Moscow mulls Norwegian model for Arctic shelf

The government wants a liberalization on the shelf. Rosneft and Gazprom wants it otherwise.

The government proposes the adoption of a Norwegian-style license model for the shelf, but encounters fierce protest from state companies Rosneft and Gazprom.


As western sanctions, low oil prices and the Russian economic downturn are putting offshore Arctic exploration on ice, the country’s government seeks ways to revitalize shelf activities.

In a letter submitted to government, the Ministry of Natural Resources proposes to liberalize the system of offshore licenses. The ministry wants shelf developers to join forces in project consortia, which can include also foreign companies. In addition, licenses should be split into two different types - on seismic mapping on the one hand and project development on the other, the ministry confirms.

The proposals, which have been harmonized with the Ministry of Energy and Ministry of Economic Development, were handed over to government this week, newspaper Vedomosti reports.

Sergey Donskoy and his Ministry of Natural Resources is repeatedly fighting with monopolist companies Gazprom and Rosneft.

“The consortia will be created under the guidance of the state and there will be conducted a pre-qualification of the stakeholders, which must be approved by the government”, Minister Sergey Donskoy says to Interfax. “The consortia do not necessarily need to include a state company”, he adds.

Donskoy admits that the proposed model bears reseblance with the Norwegian system, which is based smaller licenses distributed among a great number of companies.

The proposals are perceived with major skepticism by state companies Rosneft and Gazprom, which the last years have had a monopoly position on the shelf. In a statement, Rosneft argues that the current system “protects the Russian state interests on the shelf”, Tass reports. The company openly indicates that Minister Donskoy has a biased relationship with private company Lukoil.

“Is this a liberalization? No, this not a liberalization at all”, company representative Mikhail Leontiev argues. “The bill from the ministry is only made to support the access to the shelf of Lukoil and Rosgeologia”, he adds, Vedomosti reports.

The two state companies Rosneft and Gazprom today have a monopoly position on the Russian shelf, and the companies’ licenses are abundant. Rosneft reportedly now controls a total of 51 shelf licenses while Gazprom has 40.

Rosneft will not drill in the Kara Sea in 2015. Last year, the West Alpha rig drilled a historical well in the area.

Meanwhile, the two companies are in major troubles with the followup of their license obligations. According to the Ministry of Natural Resources, Rosneft and Gazprom have obligations, which include geological exploration worth up to $50 million before year 2020.

That will be extremely difficult for the two companies to fulfill. Following the current crisis, Rosneft has already informed that it is postponing this year’s planned drilling in the Kara Sea. A similar drill stop could unfold also in the Barents Sea and Pechora Sea.

To a great extend, the fight between the government and the two state companies is a re-run from a similar conflict in 2012. Then, Rosneft was clearly the winner and got its will. Today, the situation is quite another one and the government might finally be able to get it right.