Energy monopolies oust rivals from the Russian shelf

Russian Gazprom and Rosneft clamour to renounce governmental manifesto opening access for private companies to the continental shelf.

The only two Russian companies officially authorized to develop the continental shelf – Rosneft and Gazprom – sent another letter to Vladimir Putin expressing their concern over planned liberalization of shelf development rules.

- Hasty decision-making and adoption of the initiatives may severely damage and slow down implementation of the national shelf development policy and may lead to serious problems in relations with international strategic partners of the Russian state-owned companies, said the letter. 

 Further down in the letter, Miller and Sechin urged the government to speed up their thinking processes and issue pending exploration licenses. Decisions on 14 license blocks for Rosneft and 29 blocks for Gazprom are yet to be taken. 

Rosneft has already been granted 14 blocks on the Russian continental shelf without any competition. If Vladimir Putin decides to appease growing appetite of the company, Rosneft will grab 75% of all Russian Arctic shelf blocks that seem promising in terms of hydrocarbon reserves, Finmarket writes.

This is the third letter of concern submitted by the two companies to Putin directly as long as “the government does not listen to us”. In due course, the President urges the Ministry on Natural Resources and Ministry on Energy to come up with their suggestions. The solution on license holders may be announced by November 01.

The Minister on Natural Resources Dmitry Donskoy reported earlier that exploration practices of Gazprom and Rosneft were “highly inefficient”. For example, three licensed blocks of Rosneft in the Kara Sea has 23 “promising structures” yet according to the company’s license-bound obligations Rosneft is planning to drill only four exploration boreholes by 2020.

- To say that Gazprom and Rosneft are not active on the shelf is nonsense, responds the letter signed by Miller and Sechin. In 2012, total volume of investments will sum up to RUB 40 billion; by 2017 – to RUB 500 billion at least. Not to take into account other expenses related to drilling rigs, vessels and onshore infrastructure.

Commenting on the legislative initiative, Putin’s spokesman Dmitry Peskov said: “when we talk about state-owned companies, we can guarantee implementation of the investment programme for definite blocks” while it is very difficult to provide this kind of guarantee to private companies.

The current legislation on Russian continental shelf exploration grants licenses only to those companies that are owned by the state (over 50%) and have over 5 years of relevant experience behind. So far, only Rosneft and Gazprom meet these requirements. Private players – Lukoil, Surgutneftegaz, Bashneft, and TNK-BP – have repeatedly approached Russian legislators begging to lift the restrictions.
 
Photo: Kirinskoye field, Sakhalin-3 project by Gazprom
 
External links:
Gazprom
Rosneft
Federal law on continental shelf by Garant (in Russian)