Showing posts with label Rosneft. Show all posts
Showing posts with label Rosneft. Show all posts





Ukraine Crisis and the Arctic: Penalties or Reconciliation?
By Andreas Østhagen, April 30, 2014



Canada’s recent decision to boycott an Arctic Council task force meeting held in Moscow is a direct example of how the Ukraine conflict is starting to impact Arctic cooperation. Given its prominent position in the Arctic, however, Russia is integral to most schemes for the region’s future development. As vocalized by both former US Secretary of State, Clinton, and the current Prime Minister of Iceland, Gunnlaugsson, the Ukraine crisis might have a severe and unintended impact on Arctic cooperation [1].

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The impact of the events in Ukraine for Arctic cooperation will be neither straight forward nor harmonized across the region. Instead it will vary according to the interests of the different Arctic states. They could decide to use the Arctic as an arena for penalizing Russia further or use it to engage Russia in dialogue. Currently, officials dealing with Arctic affairs are asking themselves what exactly these consequences will be, deciding whether to take further action (like Canada) or issue warnings (like Iceland).

Economic Development

First, the immediate and direct impact of decisions taken outside of an Arctic context could hamper Russia’s strongest interest in the Arctic, namely economic development. Sanctions put in place by the European Union and the United States have the potential to affect the multitude of European and American companies engaged in developing the vast resource potential in the Yamal, Nenets and Kara Sea regions. Highlighting this, on April 28 sanctions were put in place by the US on Rosneft’s president, Igor Sechin [2].

This summer ExxonMobil alone is scheduled to conduct some of the most expensive exploratory drillings in the history of offshore oil and gas development in the Kara Sea through its joint venture with Rosneft [3]. BP is similarly dependent on Rosneft after TNK-BP was incorporated into the Russian oil giant in 2013, leaving BP with 19.5 percent of Rosneft’s shares [4]. Should further sanctions be put in place limiting western companies dealings with Russian energy companies, from either the Russian or the EU/US side, Arctic economic development in Russia will take a hit.

Cancelling Cooperation

In terms of direct cooperation in the Arctic sphere, exclusion of Russia or the boycotting of various Arctic meetings by one or several of the Arctic states have the potential to derail the relatively well-established modes of collaboration that have developed in the Arctic. Canada’s decision not to attend the Arctic Council task force meeting in Moscow last week is a minor, but still significant symbol of how Arctic cooperation is affected by the international crisis further south [5].

Similarly, Russian officials were not invited to take part in a pre-meeting to the North Atlantic Coast Guard Forum in Sydney, Novia Scotia on March 31, where the establishment of an Arctic Coast Guard Forum was discussed. The planned Northern Chiefs of Defence (CHODs) meeting scheduled for June in Iceland seems likely to be postponed as well, as could be expected. The Northern CHODs forum is one of the few arenas, in addition to the Arctic Security Forces Roundtable, where all the Arctic states convene to discuss hard security matters. Consequently several of the informal and formal arenas where civilian and military issues in the Arctic are discussed are put on hold.

Various Interests
Yet, Russia’s participation in the high level Senior Arctic Officials (SAO) meeting under the Canadian chairmanship in Yellowknife on March 25-27 proceeded as planned. In the Arctic Coast Guard Forum meeting it was also pointed out that any coast guard forum for the Arctic without the Russians present would prove futile, given Russia’s predominant role in Arctic maritime matters. For the United States and the Scandinavian countries such an approach seems only logical, given adjacent maritime borders that involve shared fish stocks and natural resource deposits. This highlights the importance of maintaining a working relationship with Russia on specific issues for some of the Arctic states, albeit these interests vary amongst the Arctic countries.

For decades Norway’s collaboration with Russia on the joint management of fish stocks in the Barents Sea has been promoted as a model for dealing with Russia on a sensitive topic that entails both a civilian and a military dimension [6]. Similarly, the 2010 maritime delimitation agreement was highly motivated by a desire in both countries to develop potential petroleum resources in the former disputed maritime area. Related cooperation between Russia and Norway has expanded since [7].

Although Sweden and Finland do not share a maritime border with Russia, Finland in particular has an extensive land boundary and is dependent on a rational working relationship with its larger neighbor. Just in terms of border crossings, Finland issued 1.3 million visas to Russia in 2013, a third of all Schengen entry visas going to Russia, according to the BarentsObserver [8]. As argued by Finland’s Minister for European Affairs and Foreign Trade, Stubb, Finland is heavily dependent on Russia’s economic trajectory and the consequences of the Ukraine crisis might be severe for the Finnish economy [9].

In the Bering Sea the US and Russia have a long standing collaboration on research and management of fish stocks, in particular with regards to the Alaskan Pollock [10]. For the last 19 years Russia and the US have worked together in this maritime area, and as ship traffic is increasing, the need for collaboration is only set to increase [11]. Combatting illegal, unreported, and unregulated (IUU) fishing in the area has already been stated as one of the main goals in the US’ Arctic Implementation Plan from January 2014 [12]. Also, as most vessels frequenting the Bering Sea are fishing boats, the potential northern movement of fish stocks due to temperature increases as seen in the North Atlantic will force the vessels to move further north and demand even greater coordination and collaboration between Russian and US coast guards, similar to what has developed in the Barents Sea.

Russia’s Primacy in the Arctic

The different Arctic states all have their own «special» relationships with Russia, with varying degrees of interdependency and collaboration. Related, it is less counterproductive to Canada’s Arctic interests to take a strong stance towards Russia than it is for some of the Scandinavian countries. The seven Arctic states excluding Russia also do not form any cohesive block against Russia, in part due to the fact that membership in international organizations vary between NATO and the EU (5 NATO members and 3 EU members – only Denmark overlaps).

Yet, coordinated efforts to exclude Russia from specific Arctic forums have been – and will probably continue to be – put in place. We should, however, not forget that Russia is the largest of all the Arctic actors, measured in everything from population to economic activity and resource potential. Efforts to deal with environmental pollution, search and rescue, and common standards in the Arctic have also been developed with a lowest common denominator approach, depending on all the Arctic states engaging and signing up to the agreements. Therefore, having Russia onboard on Arctic-related agreements is not only preferable, but also essential to ensure a responsible development in the Arctic.

Conclusion – An Arena for Penalties or Reconciliation?

In sum, Russia is dependent on a positive Arctic development, while the country is also integral to most of the development in the region. The other Arctic states undoubtedly have an obligation to act on proceedings in Ukraine, yet on a lower working level many of them are heavily dependent on continuing business as usual in various areas where Russia constitutes an essential partner. Therefore, the somewhat inconsistent responses with regards to various Arctic domains are likely set to continue.

In previous periods of high tension between Russia and the west, the Arctic has actually served as a theatre for continued cooperation. A good example of this is the 2008 Georgia crisis where collaboration in the Arctic was almost unscathed, arguably also serving as an arena for normalizing relationships as the crisis ended. What role will the Arctic have this time around? That depends on the extent to which Russia will continue to paint itself into a corner, and whether the other Arctic states choose to use the region as an arena for penalties or reconciliation.




[6] See for example Hønneland, Geir (2007), “International Cooperation and Arctic Governance: Regime Effectiveness and Arctic Governance”, London & New York: Routledge.



The Arctic This Week: News for May 19 - May 25, 2012




by Tom Fries Arctic News May 19 - 25, 2012

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Thanks for joining us this week! We take the time to pick out the most interesting stories, the best writing and the developing patterns in Arctic issues. If you like what you read, please share it with others. Your feedback and comments are always welcome; feel free to contact the author directly. All opinions and any mistakes are the author’s own.

The author is on travel this week, and this week's news is focused just on the best reads and the most compelling stories.

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Gazprom announced earlier this week, in the vaguest of language, that the Shtokman consortium might be headed for a change in its composition (Chicago Tribune). Initial buzz was that Total might be heading for the exits (Reuters, BN), but as of Friday it looked more as though Statoil is considering a graceful departure, and that Shell might be interested in stepping in in  its place (Reuters).

The Russian gas giant is meanwhile trying to make up for dwindling output by aggressively increasing its infrastructure investment program (BusinessWeek), which is not great for short-term profit but almost certainly an intelligent move for the long term. Newly-appointed Rosneft head Igor Sechin is also emphasizing that company’s Arctic initiatives in his discussions with the government (BO), while Mikhail Grigoriev stated quite publicly that the platforms intended for drilling in the Arctic are unsafe in almost countless ways (BO).

Rosneft this week also found itself part of a select coterie of companies listed for “strategic” status by the Russian government, a group which included RusHydro and the Federal Grid Company (RIAN).

On the other side of the pond, the Globe and Mail provided a good read on Canada’s upcoming auction of further licenses in its own Arctic offshore, including some great infographics. While companies are getting ready for the auction, Swedish Foreign Minister Carl Bildt expressed his skepticism that the Arctic “oil boom” will explode as quickly as people seem to think (G&M), and Michael Byers produced yet more excellent analysis suggesting that a shipping choke point between the Aleutian Islands is a likely spot for a next near-inevitable massive spill (Seattle Times). Minister Bildt’s speech at Carleton University is available online via the Swedish government, and it’s worth the read primarily for the four “key areas for further work” that he sees for the Arctic Council.

Google announced plans to track what appears to be most surface military maritime traffic underway all around the world, and publish it via Google Maps. This I find a little frightening, just because it bespeaks a whole legion of things that Google can probably do that I don’t know about. Also because the Daily Mail seems to indicate that this was achieved with expenditures of $3mn on satellites…$3mn seems like a bargain price for this kind of access to information. Meanwhile, NOAA released a new map of waters surrounding a key northwestern Alaska port, Kotzebue, and the efforts to support that mapping are a good illustrator of exactly how underwhelming our data sets in the Arctic remain (Juneau Empire).

Ground Truth Trekking has released an interactive-ish map of all (most?) of the mining projects currently operational, under prospect, or abandoned in Alaska. Incredibly interesting and fun to play with. Thanks, folks. And thanks to Eye on the Arctic for pointing it out and providing some short analysis. This week also saw discussion of the devolution of power over natural-resource questions from Canada’s federal government to Nunavut (National Post), an issue illustrated also by a great analytical piece from Anthony Speca, via the Institute for Research on Public Policy. An appropriately wonky but nice piece on the appointment of the negotiators for the devolution process was provided by Northern Public Affairs. The Walrus Blog features a good piece offering perspective on the mechanics of territorial vs provincial status in Canada, the devolution process, and whither the territories might be going.

Unalaska is considering rezoning of tidelands to accommodate an expected oil boom, whenever that may come (Dutch Harbor Fisherman). The town’s debate about the proposal puts a microscope to the hard-fought battles between oil companies and their adversaries over even the smallest issues. The Atlantic this week also covered the issue of fisheries and the “tragedy of the commons” with a guest post from Jonathan Adler. Mr. Adler suggests the  implementation of property rights-based management systems as a solution, which – if I understand correctly – is the system under which the Bering Sea snow crab stock is managed. The rebound of that stock was covered in last week’s news.

Senator John Kerry is, so the news says, behind a new push to get the US Senate to ratify the UN Convention on the Law of the Sea, which has been seen in some conservative quarters as a threat to US sovereignty (AD), but as this vote will likely be controversial in the States, Senator Kerry has suggested that any vote will need to wait until after the November election (The Hill).

Some fascinating articles in Arctic science this week:

In another ecological slow-motion car crash that we will all have to watch, the Mountain Pine Beetle is moving ever close to Yukon, having already wrought massive damage across British Columbia (Eye on the Arctic).

Sediment has been collecting at the bottom of an impact-crater lake in Siberia for, apparently, 3.6 million years. Core samples of the sediment which, at its thickest, runs to 1,312 feet are being shipped to Germany for analysis (Frontier Scientists).

Here’s something you haven’t thought about before: fungi that are pathogenic for insects. Considering what an enormous role fungi and lichens play in Arctic ecosystems, this could be really important even though it seems like a tiny scientific cul-de-sac (arthropodecology.com).

There was continued buzz about methane release out of thawing permafrost in the Arctic (NYTimes blog, Wired), including an insane video showing the researchers “flaring” the methane gas straight of the ice. Nutty.

We also read that Siberia’s massive Arctic rivers are looking increasingly as though they are the undiscovered culprits behind high concentrations of mercury found in marine Arctic fauna (phys.org).

Other assorted stories worth your time from this week’s output:

It’s juvenile to be so enchanted with the notion of a hovercraft doing seismic surveying for Norway, but I am. Norway’s Sabvabaa, as part of the 2012 Fram mission, will be doing mapping of the Lomonosov ridge. In light of the comparative costs and fuel usage described in this article from Upstream Online, it’s difficult to understand why hovercraft aren’t more frequently used for such work.

Russia celebrated its victory over Slovakia in the world hockey championships in Finland. For those of you in Washington, DC, you can see Alexander Ovechkin’s distinct gap-toothed grin smack-dab in the middle of one of the photos (RIAN).

Eye on the Arctic offered a really thoughtful and detailed piece about the tensions that exist within a long-standing United States program to support businesses owned by Alaska Native, American Indian and Native Hawaiian corporations. It highlights that most eternal challenge: getting people to act in concert with the spirit – rather than just the letter – of the law.

And, via Etsy, a  well-crafted video of Sylvester Ayek, an Inupiat elder who has carved out a fascinating combination of modern and traditional living.

Last and, in fact, least, this week in Sweden featured a daring rescue of…a beaver (The Local).



Cairn Energy Abandons Second Well on West Coast of Greenland






by Malte Humpert Cairn Energy, an Edinburgh-based oil and gas explorer, announced that it is abandoning its Gamma-1 exploration well off the west coast of Greenland. The failure to find oil or gas represents the second setback for Cairn this year. It also drew a blank at its southern well LF7-1 and suspended work on its AT7-1 well. Furthermore, equipment used on what was thought to be its most promising well, Delta 1, is scheduled to move further south to complete drilling operations at AT7-1, after Delta-1 "encountered several hundred meters of tertiary volcanic section" and shows only minor hydrocarbon indications. In total Cairn plans to drill five wells in the Arctic this summer.

Cairn, which is investing around $600 million this year into its Arctic drilling operations, is leading the charge into offshore oil exploration in Greenland. Even prior to the latest setbacks the company announced that it hopes to bring in a partner to help with its Greenland operation. Exxon Mobil, Husky Energy, and Chevron also have plans to begin drilling above the Arctic Circle.

The Scottish oil and gas explorer started exploration in the Arctic during the summer of 2010 but failed to find oil or gas during the narrow three-month window when weather conditions in the harsh Arctic environment allow for operations to take place.


In addition to representing a significant capital investment, Cairn's Arctic operation has been the target of extensive protests by environmentalists, primarily Greenpeace, which may lead to irreversible damage to Cairn's reputation. Environmental activists managed to board the company's drilling equipment during the summer of 2010 and 2011 to highlight their opposition to drilling operations in the fragile Arctic ecosystem. Greenpeace argues that even a minor oil spill would have devastating consequences and would be impossible to clean up due to a lack of infrastructure and equipment above the Arctic Circle.

Cairn's Arctic operations serve as an example of the continued challenges future oil and gas exploration in the High North will face. Despite continued melting of sea ice and strong climatic warming in the Arctic working conditions will remain challenging even during the short summer season. The high capital costs of developing a field in the extreme Arctic environment far removed from existing infrastructure and consumers may continue to represent a key obstacle for an Arctic exploration bonanza to materialize in the near future. The development of the Shtokman field in Russia's part of the Barents Sea has been delayed since 2006 and was postponed by another 3 years in February 2010.

Exxon Mobil's deal with Russia's largest oil producer OAO Rosneft earlier this month exemplifies the vast capital investments necessary to develop offshore oil and gas resources in the Arctic. According to Prime Minister Putin the total investments envisioned under the agreement could reach $500 billion, of which $200-300 billion would be direct investments in the region.


ExxonMobil Gains Access to Arctic Oil and Gas Reserves in Deal with Rosneft





by Malte Humpert Exxon Mobil, the world's largest company, and OAO Rosneft, Russia's largest oil producer, signed a deal to develop oil and natural gas reserves in the Russian Arctic. The two companies plan to invest an initial $3.2 billion developing East Prinovozemelsky Blocks 1, 2, and 3 in the Kara Sea. 

The total investments envisioned under the agreement could reach $500 billion, of which $200-300 billion would be direct investments in the region. According to Prime Minister Putin "new horizons are opening up. One of the world's leading companies, ExxonMobil, is starting to work on Russia's strategic shelf and deepwater continental shelf." He ensured full support of the Russian government and welcomed the Texas-based company as a "reliable, strategic, and good partner." 

The plan appears to supersede a now-defunct partnership between Rosneft and BP. The British oil company's attempt to gain access to the Arctic through its joint venture TNK-BP was blocked by stakeholders earlier this year. 

As part of the deal Rosnet will be granted access to some of the Exxon's American assets and gain experience in deep-water exploration and the extraction of shale gas. Exxon's expertise in developing unconventional natural gas reserves may have played a crucial role in getting access to the Arctic. Exxon acquired XTO Energy, the largest producer of natural gas in the U.S., for $31 billion in 2009 and gained access to the company's formidable expertise and experience in hydraulic fracturing, a process used to extract shale gas out of tight rock formations. 

A number of leading oil companies have been vying to gain access to yet untouched oil and gas reserves in the Arctic as access to reserves in the Middle East, e.g. in Saudi Arabia, has been getting harder for foreign oil companies and few easy to exploit hydrocarbon reserves remain. 


The Kara Sea, where the two companies will begin exploration, may hold as much as 100 billion barrels of oil equivalent. This part of the Arctic Ocean has become the focus of attention as sea ice continues to recede earlier during the year allowing for less challenging drilling operations. 

Despite the rapid melting of sea ice, however, conditions vary starkly from year to year and oil and gas platforms across the High North are built to withstand significant ice flows. Rosneft has been developing the Prirazlomnaya Offshore Ice-Resistant Fixed Platform (OIRFP) and expects to need at least a dozen such platforms by 2030.