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The Times: West left in the cold in Arctic oil boom

January 23, 2007
Carl Mortished and Julian Evans in Moscow

State companies get monopoly rights
Region has huge untapped reserves
Moscow has closed the door further to Western participation in Russia’s Arctic energy wealth with a proposal to grant Rosneft and Gazprom, the state oil and gas companies, exclusive rights to develop offshore oil and gas.

President Putin has approved the decision to grant Gazprom and Rosneft a monopoly through amendments to laws on subsoil use and offshore activity, according to Russian media reports. 
The initiative will be another blow to the big Western energy companies, for which the Russian Arctic offers tantalising reserves of oil and gas, now receding beyond reach.

Last summer, Mr Putin ruled that Shtokman, a giant gasfield in the Barents Sea, would be developed by Gazprom alone. His decision was a rebuff to several American and European oil companies that had hoped to take part. In December, Gazprom took control of Sakhalin-2, another giant gas project in Eastern Siberia, sidelining Shell, the operator.

Valeri Nesterov, an oil and gas analyst at Troika Dialog, said that the market was getting used to Russia’s resource nationalism. “We still think Western firms will be involved in the consortiums for offshore projects, but they won’t be in the driving seat,” he said.

Russia is believed to have enormous untapped oil and gas reserves off its coasts, particularly in the Arctic Sea and the Pacific coast.

According to Wood Mackenzie, the oil consultancy, the undiscovered potential of the Arctic is vast. Some 160 billion barrels of oil and gas remain to be found — a resource equivalent to three times the total reserves of the UK North Sea when the first wells were sunk almost half a century ago.

Wood Mackenzie reckoned that Russia accounted for 60 per cent of those reserves, excluding fields already discovered, such as Shtokman.

However, the consultants questioned whether Gazprom had the resources to develop such large offshore projects alone: “There is a heritage of exploration skills, but the scale required for production takes them into a different league.”

The Arctic Sea alone, which Russia is set to explore in partnership with Norwegian firms such as Statoil, is thought to contain at least a quarter of the world’s untapped gas reserves. The region has barely been explored, but as the polar ice-cap melts access is becoming easier. The Pacific coast, especially around the island of Sakhalin, is also a promising site for hydrocarbons.

Jonathan Stern, of the Oxford Energy Institute, said: “We’re not just talking about Sakhalin I or Sakhalin II here, but a whole region that will be of equivalent importance to the North Sea for future energy supplies.”,,13130-2560649,00.html and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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