It is expedient to expand access to shelf in order to enhance the competitive pressure on state-owned companies

23 april 2015 | ""

The Government proposes to amend the existing law "On Subsoil" to allow private companies, including foreign, produce oil and gas in the Arctic shelf area. It is expected that private companies will obtain shelf exploration licenses followed by a guaranteed right for extraction. "Rosneft", which recently has asked the state another trillion rubles (otherwise they
will have to slow down projects which are the most important for the country), is strongly opposed to the help of private companies.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

Alexander Kurdin, the Head of the Department for Strategic Studies in Energy of the Analytical Center, commented on the situation to "". The expert considers the idea of ​​access of private companies to develop shelf fields to be right.

"There is nothing wrong with giving the access to shelf fields to a wide range of investors", said Mr. Kurdin. "Especially in current difficult conditions of restrictions on investment from abroad. As we know, our major oil and gas companies face these restrictions. And even if sanctions are not imposed or imposed on someone in a lesser extent, problems still occur. So now this access is reasonable."

The state should control access to the shelf, considers the expert. "Environmental aspects are rather complex, there are also Russia's strategic interests", says the expert. "Therefore, the regulation should be  more stringent. However, the very attraction of investments, the participation of foreign companies in projects, primarily to involve funds and technology, seem reasonable to me."

Nevertheless, the public "Rosneft" dissatisfaction is understandable, according to him. From the point of view of the public interest, too. "All companies have their own interests in having alone as many own stocks in their balance sheet as possible", said Mr. Kurdin. "The company's market capitalization depends on assets that the company reserves on its balance sheet. For instance, if the "Rosneft" has a lot of stock, if it possesses a large part of the shelf, it will be valued higher in change. And it will be easier and more profitable for the State to privatize a package of its shares, which, strictly speaking, is planned to be done. This aspect is also present."

And yet, giving access to the shelf for private companies is mostly good, points out the expert. "If we talk not about prospects of privatization of the "Rosneft" company but about  prospects of oil production in the country, the access still seems to be a more preferred option", said Mr. Kurdin.

The strategic benefit from competition on the shelf, according to the expert, will be received by both the state and "Rosneft". "It is very bad, if a company does not have the necessary technological reserve, if the company is not engaged in the necessary research, development, exploration", said Mr. Kurdin. And it is just advisable to carry out the expansion of access to the shelf in order to intensify competitive pressure on state-owned companies."