Every effort should be made to draw investments to the continental shelf

25 june 2015

The Analytical Center held a round table on the terms and conditions for the access by state and private oil and gas corporations to oil and gas fields in the continental shelf.

At the round table experts discussed ways to liberalize access by private oil and gas companies, including foreign ones, to oil and gas deposits in the continental shelf of Russia as well as possible mechanisms for organizing exploration and development in the continental shelf that would attract investment.

Opening the round table, the Head of the Department for Strategic Studies in Energy at the Analytical Center Alexander Kurdin reminded those present that in the spring of 2015 the Russia’s Ministry for Natural Resources submitted proposals to the Russian Government on ways to review the existing restrictions on access by non-state corporations to deposits in the continental shelf. These proposals are to be reviewed in the near future. “The authors of the proposals believe that if private companies are allowed access to the continental shelf, the quality of the geological and geophysical exploration being carried out on the shelf will improve, replenishment of available sources of resources will be expanded and new exploration and development infrastructure will be built,” the expert said. At the same time, questions remain about whether private companies have the requisite capabilities to develop deposits on the continental shelf and what criteria should be used to give them access to the shelf, Mr. Kurdin added.

The Head of the Centre for Monitoring and Audit of the Committee for Energy Policy and Energy Efficiency of the Russian Union of Entrepreneurs and Industrialists Artem Plaksin offered 14 pros and 1 con of granting access to the continental shelf to state and private companies. “The con has existed since 2008 when restrictions were imposed for Russian private oil companies, on the grounds that it could pose a potential threat to the country’s defense capability and state security but nobody’s been able to say what that threat is,” the specialist summed up. On the other hand, if Russian private companies were given access to the shelf, investments in exploration and assessment of oil and gas fields on the shelf would increase and we would have more information about what resources we have available on the continental shelf, Mr. Plaksin believes. In addition, such access could serve as an adequate response of our state to the American policy of containment it has been pursuing against Russia and the western sanctions against the Russian fuel and energy sector, the specialist noted.

The Director of the Department for State Policy and Regulation in Geology and Use of Natural Resource of the Russian Ministry for Natural Resources Aleksey Orel said that the Ministry for Natural Resources is suggesting opening the continental shelf to service companies. “We are talking about companies that will use their own vessels for exploration, they will get geological information, which they are going to be required to share with the state and which they will be able to sell to a broad range of interested parties,” the specialist said. According to him, this mechanism is based on the so called multi-client exploration that is wildly used abroad. “When the state offers access to an unexplored territory, nobody can predict its value, this results in sunk costs either on the part of the investor or on the part of the state, but in this manner the value of these territories can be assessed,” Mr. Orel believes.

In conclusion the specialists noted that every effort should be made to attract investments to the shelf because at the moment the rate of exploration is very low there. At the same time the experts believe that an integrated approach should be used to tackle this issue.