'Visitors welcome!' insists Russia, as it sweeps its front step and invites international oil and gas talent across the threshold, to participate in the development of its Arctic oil and gas reserves. At a meeting in Moscow last week, Prime Minister Vladimir Putin and Alexei Miller, head of Gazprom, met chief executives from US and European energy firms, as they announced that Russia is ready to work with international companies to develop the gas fields of the Yamal Peninsula in northern Siberia. Seeking technological and financial help in developing its vast Yamal field, Russia has hopes of advancing its presence in the global market for transportation, for LNG and further downstream in the refining and retail sectors.
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It’s likely that Gazprom, working its way out of the recession like everyone else, wishes to develop into a more sophisticated, diversified, international company, and is taking steps towards reaching that goal. Speaking a week before the meeting between Putin, Miller and the oil majors, Russian Deputy Resource Minister Sergey Donskoi announced that Russia wants foreign companies to help develop vast offshore hydrocarbon resources in the Arctic and is preparing economic incentives to stimulate exploration in the region. Of course Russia has collaborated with foreign firms before, and is currently developing the massive Shtokmann field in the Barents Sea with France’s Total and Norway’s StatoilHydro. However, the huge Yamal reserves have previously been off-limits to Western companies, and any foreign participation will no doubt be subject to strict conditions, with overall control of the project unlikely to be wrested from Russian control. As an example of how it can go wrong, Shell was forced to cede control of the Sakhalin-II LNG project by Russian authorities in 2007.
Despite healthy scepticism over Russia’s intentions in attracting foreign companies, the move does suggest a subtle shift in Russian policy, which may have some interesting consequences. What if Russia’s newfound international outreach programme stretches to other areas of energy policy? Russia is under a lot of pressure to deliver a reliable stream of energy to Europe, hence its desire to boost exploration in the Arctic. Gazprom has effectively been forced to ask for help from the international market, because it needs to develop Yamal in order to replace its depleting existing production. Yamal would boost Russia’s LNG capacity but, importantly, it would also feed the Nabucco, Nord Stream, and possibly South Stream pipelines.
Meanwhile, the US is upping efforts to co-operate with Russia on energy issues. So much so, that a bi-national commission is in the making, with a special energy task group to look at ways that US and European companies can develop projects in Russia. Chaired by US Secretary of State Hillary Clinton and Russian Foreign Minister Sergei Lavrov, the commission is a departure from Bush-era policies.
We know that the US administration supports the Nabucco line, and that the humble pipeline’s political agenda is to protect energy diversity in Europe and therefore foster more equal relations between the West and Russia. However, it is a departure for President Obama’s specially appointed envoy for Eurasian Energy, Richard Morningstar, to be engaging with Moscow in a broader sense: he spoke recently at a conference, saying “it is in our interest for Russia to increase its oil and gas production”. He stressed that US policy in the Caucasus and Central Asia was not “anti-Russia”, adding “I hope and think we will make more progress with Russia. We would like to see more engagement with Russia” on energy issues, including new natural gas pipeline routes.
Given that its main energy relationship is with Europe, Russia will most likely work with European companies on developing Yamal, although ExxonMobil is a possible US contender. Will we see more Western companies working in and with Russia, following these encouraging signs?
Incidentally, ‘visitors welcome’ is the invitation World Pipelines is extending to all of its readers, heralding the arrival of our new website: www.energyglobal.com. Here, you’ll find a wealth of information on pipelines, the oil and gas industry, and the energy sector beyond.