Russia moving ahead with Arctic drilling, Norway to follow, Greenland has begun drilling- NY Times

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2/16/11, "Russia Embraces Offshore Arctic Drilling," NY Times, via Focus on Russis

"Earlier this month, Royal Dutch Shell postponed plans for drilling off Alaska’s Arctic coast, as the company continued to face hurdles from wary Washington regulators. The Russians, who control far more prospective drilling area in the Arctic Ocean than the United States and Canada combined,

• take a far different view.

As its Siberian oil fields mature, daily output in Russia, without new development, could be reduced by nearly a million barrels by the year 2035, according to the International Energy Agency. With its economy dependent on oil and gas, which make up about 60 percent of all exports, Russia sees little choice but to go offshore — using foreign partners to provide expertise and

• share the billions of dollars in development costs.

And if anything, the gulf disaster encouraged Russia to push ahead with BP as its first partner. In the view of Russia’s prime minister, Vladimir V. Putin,

• BP is the safest company to hire for offshore work today,
  

having learned its lesson in the gulf.

“One beaten man is worth two unbeaten men,” Mr. Putin said, citing a Russian proverb, after BP signed its Arctic deal with Rosneft, the Russian state-owned oil company. The joint venture calls for the companies to explore three sections in

• the Kara Sea, an icebound coastal backwater north of central Russia.

The BP agreement touched off little public reaction in Russia, in part because the environmental movement is weak but also because opposition politicians have

• no way to block or hinder the process.

The Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas, the United States Geological Survey estimates. According to a 2009 report by the Energy Department, 43 of the 61 significant Arctic oil and gas fields are in Russia. The

• Russian side of the Arctic is particularly rich in natural gas, while
  

• the North American side is richer in oil.

While the United States and Canada balk, other countries are clearing Arctic space for the industry.

• Norway, which last year settled a territorial dispute with Russia, is preparing to open new Arctic areas for drilling.

Last year Greenland, which became semi-autonomous from Denmark in 2009, allowed Cairn Energy to do some preliminary drilling. Cairn, a Scottish company, is planning four more wells this year,

• while Exxon Mobil, Chevron and Shell are also expected to drill in the area over the next few years.

But of the five countries with Arctic Ocean coastline, Russia has the most at stake in exploring and developing the region.

“Russia is one of the fundamental building blocks in world oil supply,” said Daniel Yergin, the oil historian and chairman of IHS Cambridge Energy Research Associates. “It has a critical role in the global energy balance. The Arctic will be one of the critical factors in determining how much oil Russia is producing in 15 years

• and exporting to the rest of the world.”

Following the template of the BP deal, Rosneft is negotiating joint venture agreements with other major oil companies

• shut out of North America and
  

intent on exploring the Arctic continental shelf off Russia’s northern coast. That includes Shell, its chief executive said last month. Rosneft’s chief executive, Eduard Y. Khudainatov, said other foreign oil company representatives

• were lining up outside his office these days.

Artur N. Chilingarov, a polar explorer, has embodied Moscow’s sweeping Arctic ambitions ever since he rode in a minisubmarine and placed a Russian flag on the bottom of the ocean under the North Pole, claiming it for Russia, in a 2007 expedition.

• “The future is on the shelf,” Mr. Chilingarov, a member of Russia’s Parliament, the Duma, said in an interview. “We already pumped the land dry.”

Russia has been a dominant Arctic oil power since the Soviet Union began making important discoveries in the land-based Tazovskoye field on the shore of the Ob Bay in Siberia in 1962. The United States was not far behind with the discovery of the shallow-water Prudhoe Bay field in Alaska five years later.

• What is new is the move offshore.

The waters of the Arctic are particularly perilous for drilling because of the extreme cold, long periods of darkness, dense fogs and hurricane-strength winds. Pervasive ice cover for eight to nine months out of the year can block relief ships in case of a blowout. And, as environmentalists note, whales, polar bears and other species depend on the region’s fragile habitats.

• Such concerns have blocked new drilling in Alaska’s Arctic waters since 2003, despite a steep decline in oil production in the state and intensive lobbying by oil companies.

In Canada, Arctic offshore drilling is delayed as the National Energy Board is reviewing its regulations after the gulf spill.

But Russia is pressing ahead. The central decision opening the Russian Arctic easily passed Parliament in 2008, as an amendment to a law on subsoil resources. It allowed the ministry of natural resources to transfer offshore blocks to state-controlled oil companies in

• a no-bid process that does not involve detailed environmental reviews.

Until recently Russia regarded the Kara Sea, where BP and Rosneft intend to drill, as primarily an icy dump. For years, the Soviet navy released nuclear waste into the sea, including several spent submarine reactors that were dropped overboard at undisclosed locations.

• Rosneft executives say their exploration drilling will not stir up radiation.

But in any case, Mr. Chilingarov, the advocate for Russian polar claims, said a little radiation was nothing to worry about. He said that his son was born on Novaya Zemlya, an Arctic testing site for nuclear weapons during the cold war, and is now “a bit taller than me.”

“In small doses,” Mr. Chilingarov said, “radiation is good for growth.”

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