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New federal policy on shelf leaves state companies in control

Rosneft and Gazprom are the winners in the new Russian shelf development programme. Photo: Gazprom.ru

After a fierce battle with Rosneft and Gazprom, the Russian government gives in. Non-state companies will not get any breakthrough in Russian Arctic waters.

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Tuesday’s meeting between the Government and the oil industry might have sealed the future of Russian oil and gas activities on the Arctic shelf. After massive pressure from the two state-controlled companies, the government withdraws several of its proposed measures on liberalization of the shelf regime.

The two companies are now highly likely to get the government’s blessing for their requested new licences to offshore Arctic fields. The new licenses will give the two state companies control over as much as 80 percent of the prospective parts of the Russian shelf.

As previously reported, Rosneft and Gazprom in late 2012 submitted to the Russian Mineral Agency respectively 12 and 17 new license bids.

However, also the two energy companies have had to make concessions. The government insisted that both Gazprom and Rosneft step up mapping and exploration and include a higher level of seismic works and exploration drilling in their license applications. Talking at the meeting, Minister of Natural Resources Sergei Donskoy underlined that the level of knowledge about the Russian Arctic shelf today is ”extremely low”.

Pushed by the Government, Rosneft just hours before Tuesday’s meeting handed in a revised and more ambitious exploration plan for its new license applications. The plan meets the government’s minimum requirement for 2D seismic works of 0,35 lineal km per 1 square km of water, a transcript from the meeting reads.

However, the two companies seem to have successfully resisted the government’s intention to give also non-state companies access the shelf. The new programme leaves the state companies in full control of developments. Like before, they will have the exclusive right to get offshore Arctic licenses.

The programme opens the door for non-state companies only in the licenses which have been abandoned by Gazprom and Rosneft.

Like before, foreign companies will be admitted to the shelf only in junior partnerships with the two Russian companies. According to Minister Donskoy, foreign companies will also face less favourable tax regulations than the ones applied for the Russian companies.

This week’s meeting did clarify a number of key issues. However, Deputy Premier Dvorkovich in a press conference admits that several troublesome and conflicting points remain to be handled.

As previously reported by BarentsObserver, Prime Minister Dmitry Medvedev in August commissioned his deputy Arkady Dvorovich with the elaboration of a revised federal shelf development programme. The new version of the programme, drafted by the Ministry of Natural Resources, was originally to be approved late 2012. However conflicting interests between the involved parts have repeatedly delayed the process. The new development programme comes as President Putin on 3 January 2013 signed a new Law on the Continental Shelf.