Page 5 - FSUOGM Week 36 2019
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FSUOGM COMMENTARY FSUOGM
The offshore North- Vrangelevsky licence area. Source: www. mineral.ru.
activities in the East Siberian, Chukotsk and Kara Seas. But this partnership became impossi- ble after the imposition of Western sanctions on Russia’s oil and gas sector in 2014. The sanctions prohibit EU and US operators from taking part in any offshore oil and gas projects in the Russian Arctic, and other Western companies have also had to abide by the restrictions.
This explains Gazprom Neft’s decision to partner up with Novatek instead. While non- state companies cannot operate offshore Arctic licences, there is nothing to prohibit state enti- ties from inviting them to take stakes in pro- jects. In practice, though, both Gazprom Neft and Rosneft have traditionally been reluctant to share offshore resources with their domestic rivals, instead preferring to partner up with for- eign operators when financing and technology requirements deem it necessary.
Gazprom Neft has shifted its position, how- ever. In addition to joint work in the Chukchi Sea, it is also understood to be in talks with Novatek on exploring for oil and gas off the west- ern coast of the Yamal Peninsula.
Given that East-Vrangelevsky is believed to contain both oil and gas, Gazprom Neft likely will want to tap Novatek’s experience in LNG production in the event of a discovery. Though having only limited offshore experience, Novatek has also proved itself a capable onshore gas developer. A partnership will also help both sides de-risk the project and expand access to financing.
The duo are already working together at Arc- ticgaz, which operates several large gas deposits inWesternSiberia.
Reforms
Russian officials recently pledged to draft a bill that would allow private companies greater access to the Arctic’s offshore oil and gas wealth.
A decision was taken on crafting the legisla- tion at a meeting between Deputy Prime Min- isters Dmitry Kozak and Yury Trutnev in late August, and the move is understood to enjoy broad support in government.
Under a law passed in 2008, only state companies with at least five years worth of experience operating on the shelf can apply for licences in the region. Gazprom Neft and Rosneft are the only operators to meet this criteria, and over the years they have fortified their position on the shelf by acquiring 90% of licences. The government has proposed that the remaining 10% be distributed to private investors.
Earlier this year, Trutnev suggested that pri- vate investors work together with state entities at projects, with the state commanding a share of only 30%. Russia’s energy ministry has since sug- gested a more conservative framework, whereby the state would retain 50%.
The offshore Arctic is set to play a vital role in the future of Russia’s oil and gas industry, helping to offset decline at mature fields in more developed areas. Past efforts to liber- alise access to the shelf have been torpedoed by Rosneft and its powerful head, Igor Sechin. But Moscow now looks increasingly likely to undertake reforms, recognising the need for private investment to help galvanise offshore development.
Week 36 11•September•2019 w w w . N E W S B A S E . c o m P5
