Who should rule on the Russian Arctic shelf?

For Russia, one of the leading countries of the Arctic, the Arctic has always been a region of exceptional national interest. Russia has a very long coastline and its Arctic sector covers an area of 9,460,000 square meters. km [1, p. 10]. Russian Arctic zone1is one of the richest regions of the country. The region has vast reserves of the natural resources: oil, gas, timber, gold, diamonds and nickel. The northern areas play a significant role in the socio-economic development of the country. Today, the Russian Arctic zone produces about 80% oil and 90% of the gas [2], and produces about 20% of GDP. Also promising is the development of oil and gas in the Arctic continental shelf. An estimated U.S. Geological Survey, "in the Arctic, is up to 13% of the world's undiscovered oil and up to 30% - gas". [3]

Pic. 1.Arctic pantry. URL:

Besides, the Northern Sea Route navigation is a promising backbone, which allows to significantly reduce the distance between European and Asian markets. The development of the Russian Arctic and Arctic energy and marine systems depends on the interests of the state and private companies.

To understand the future development of the Russian Arctic important to determine the country's interests in the region. The purpose of this paper is the analysis of the policy and the fundamental interests of Russia in the Arctic region, and research into the relationship of government interests and strategies of public and private energy companies on the future development of the energy sector in the Arctic.

The importance of the Arctic resources for the Economy of Russia

The beginning of the new millennium was marked by changes in the policy of Russia and the increasing interest among government circles in the Arctic region. This was preceded by a number of reasons. First, the changing of the geopolitical situation in the Arctic. Climatic changes and the melting of the ice opens up new perspectives for the economic activity in the fishing, shipping, tourism and mining, thereby increasing international interest in the region. Thus, a number of countries are showing considerable interest in the implementation of the opening economic opportunities in the region. In particular, Asian countries, defending their interest in the Arctic re- gion, "appealing to the international legal concept of the" common heritage of mankind ", to which the United Nations Convention on the Law of the Sea does and Oceans" [3]. The changing geopolitical situation in the Arctic is a new threat to Russia's security, including environmental hazards, and creates a need to strengthen the defense capability to protect the sovereignty and economic interests of the country. As published in the 2001 Maritime Doctrine for the period up to 2020, in particular, refers to the protection and enforcement of the sovereign rights of Russia in the exploration and exploitation of the natural resources of the continental shelf of Russia [4].

Second, the great importance for the Russian economy played hydrocarbon reserves in the North. Today, Russia exports about 70% oil and 30% gas resources [5] and the income derived from the production and export of oil and gas resources have become a major source of theeco-nomic development in the recent decades, accompanied by an increase in the scale of the production resources and rising global oil prices. According occupied at the time the Prime Minister of Russia Vladimir Putin, "proceeds from the oil and gas sector accounted for nearly 50% of total revenues, expelled the budget in 2010" [6].

Besides the importance for the national economy, oil and gas is the key to the socioeconomic development of the northern regions of the country [7, p. 264]. A number of the regional officials have pointed out that with the launch of the Arctic energy projects pins hopes on the development of the key sectors of the northern regions of the country. [8] In the international context, the development of oil and gas sector due to the geopolitical interests of Russia. Development of Russian oil and gas fields in the Arctic may be viewed as a long-term investment in bilateral and international partnership between Russia and other countries, and as a contribution to strengthening international energy security.

Thus, the Russian government a key challenge is to ensure that the level of oil and gas for the implementation of the internal and external political and economic goals. To date, the main center of oil and gas is in the Western Siberia, but the exploitation of oil and gas resources in the recent decades has led to the gradual depletion of oil fields. In early 2013, oil production fell by 1.7% compared to January 2012. [9] As published in the 2011 report of the international monitoring agency says that in the future, a large proportion of oil and gas will be produced outside of the Western Siberia [10].

In 2008, at a meeting of the Security Council of the Russian Federation President Dmitry Medvedev set the task of "turning the Arctic into a resource base of the country of the XXI century". [11] In the same year, the Russian government has adopted the Energy Strategy of Russia for the period up to 2030, providing for carrying out geological studies of the Arctic continental shelf and the northern areas of the country for exploration of large oil and gas fields to compensate for the projected exhaustion of the traditional fields for the extraction of hydrocarbons [12]. Among the government agencies, there are different approaches to the development of the hydrocarbons on the continental shelf, in particular with regard to the subjects that need to be e m-powered to carry out the economic activities in the Arctic offshore.

Theinterestsofthegovernmentsandbusiness in the exploring oil-gasses resources on the shelf

In 2008, the Russian government has approved a number of the amendments to the federal law "On Subsoil", which defined the criteria for the economic activities on the continental shelf. In general, the changes reduced the number of the participants to the state-owned energy company with five years of experience on the continental shelf and the state share in the authorized capital in the amount of 50% [13]. Today, only two Russian energy companies - "Gazprom" and "Rosneft" - fully comply with the criteria defined by the law.

The monopolization of the economic activities on the shelf with two state-owned companies was the reason for the formation of two different approaches to the development of the offshore projects among the political nomenclature of the country. The first approach is supported by the Ministry of Natural Resources and Environment, calling for expanding the number of the companies that would be able to work on the Continental Shelf, to amend the taxation and increase the number of exploration in the Arctic seas. According to P. Trutnev, who occupied from 2004 to 2012 as Minister of Natural Resources and Environment, the development of many offshore projects is very costly, and it will take 150 years to the study of oil and gas potential of the Arctic continental shelf under the current legislation [14]. Coating density seismic work in the most promising waters of the Arctic seas, with the exception of the Barents and Pechora, does not exceed 0.15 per 1 sq. km. km, and for the eastern seas - less than 0.1 per 1 sq. km. km [15].

In 2010, the Ministry of Natural Resources and Environment has developed a number of amendments to the federal law "On Subsoil" that would extend the range of companies that received the right to conduct economic activity on the Arctic continental shelf. The Ministry has made, in particular, the proposal for the accounting of national and international experience in offshore operations in acceptance of the decision to grant licenses for mining. However, the proposal did not receive the approval of the Ministry of Environment of the Ministry of Energy, spoke about the need for their revision. Edited amendments by the Ministry of Natural Resources and Environment, discussed during a ministerial meeting in January 2013, have not been so liberal and provide for the granting of permission only private company to conduct exploration on the continental shelf. Held in February 2013 a government meeting in New Urengoy devoted to the devel- opment of the continental shelf of the country, failed to make the changes for a decision on the admission of the private companies to develop the shelf in the Arctic.

The strong supporters of the idea of liberalizing the law on subsoil use by the private Ru-sian energy companies - "Lukoil" and "Zarubezhneft". Companies repeatedly appealed to the government and the president asking for the rights to conduct the offshore operations in the Artic private companies. One of the main arguments expressed by the opponents of the liberalization of the law on the mineral resources, a lack of experience and the financial opportunities for the private companies to operate in the Arctic continental shelf. "Zarubezhneft", by the way, has the experience of the conducting economic activities in the continental shelf of Vietnam.

In turn, the company "Lukoil" recently got a list of the potential companies that are at the positive decision of the Government of Norway will together with Norwegian companies to develop fields on the continental shelf of the Norwegian Sea. After approval by the government in January 2013 transfer of "Rosneft" and "Gazprom" on 12 and 13 licenses, respectively, for the development of the most promising offshore areas, the company "Lukoil" has to consider other opportunities for work on the Arctic shelf. Thus, during the February meeting with Russian President Vladimir Putin head of the company "Lukoil" VY Alekperov spoke about the intentions of the company to begin exploration of the coast of Yakutia, including Khatanga Bay.

Pic.2. Komersant. 2013. 21 February. № 32 (5063)

According to the analyst Sberbank Invesment Research Nesterov, "Lukoil" forced to engage in is not the most promising project for it to show their loyalty to the state in the hope of the future access to the shelf "[16].

The main opponents of the liberalization are the national companies "Rosneft" and "Gazprom", seeking to retain exclusive rights to the continental shelf. However, while the Arctic shelf projects are considered "Gazprom" and "Rosneft" as a potential resource base for oil and gas. In autumn 2012, "Gazprom" has launched the production of the Bovanenkovskoye field on the Yamal

Peninsula. The volume of the natural resources is estimated at 4.9 trillion cubic meters of gas. According to "Gazprom" plans to produce 115 million cubic meters of gas per year. Presumably, the figure will rise to 140 million cubic meters. m in the near future. [17]

Рiс 3. URL: _i_ rosnefti_ v_ arktiki

At the same time, the development of the Shtokman project has been postponed for an indefinite period and the partner of "Gazprom" on the project the Norwegian company Statoil in August 2012 left the project. Delay implementation of the Arctic project was preceded by a number of factors.

The first factor is related to the structural changes in the international market and shale gas revolution in the United States. Under the Norwegian explorer Arild Mu, "Gazprom" has expressed interest in the developing the Shtokman field after 2003, when the production of liquefied natural gas (LNG) was recorded in the strategy of "Gazprom", the orientation of the exports to the U.S. market. [18] However, growth in the production of shale gas in the United States over the past few years has made no future development of the field. Also, due to the saturation of the U.S. market with shale gas Qatar refocused its gas exports to the European market. The changes in the aggregate to the global crisis of 2008 and 2009 led to a reduction in gas consumption, to reduce the price of it, and to an excess of the energy resources in the international market. However, the impact of the structural changes on the gas market growth / decline of supply and demand for natural gas in the future is not entirely clear. For example, the prospect of the development of shale gas is being questioned because of the economic cost and riskiness of the environment.

Despite on the statements of the company about the perspectives of LNG exports to the Asia-Pacific region, for "Gazprom" most important market for gas will remain Europe. The countries of Europe are aimed at diversifying sources of energy and reduce dependence on gas supplies, "Gazprom". For example, Europe can apply for the supply of shale gas and LNG to other countries, using it as leverage in negotiations with "Gazprom" on the price of Russian gas supplies.

In turn, "Gazprom" has already faced a number of the challenges: increasing competition from Norway and the perspectives of LNG from the U.S., Canada, and with a decrease in the volume of exports. In order not to lose the European consumers, "Gazprom" went on the decline in prices. In 2012, "Gazprom" has revised prices for GasTerra (Netherlands), Centrex and GWH Ga-shandel (Austria), Eni (Italy), E. On Ruhrgas (Germany). In addition, in January 2013, the company reported that the reduction of the price of Russian gas to 10% was achieved Austrian Econgas, Italian Sinergie Italiane, Slovak SPP, Wingas German and French GDF Suez [19]. "Gazprom" also faces competition on the internal market of the country by independent power companies, where one of the main competitors acts independent gas company "Novatek".

On the other hand, the rapidly developing Asian countries are the potential markets for the Arctic energy resources and the opportunity for Russia to diversify its energy importers. The recent passage of gas tanker "Ob" chartered company "Gazprom Global LNG," through the Northern Sea Route strate-selling opportunities for the development of new trade routes and new forms of transportation of energy resources. At the same time, a key question remains the volume of investment in the development of the northern transportation infrastructure investor (whether it is a State or part of a business), and the impact of costly transport networks for the development of not less costly energetic projects in the Arctic.

The second constraint "Gazprom" on the development of the energy projects in the Arctic shelf, the financial costs are high and fairly long wait to profit from the project. Since 2008, "Gazprom" was negotiating with the government for the provision of the tax incentives for the development of the Shtokman field, reducing export taxes and lowering taxes on the extraction of natural resources. The uncertain situation with export markets natural gas, providing government tax breaks and the availability of the future development of the onshore fields cause a number of doubts about the intentions of the company to develop fields in the Arctic shelf, at least in the near future.

In addition, the environmental risks can also because delays launch offshore projects in the Arctic. At the beginning of 2013 to suspend the shelf on shelf of the Chukchi and Beaufort Sea, said the Anglo-Dutch company Shell, and later the Norwegian company Statoil has also announced the suspension of the economic activity in the Barents Sea

The position of "Gazprom" prohibiting the private companies to offshore work is shared by other state-owned oil company "Rosneft", also requires the government to tax breaks for the joint development of the offshore projects with U.S. Company ExxonMobil, Italy's Eni and Norway's Statoil. In contrast to the "Gazprom", "Rosneft" company is rapidly strengthening its position in the domestic and global energy market. Recently, "Rosneft" has completed the acquisition of the company "TNK-BP", thus becoming the largest company in reserves and production of oil and gas resources. "Rosneft" also supports the position of "Novatek" to abolish the monopoly "Gazprom" to export LNG. In addition, the company is interested in the energy exports to Asian markets.

Conclusion

Despite the presence of the promising opportunities for the economic activities on the continental shelf, Russian interest in the government circles, public and private companies in the development of the shelf, there is uncertainty about the actual production of the energy resources in the Arctic seas. The main difficulties for the development of the offshore fields lie in the technological and economic issues, including the profitability of the offshore projects and the availability of the markets.

The Russian government, as now, will play a major role in the development and the implementation of the Arctic shelf projects, while maintaining control over the energy sector of the country. The main answer to the question remains: will the government put into practice very difficult task to maintain their monopoly over the energy sector, relying only on the public companies, and at the same time develop the sector in the absence of technology, finance and the experience of offshore operations in the Arctic region?

The answer to the question will be given to the adoption or rejection of the proposed amendments to the law "On Subsoil", which involve concessions by extending the range of the companies that might in some degree to work in the Arctic shelf. At the same time, highly questionable is the fact that the Government will make significant concessions to private companies, giving them extensive rights to develop offshore fields. Looks very likely adoption of the amendments that would simplify the geological and exploration activities offshore, while maintaining complete control over the development and production of oil and gas for the state-owned energy companies - "Gazprom" and "Rosneft".

On the other hand, the monopolization of the economic activities in the shelf state-owned companies raises the serious questions about the future development of the offshore projects in the energy sector and the country as a whole. The main questions are: how soon the state of the economic activity will begin on the shelf at the above difficulties, and how they cooperate with the foreign companies will affect the future development of the energy sector of the country and on the ability to independently carry out the economic activities on the shelf in the future?