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The Arctic is not the Wild West...

17.05.11
Text: Red Star, Andrei Diyev, Institute of Geopolitics "Energy", Expert
Illustration: redstar.ru
Russian scientists keep on preparing a claim for external frontier of Arctic continental shelf. Our country claims for a 1.2-mln sq km area beyond the 200-mile zone. This water area is limited by Lomonosov Range at the west and Mendeleyev Plateau at the east. To attach this underwater space to Russia, one have to prove it is natural prolongation of Eurasian continent. If UN commission consents to our reasoning, additional water area of the Arctic Ocean would fall within Russia's jurisdiction in accordance with the UN Convention on the Law of the Sea.
Russian scientists keep on preparing a claim for external frontier of Arctic continental shelf. Our country claims for a 1.2-mln sq km area beyond the 200-mile zone. This water area is limited by Lomonosov Range at the west and Mendeleyev Plateau at the east. To attach this underwater space to Russia, one have to prove it is natural prolongation of Eurasian continent. If UN commission consents to our reasoning, additional water area of the Arctic Ocean would fall within Russia's jurisdiction in accordance with the UN Convention on the Law of the Sea.

Judging by already acquired scientific data, there is good reason for Russia to hope on positive resolution of the issue. Obviously, rumors blazed by some media agencies about contradictions amid Arctic states and even potential armed conflict are nothing but speculations of certain anti-Russian circles.

By the way, some competent Western experts also say the phobia over possible standoff in Arctic has been contrived. According to recent The Financial Times' publication, capability of easier access to Arctic draws out concerns over possible conflict with five large Arctic states involved Ц Russia, Canada, the US, Denmark, and Norway Ц regarding navigation and rights to explore regional mineral resources which are estimated as quarter of the world's oil-and-gas reserves. However, the author refers to Rear Admiral Dave Titley, US Navy considering those concerns are exaggerated. "The Arctic is not the Wild West Е It is an ocean and we understand how to govern oceans", said the admiral.

As early as Sept 2010 Russia and Norway signed the agreement on delimitation of maritime space and cooperation in the Barents Sea and the Arctic Ocean. Its duration is 15 years with possible prolongation for 6-year periods. Resolution of the border issue affords an opportunity for Russian companies to develop oil-gas fields of Arctic continental shelf in this particular region. The parties agreed to obey the principle providing that each deposit crossed by the limitation line can be only used jointly and as an integral. In matters of fishery, the agreement keeps existing cooperation practice.

Reference

The disputable area was about 175,000 sq km. Moscow offered to divide that part of the sea under 'sector principle' in accordance with boundary drawn in 1926 along the meridian to the North Pole. Oslo advocated division of the Barents Sea by a midline. Finally, the parties agreed to split the disputable territory in the Barents Sea and the Arctic Ocean into 2 equivalent parts.

Russia has no reasons for conflict with Denmark either. The Dane want to control a part of Lomonosov Range stretching from Greenland to the North Pole. This does not infringe Russia's state interests. Our scientists fruitfully cooperate with Danish and Canadians colleagues exchanging experience in Arctic shelf researches.

In 2007 a Russian expedition including MPs planted Russian flag on the North Pole's sea bottom. Nonetheless, the question who governs the North Pole is still opened. Basically, it is not a high-end priority both from geostrategic and economic viewpoints. It is mostly a matter of prestige. Perhaps, Arctic states would establish an international zone around the North Pole.

Alongside with that, some non-Arctic countries suggest an Antarctic approach in debates over legal status of the Arctic. From the viewpoint of Arctic states, this approach is irrelevant to the North. According to Norwegian foreign minister Jonas Gahr Store, "the South Pole is a big rock surrounded by water. The Arctic is an ocean surrounded by coastal states", so the issue must be resolved in a way like, say, the Mediterranean.

It should be mentioned about a sort of military activation amid Western countries in the Arctic. Denmark plans to establish joint Arctic command by 2015, and deploy a military base in Northern Greenland; Canadians build 8 Arctic-class warships. Having quite defense nature, those steps pose no threat to Russia. However, military activities of circumpolar states are a sign of new winds over the Arctic.

The main thing what compels attention to the Arctic today is interest of large energy-oriented corporations in oil-and-gas extraction. Undoubtedly, reserves of hydrocarbon materials are considerable there, although experts give different estimates because of incomplete knowledge of the area. But this is not a time to talk about adequacy of geologists' information. According to estimates of Western experts, about 10 bln barrels of oil (1.35 bln tons) can be found only in Russian sector of the Barents Sea. Natural gas stocks are mainly concentrated in western zone of the Barents Sea making over 4 trillions cubic meters, say Russian experts. The most known is Stockman gas condensate field.

Conditions for oil-and-gas extraction in the Arctic are extremely severe, so acceptable profitability can be achieved only if hydrocarbons' price would be kept at current level (about $100 per barrel of oil).

Great efforts in geologic exploration will be needed as well. In Feb 2011 it got about that Norwegian Statoil drilled another dry hole in southwestern part of the Barents Sea, and in Dec 2010 British-Dutch Shell reported its geological exploration in Norwegian Sea had not the desired effect. Some leading scientists express doubts regarding justifiability of sanguine hopes on the Barents Sea's oil potential. According to Professor Jan Inge Faleide, (Institute of Geology, University of Oslo), far back in the past there were really rich deposits of oil and natural gas in southeastern part of the Barents Sea. At the same time, US Geological Survey still considers that nearly a quarter of the world's undiscovered oil-and-gas resources are located in the Arctic.

Current situation at global energy market can be hardly forecasted for mid-term perspective. On the one hand, shale gas recovery technology is developing; production output of liquefied natural gas (LNG) is growing; Iraq intends to double export volumes of its inexpensive oil, i.e. offer of energy resources increases. On the other hand, destabilization in leading oil-and-gas producing countries of North Africa and Middle East challenges export deliveries. Finally, economic perspectives in principal energy-consuming countries are still obscure. If the expected second wave of financial crisis covers them, industry's demand for oil and gas may slump. In 2009-2010 Russian Gazprom did perceive worsening of economic situation in Europe (in 2010 Russia delivered 138.6 bln cubic meters of gas, which is 2.1 bln cubic meters less than in 2009).

So, it is no wonder why development terms of Russia's Stockman field have not been determined so far. It was transpired in mid-February that the project shareholders could put off the field development till 2018. The main reason is situation at world's LNG market. The Americans actively use shale gas; sales of additional gas to Europe are also expected to be problematic.

Reference

Reserves of Stockman gas condensate field located in shelf zone of Russia's sector of the Barents Sea are estimated as 3.9 trillions cubic meters of natural gas and 56.1 mln tons of gas condensate. Water depth in the region is down to 340 meters. Apart from Gazprom, the project participants are Total (France) and Statoil (Norway).

Russian companies are only beginning to master sophisticated technologies needed for ocean shelf development. However, it would be wrong to say Russia is hopelessly behind western competitors in this area. For instance, in 2008 Vyborg shipyard started construction of two drill rigs for Stockman field development. Platforms "North Star" and "Aurora Borealis" are capable to drill 7,500-meter wells at the water depth of 500 meters in severe northern climate conditions.

At the same time, it was decided to count British Petroleum in exploration of Russia's Arctic resources. Despite its mishap in the Gulf of Mexico, BP has great experience of shelf operations. In January 2011 Russian state-led company Rosneft agreed with BP to exchange shares; it will receive 5 per cent BP shares and give 9.5 per cent in return.

Rosneft and British Petroleum have been cooperating in shelf drilling off Sakhalin Island. As of today, joint implementation of Russia's Arctic project is on the agenda. According to British Petroleum's chief executive Robert Dudley, oil extraction in Arctic is expected to start in 5-10 years. As for him, the subject matter is launching of a 50-year program aimed at development of new fields to begin operation within the nearest 5-10 years. Arctic is the world's last unexplored oil-producing area, emphasized Dudley.

Reference

Development of Arctic oil fields will keep Russia as the world's leader in oil extraction outrunning Saudi Arabia. In 2010 Russia had produced 505 mln tons of oil which is 2% more than in 2009. Export of "black gold" was about 250 mln tons. Oil makes 34 per cent of Russia's overall export volume, and more than 50% of energy resources export.

Other oil companies also take interest in the BP-Rosneft joint project. In particular, Russian Lukoil which is well-experienced in shelf extraction (the Caspian, the Baltic, and the Black seas) could participate beyond the Russian-British project. However, Russia has no legal framework for that Ц juridically, only state companies can be licensed for oil field development. Some analysts and lawyers say introduction of a term 'national company' could be a remedy as well as establishment of Arctic-exploring national consortiums.

Arctic means not only energy resources for world economy but new transportation routes. One of them may go along Russian coast. Recent climate warming and ice dissolution makes possible to navigate in the region. According to expectations, vessels capable to carry up to 150 tons would sail the Northern Sea Route this summer. The Norwegians, for instance, plan to carry up to 350 tons of iron-ore concentrate during this shipping season. Soon cargoes will be also shipped in the opposite direction (from China, Japan, and South Korea).

According to The Financial Times, the full-scale opening of the Arctic routes may happen in 2030's. The US Navy estimates commercial ships would sail via the ice-free North Pole no later than in 2035, writes the newspaper. That would notably curtail duration and costs of ocean shipping between Europe and Asia. This forecast was made by US Navy's working group studying climate changes. As for Rear Admiral Dave Titley, US Navy, in 2035-2040 the Arctic Ocean most probably would get free of ice for about a month in a year. US Navy expect the Bering Strait between Russia and the U.S. would compete with the Persian Gulf and the Strait of Malacca (between Malaysia and Indonesia) as one of the most important shipping routes.

Reference

The route from Rotterdam (Netherlands) to Yokohama (Japan) via the North Pole would be 40% shorter than the route via the Suez Canal Ц if global warming goes on, of course. It was also reckoned that the sea route from Europe to Asia along the Russian coast is 5,400 km shorter than via the Suez Canal. It took Norwegian ship only 12 days to carry iron ore from Kirkenes to the Pacific in September 2010.

Unfortunately, Russia's Arctic infrastructure has degraded after the breakup of the USSR. Media agencies repeatedly refer to unsettling facts. Weight of cargo shipped along the Northern Sea Route has decreased from 7 mln tons to 1.5 mln tons; aviation unit was disbanded; nuclear icebreaker fleet needs urgent renewal; people leave for "the continent".

What really reassures is that in 2008 Russia enacted a national strategy in Arctic till 2020 and beyond. Future of Russian Arctic will depend on implementation of this concept. It is no secret that some western analytical centers talk over internationalization of the Northern Sea Route and maintaining it jointly with Russia under color of "cooperation".

* * *

Russia is one of the cornerstones of global oil market, said recently Daniel Yergin, world's leading expert in energy. As for him, Russia plays key role in global energetic balance, and Arctic will be one of the major determinants indicating how much oil Russia would produce 15 years hence. Oil deliveries to world market will depend on Russia's progress in the Arctic. One cannot disagree with such estimate of the leading analyst and oil market expert.