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Oil drillers at attention along Russian border

It is today not in Norwegian interest to drill along the border to Russia, Johan Petter Barlindhaug argues.

”Norway should abstain from drilling in the areas immediately adjacent to the Russian border”, says Arctic oil expert Johan Petter Barlindhaug.

Irrespectively of the oil price, strained relations with Russia might put a stop to planned Norwegian drilling in the Barents Sea. According to Barlindhaug, a Norwegian analyst and businessman, drilling in the border areas could negatively affect the already strained east-west relations in the area.

Like most of Russia’s neighbors, Norway is highly alarmed by Moscow’s expansionist policies and has cut political bilateral cooperation to a minimum.

23rd License Round
The comments from Johan Petter Barlindhaug come as the 23rd Norwegian License Round is around the corner. In that license round, as many as 34 blocks are located in the waters bordering on Russia. Expectations from the oil companies have been significant, and a number of the world’s biggest companies have signalled interest. Among the license bidders are also Russian companies Rosneft and Lukoil.

Barlindhaug argues that the oil industry clearly must  move into the formerly disputed waters, but warns against entry into the areas immediately adjacent to the borderline, the areas where the chances of cross-border discoveries are imminent.

Norway and Russia have over many years developed a close energy cooperation, and companies Statoil and Rosneft have a comprehensive partnership agreement aimed at the Barents Sea. That agreement might now be put on ice, not only because of the low oil price, but also because of the political climate between the countries.

Formerly disputed waters
When Norway and Russia in 2010 signed the historical delimitation agreement for the Barents Sea, a 40-year old strain in bilateral relations vanished. At the same time, an area with a major hydrocarbon potentials became open to exploration.

The signing of the delimitation agreement for the Barents Sea in September 2011 boosted optimism about joint Norwegian-Russian energy development in formerly disputed waters.

Symptomatically, on the same day as the deal came into force, a Norwegian seismic vessel moved into the area to start mapping. Preliminary results of that mapping has made Norwegian authorities start talking about possible making of a new oil and gas province in the border areas.

The delimitation agreement in detail outlines procedures for drilling in the border areas and the steps needed to be taken in cases of cross-border discoveries. However, in the current political situation, any operation along the Russian border is increasingly deemed sensitive and abound with risks.

Arctic drilling
Both Gazprom and Rosneft have over the last years acquired dozens of licenses in Arctic waters, including in the the Barents Sea. However, according to Johan Petter Barlindhaug, the Russian oil companies appear no longer much interested in the Barents Sea. Instead, they are placing their bets on the Yamal Peninsula and the Kara Sea, where they have both gas and oil in abundance.

Despite its comprehensive partnerships in the Barents Sea with Statoil and Eni, oil major Rosneft now looks first of all towards the Kara Sea where it in 2014 discovered the major University-1 (Pobeda) field.

A significant Norwegian oil discovery along the border to Russia would inevitably re-engage Russian interest in the area.  In today’s situation, that re-engagement might not be in Norwegian interest.