On Russian shelf, a battle for control

In the debate about Russian shelf development, powerful interests pull in different directions. Photo:

While the government is getting ready to let in private companies, state-owned Rosneft is fighting for its exclusive monopoly position.


The slow pace on Russian Arctic shelf exploration is adding pressure on Rosneft and Gazprom, the two state-controlled companies with monopoly rights in Arctic waters. The Russian Minister of Natural Resources Sergei Donskoi now proposes to give private companies drilling licenses on the shelf without tenders in order to step up the level of offshore exploration. His view is strongly disputed by Rosneft President Igor Sechin, who in a recent letter to Prime Minister Dmitry Medvedev underlined that the opening of the shelf to private companies will “give losses to the state treasury and the economy as a whole”.

“As owner of the shelf and main shareholder of the companies [Gazprom and Rosneft], the state is directly participating in the generation of values and has an obvious interest in the revenues from shelf development,” the letter obtained by newspaper Izvestia reads. 

In this ongoing battle of conflicting interests, Rosneft and Gazprom, two long-time rivals, are joining forces. A cooperation agreement sign on 21 September commits the two state-controlled companies to join efforts in offshore exploration and resource exploitation, as well as in the development and use of Arctic offshore infrastructure.

Rosneft and Gazprom reportedly already controls 41 percent of Russia’s offshore energy resources. It is the question of control over the remaining 59 percent which is now on the table.

The development of the shelf will be subject in an upcoming government session, reportedly due October 1. As previously reported, Prime Minister Dmitry Medvedev in a meeting on 2 August announced that a new law on the issue is in the pipeline and hinted that it will include tax breaks and better conditions for private companies.

The proposal from Minister Donskoi includes a major liberalization of the current regulations on shelf exploration, according to which only Rosneft and Gazprom are entitled to operate. At the same time, Donskoi want to preserve an exclusive position of the two state-controlled companies when it comes to offshore production. In case the private explorers discover oil and gas, the two energy giants will be entitled to get 51 percent of the licenses, Izvestia reports.

The proposed liberalization of the shelf regulations has the support also from the Ministry of Energy. As recently reported, Minister of Energy Aleksandr Novak this month confirmed that a major energy project marketing campaign is about to unfold, which has as an objective to attract as much as $1 trillion of foreign investments by year 2020. The projects in question will first of all be in Eastern Siberia and on the shelf.