currently drilling up to 2bn tonnes (14.7bn barrels) of oil.
given current low prices two wells in the Kara Sea. This is Rosneft’s first
and huge uncertainty project in the area since 2014, when joint drilling A question of feasibility
around future oil activities with US partner ExxonMobil were sus- Russia’s offshore Arctic zone is thought to hold
demand. pended owing to Western sanctions. many billions of barrels of oil, along with tril-
Sechin did not provide details about the oper- lions of cubic metres of gas. But the region’s
WHAT NEXT: ations, although Russian state news agencies remoteness and harsh operational conditions
It is unclear if oil reported that the wells had been spudded at the make development extremely costly. The well
markets will offer a Vostochno-Prinovozemelsky-1 and -2 blocks that found Pobeda cost around $700mn, mak-
sufficiently high price to near the Novaya Zemlya archipelago. The rigs ing it the most expensive ever drilled in modern
justify Rosneft's Arctic used are likely the same ones that drilled two Russia.
developments. wells for Gazprom earlier this year: Gazprom’s Like its peers across the world, Rosneft has
own Arkticheskaya jack-up and the Nanhai VIII been forced to make considerable spending cuts
semi-submersible belonging to China Oilfield in response to the coronavirus (COVID-19)
Services Ltd (COSL). pandemic and subsequent oil market collapse.
Vostochno-Prinovozemelsky-1 was where It has slashed its capital expenditure budget for

P4 www. NEWSBASE .com Week 34 26•August•2020