Wednesday, May 22, 2024
 
 

Despite low oil prices, Russia makes fresh Arctic bid

Given western sanctions and low oil prices, Russia is unlikely to carry out exploration in the Arctic for now

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Russia has reportedly submitted to the United Nations an updated bid for the extension of the continental shelf in the Arctic Ocean. Russian Minister of Natural Resources and Environment Sergey Donskoy held the presentation for the members of the UN Commission, Russian media reported.

Earlier, the UN Commission rejected Russia’s bid due to the lack of information in official documents. “The new bid presents the same area, although with a number of modifications – in connection with new substantiating materials that confirmed Russia’s correct position,” Pravda quoted Donskoy as saying during the presentation, noting that the preparation of the materials for the new application continued for more than 10 years, including extensive research in the Arctic Ocean to study the geological nature of the Mendeleev and Lomonosov ridges, which are claimed by Russia.

“From 2002 to 2014, nine unique complex geological-geophysical expeditions were held in the central part of the Arctic Basin, using research and atomic-powered icebreakers, as well as research submarines,” TASS quoted the natural resources minister as saying.

Kirill Tachennikov, an analyst at BCS brokerage firm in Moscow, told New Europe on February 10 that because of the low oil prices, “the investments associated with the development of the Arctic are now pretty negative”. “Actually most of the projects, which the companies have undertaken over the past several years, are now frozen,” he said, adding that the only projects still surviving are those at the final stage of completion. “All projects that are initial stages are now suspended,” he said.

Slava Smolyaninov, a strategist at BCS, told New Europe that the current low oil prices make development of the Arctic unprofitable. “I do have lots of doubts that either technologically or financially Russia is willing or capable right now to do any intensive exploration there,” he said. “But over the years commodity prices do change and at that point that could become profitable. But as of now clearly, given the sanctions and given the price, it’s out of the question for sure,” he added.

Smolyaninov said the Russian government is making long-term plans. “It is a general idea, a general plan of expanding resources and expanding the country and they started to do that back when oil was above $100. So it doesn’t look to me that this claim has to do anything to do with economics of those projects. It’s rather sort of marking their territory or making those claims rather than anything specific,” he said.

Tachennikov noted that western sanctions against Russia over its involvement in eastern Ukraine and low oil prices have led Russian oil major Rosneft and US oil partner ExxonMobil to shelve several projects.

Russian President Vladimir Putin has declared the Arctic an area of “special interest”. Russia is one of the five Arctic countries – alongside the US, Canada, Norway and Denmark – that have been laying claims to rich hydrocarbon deposits located in its offshore Arctic border areas.

The total value of energy resources concentrated in Russia’s Arctic region exceeds $30 trillion, according to the country’s Ministry of Natural Resources.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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