State Ups Financing for Geological Exploration
The Russian Ministry of Natural Resources has corrected its long-term geological exploration program, doubling its finances. The new version of the program, set in place until 2020, sees investment at 540 billion ruble. Although the largest share goes toward fossil fuel exploration, precious metals are getting twice, sometimes three times more than under the old plan.
On Monday the Minister of Natural Resources Yury Trutnev announced that his ministry would introduce a new program increasing the mineral and raw material base in Russia. “We are going to be increasing investment, and not just as a lump sum. We have enough experience to determine which projects are worth developing,” Trutnev said in an August interview.
The program would modify one made in 2004 concerning exploration for 2005-2020. “The program showed good results,” the minister explained. “In 2006 we explored more than we mined. This includes natural gas, oil, copper and gold. Still, some minor insufficiencies have appeared, including the gas pipeline running from Eastern Siberia to the Pacific Ocean. There are also problems with specific minerals like uranium and manganese.” If the plan is approved it will come into effect in 2010.
The program doubles the amount of financing in the current plan, bringing the total up to 504 billion rubles, including 2005-2007, (106% more than the present 260 billion rubles).
The sum is needed to resolve several issues that have appeared in 2005-2007, including incomplete compensation of reserve mining, insufficient exploration sites, low reserve liquidity, high monopolization. The program will encourage an estimated 225 trillion ruble value increase among Russian reserves. According to the plans drafters it would also increase income by 35-40% and create 250-300 new jobs and new industrial centers.
In absolute terms the oil sector looks like the winner of the most financing, the new plan giving an additional 85 billion rubles to the sector. Relatively speaking, however, it is only a 50% increase, which is the same increase for solid fuels. The Ministry explains that oil exploration has been intensive in the past few years and no longer corresponds to reserve growth.
The ministry has long been concerned that the East Siberian-Pacific Ocean lines would not have enough reserves. “We are not responsible for the pipelines. That is the Energy Ministry’s concern,” said Sergei Fyodorov, head of the state department of geology and mining. “But we are responsible for reserves. Our reserve growth rate is slowing. We do a good job of licensing, but companies are not opening the reserves and not meeting their drilling volume. Partly because they are afraid to invest the money,” he said.
“On the one hand, our reserves are not looking that bad,” Troika Dialogue Analyst Valery Nesterov said. “But companies are not opening new deposits… and those reserves are quickly being used up.” He feels the government should increase its investment in geological exploration. “It allows them to sell reserves rather than resources, which increases their value at an auction. Likewise the risks for the companies will decrease.”
Although 47% of the money under the new programs goes toward fossil fuels, special attention in the project is given to other resources. Funding for metal and diamond exploration will double to more than 65 billion rubles. Underground reservoir exploration will increase by 2.3 times to 10 billion rubles. Nonmetal exploration will get 7.5 billion rubles, more than tripling. Uranium exploration will get 37 billion rubles, an almost four-fold increase. The same is true for ferrous and non-ferrous metals, with an almost five-fold increase to 45 billion rubles.
This investment is not so much out of a problem with reserves as it is with developing the Far East and Eastern Siberia. As such, these regions are the largest recipients of funding. According to Fyodorov, this investment is necessary to keep people from leaving the regions.
The new program envisages new divisions such as explorations of cement deposits. “Because of the housing project we now have a shortage of building materials,” Trutnev explained. “We’re not saying that there’s a crisis. There’s plenty of cement, but we still need to search out new sources and auction them off. There should be a cement deposit next to every production center,” says Sergei Fyodorov. He added that the government and presidential apparatus already have a plan to distribute cement deposits. “Currently cement deposits belong to only a handful of players. We need to divide that up as quickly as possible if we don’t want prices to rise,” Fyodorov added.
In addition, about 22% of the budget goes toward regional geographic research, state geological information sources, scientific research and cartography. The program includes 15 billion rubles to explore the ocean shelf. Exploration can be beneficial to many parties: “Selling land use rights is a good source of income of the government,” says Yury Makarov, head of the Anglo-Ruso production company Aricom, adding that the better the owner knows the land the more effective the sale will be.
Natalya Skorlygina, Denis Rebrov, Dmitry Smirnov, Maria Cherkasova
All the Article in Russian as of Oct. 05, 2007
|
