http://en.rian.ru/valdai_op/20110118/162187598.html
08:47 18/01/2011
The Arctic, along with the Antarctic, is the last region in the world that has remained untouched and intact. The Russian companies are entering international markets, but they need to be prudent when it comes to environmental issues in the Arctic.
The Arctic, along with the Antarctic, is the last region in the world that has remained untouched and intact. The Russian companies are entering international markets, but they need to be prudent when it comes to environmental issues in the Arctic.
Valdaiclub.com interview with Leonid Grigoryev, Professor, The Higher School of Economics (HSE), Moscow, Russia.
The share swap between BP and Rosneft is only part of the deal. The companies have also agreed to jointly develop oil fields in three segments of Russia`s Arctic shelf. How do you see the prospects for cooperation between these major oil producers in the region?
The commercial use of Arctic resources is a problem with three aspects. The first is the legal aspect - the question of who is legally allowed to operate in the Arctic. Russia and Norway have divided the continental shelf 50/50. This removed the limits on developing fields in this area, making it easier for companies to operate here in the future.
The second aspect is economic necessity. Oil production in the Arctic is very expensive, and there are areas where oil can be produced at a lower cost. There are Norwegian rigs nearby, and Norway has considerable experience drilling in such areas. More to the point, these rigs are located closer to the main markets for oil products. So it`s clear why companies want to develop oil fields in the Arctic.
Furthermore, an oil company in this strategically important region is required under law to operate in tandem with an authorized Russian company. BP would not be able to do business here without the state-run company Rosneft.
BP needs to make up for the consequences of the disaster in the Gulf of Mexico. All the blame for the spill was unfairly pinned on the company, and it had to swallow greater losses than it should have. To pay the damages caused by the accident, BP had to sell a part of its assets, and now the company needs to build them up in order to show that it`s resilient. That`s why BP needs this deal.
Rosneft, for its part, will gain access to new technology through this deal. It will have a chance to work on projects that it could not otherwise handle on its own. So, both companies stand to benefit greatly from this deal.
But then there is the third aspect, the threat to the environment. Harsh criticism can be expected from the public and environmentalists around the world, including in Russia. No one has a problem with natural gas production in the Arctic, but ever since the disaster in the Gulf of Mexico, environmentalists have been calling for extreme caution when developing oil fields in this region.
The problem is that there is no technology to clean up an oil spill in the cold water and climate of the Arctic. The oil spill in Alaska over 20 years ago still hasn`t been cleaned up, and the ecosystem there still hasn`t recovered.
This is why environmentalists are demanding tough preemptive legislation that would make oil producers responsible for spills. It`s not about developing the technology to clean up oil spills; it`s about completely eliminating a possibility of an oil spill. Without this legislation, we will run into conflict with environmental activists who have the support of the public.
The Arctic, along with the Antarctic, is the last region in the world that has remained untouched and intact. Environmental protection will be a serious issue for the companies doing business here. It will be impossible to drill in the Arctic without strong legislation and effective technology.
It`s good that drilling will start sometime in the next five to ten years. In five years we`ll probably have the legislation and in ten years the technology, if there is consistent work in this direction. I`m pinning my hopes on BP in this respect, since a repeat of the spill in the Gulf of Mexico in the Arctic would be disastrous for the company`s reputation and business. Hopefully, BP has the instinct for self-preservation.
Will Rosneft be included in BP`s international projects? What are the prospects for their joint participation in oil programs in third-party countries?
This deal is very beneficial for both parties. It`s not an agreement for the Arctic only. In essence, we are giving BP access to this region, while Rosneft is receiving access to other BP projects. This is a very sound move, as Russian companies need to cooperate with international partners and to participate in more projects.
Russian energy companies gain valuable experience through international cooperation. This is what will make them full members of the industry on par with accomplished players in the hydrocarbons market. It`s good that Russian companies are entering international markets, but they need to be prudent when it comes to environmental issues in the Arctic.
© 2010 RIA Novosti
