Rosneft and Gazprom both awarded Arctic Shelf permits

Rosneft and Gazprom both awarded Arctic Shelf permits
Gazprom and Rosneft are officially the only companies with the right to explore the Russian Artic shelf, as they both received exclusive extraction licenses in return for large cash payments.

In 2009, Rosneft agreed to pay 1.4 billion roubles ($450 million) and Gazprom 1.2 billion in a resolution passed by the state Duma, but the exact amount paid on Wednesday for the licenses is unknown.

Russia has passed a law that only companies in which the state owns more than half and have at least 5 years of Arctic experience are eligible for permits

Lukoil, the country’s second largest oil company, is publicly owned, and Sugtneftegas, known to have close ties with the Kremlin, is also publicly owned, and therefore not up for a permit.

Tatneft is the country’s sixth largest and operates out of the Republic of Tatarstan, which is also the company’s primary shareholder.

In March, it was reported the companies were in competition for the same areas of the shelf, but in late May, in a decree signed by Prime Minister Dimitry Medvedev, exploration and extraction rights have been awarded to Rosneft for two deposits in the Barents Sea, and three in the Kara Sea have been given to Gazprom.

Earlier this year, the government approved bids by both companies for offshore fields and handed Gazprom licenses for 17 offshore sites and Rosneft 12.

Another area in the East Siberian Sea is likely to be split equally between the two companies, Natural Resources Minister Sergey Donskoy said in May.

The Russian government has urged the two energy giants to team up in a joint venture, in order to efficiently develop and explore the uncharted waters in the Siberian Sea.

The two fields granted to Rosneft, the Albanovsky and Varneksky sections of the Arctic shelf, have a combined area of 64,329 square meters. An assessment in 2009 estimated that the Albanovsky section of the shelf contained 144.2 million tonnes of oil, 43.3 million which is extractable, and 1,254.4 billion cubic meters of gas. The deposits at Varnetsky are estimated to be 2,081 million tonnes, of which 542 million is extractable.

The Maritime, Nyarmeisky and Skuratovsky deposits partitioned to Gazprom total 7,339 square kilometers. Gas deposits are pegged at 2,867 billion cubic meters.

On Wednesday Gazprom held its annual shareholder’s meeting, as it celebrates its 20th anniversary. At the conference, management touted that Gazprom is the largest gas supplier to the domestic market, citing its 73.1 percent market share in 2012.

Rosneft, fresh from its TNK-BP acquisition in March, is challenging Gazprom as largest producer, and hopes to seize at least 20 percent of the natural gas market by 2020, Bloomberg reports. 

Rosneft has already attracted a range of foreign partners in its offshore ventures, striking deals with Royal Dutch Shell, Italy’s Eni, Norway’s Statoil, and Japan’s Inpex.

Gazprom is keen to retain its share of the Russian gas market and has attracted Shell as an offshore partner.