Summary
Sergey Donskoi, deputy resources minister said that the nation is preparing economic incentives to stimulate exploration in the region. Arctic operations requires modern technology and financial resources. Arctic work to date is limited to OAO Gazprom and OAO Rosneft, both state-controlled. Gazprom is working with Total and StatoilHydro to develop the huge Shtokman gas condensate field in the Barents Sea. Lower credit rates will be one of the incentives.
Analysis
The Arctic is considered to be a natural gas-gas condensate prone region. Most of the far northern Norwegian discoveries are in this category. For the world at large, development of more natural gas and gas-condensate is the way to go. Natural gas is the most ecological friendly fuel on earth. The international majors have exactly the skills and financial resources that Russia seeks. More importantly, the government is now quite comfortable working with them. In vast Mother Russia, somewhere,most of the majors are at work. This is a case where Russian energy policy meshes exactly with the needs of the majors to reinforce their positions as the most efficient and least expensive providers of clean-burning energy. Even with the existing low-price natural gas environment that exists today, the majors will move ahead at a pace such that when the gas is needed some five years hence, they will be in position to produce it. Concerns about peak production of black oil will moderate significantly as the move to natural gas gains even more momentum than it has had for a decade.
Michael Lynch consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
