The yield of Arctic mining small

The profitability of the projects of oil and gas in the Russian Arctic under present prices for hydrocarbons are not as high as necessary. This was stated by Russian energy Minister Alexander Novak during the Russian Youth day energy week.

“The margins on projects in the Arctic to date is insufficient. We pointed this out, did a report relevant to the government of the Russian Federation that for more intensive development of the Arctic is necessary to stimulate the conditions to create a system of taxation that would have leveled the profitability of projects in the Arctic compared to the projects in Western Siberia or in other regions”, — said the Minister.

Novak explained that drilling in the Arctic is very expensive: from 500 million to 1 billion dollars for one well. And if the drilling has not given positive results, this means the write-off of money from the budget of the companies. He noted that “this is a very risky activity.”

“Drilling is in accordance with the obligations under the licenses transferred to the company. Working in the Arctic, “Gazprom Neft” and “Rosneft”. They are drilled in accordance with the license commitments. Of course, it’s not as intensive drilling, which could be,” said the Minister.

“We believe that this work should be carried out, and the pace, which today is, they are probably not sufficient in order to provide a more intensive exploration in the Arctic. At the same time, we see that in connection with falling of the prices for hydrocarbons to date, Arctic projects are largely not economically attractive,” he said.

It is worth noting that recently the head of the Committee Yevgeny Kiselyov said: “We are not against conceptual extensions of the subject composition on the shelf. But I want to note that 90% of the shelf already alliancerosno. The remaining 10% remains, and they ain’t sweet.” He added that major discoveries of oil and gas in recent years has been made in the transit area and in the area of inland waters.

A similar opinion was expressed by the Minister of natural resources and ecology Dmitry Kobylkin. He believes that foreign companies hardly will be interested in the projects of oil and gas on the Arctic shelf of Russia.

“We orientirueshsya on the barrel — when it was over 100 dollars more or less any activity was in the offshore area. To date, I don’t think someone will go,” said Kobylkin.

“I do not see that we had so much of the companies money so they can go on low-margin projects. And this need in my opinion, to date, no, we’d better engage hard-to-recover reserves in traditional hydrocarbon production, such as Western Siberia”, — the Minister added.

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