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May 30, 2008
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Arctic Ocean Prospects
You can only hail the conference of the five Arctic powers in Greenland and the commitments made there. Common sense prevailed when addressing the sensitive issue of rights to the Arctic Ocean area and, whats even of greater significance, the minerals of that zone. Its important that the participants of the meeting agreed to follow the UN legal procedure and the principles of regulated mechanisms in case it comes to controversy.
It can be called a sober reply to the pure hype like the expensive expeditions with a sole goal of sticking a national flag at the bottom of the Arctic Ocean at the North pole. At the same time, unfortunately, true geological research of the maritime continuation of the Siberian basement hasnt given substantial evidence in support of Russias claims on the zone. At least Russian arguments are rendered insufficient with the UN Committee for Continental Shelf.

So far you cannot adequately estimate the Arctic Oceans oil deposits. Seismic shots that you can trust have been taken and studied only at the Barents Sea area and a part of the Kara Sea. It need be pointed out that no mining has been carried out at the majority of the fields discovered. And anything else is mere speculation.

It need also be emphasized that oil companies as well as the Russian Ministry for Natural Resources should threat the potential of the Arctic shelf like those organizing ice-breaker voyages to the Pole. You can only take account of the deposits you can explore within Russias 200-mile economic zone, whereas assessments of the territory beyond the zone havent been taken into consideration.

According to the Ministry for Natural Resources, in the Russian area of water proper (the Barents Sea, the Pechora Sea, the Kara Sea, the East Siberian Sea, the Chukchi Sea and the Laptev Sea), oil deposits are estimated to amount to 418 mln tons, and those deposits that havent been explored yet to 9.24 bln tons. As to gas, the figures are 7.7 trln and 88.3 trln cubic meters correspondingly. Apparently, you should keep these figures in mind.

The problem is that according to a rough estimate of experts with Rosneft for example, exploring and proving oil deposits will require 12.7 trln roubles throughout the year 2030, and mining another 39.8 bln roubles. No budget provides for allocating that sum of money. You should also understand that neither Gazprom nor Rosneft have the experience of working at the Arctic shelf.

Moreover, Gazprom calculated that production cost of 1.000 cubic meters of gas at the Yamal peninsula equals to $91 compared with $7-10 at older large gas fields that the monopoly inherited from the Soviet Union. As to the Arctic shelf, these figures may double, or even triple. So, mining will be efficient only if energy carriers prices go up, which is hard to imagine now.

To conclude with, diplomats have a plenty of time. And you shouldnt pay much attention to those with national flags.
Mikhail Krutikhin, Partner and Analyst with the RusEnergy consultancy

All the Article in Russian as of May 30, 2008

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