MOSCOW – The Arctic Ocean is a forbidding place for oil drillers. But that is not stopping Russia from jumping in – or Western oil companies from eagerly following.
Russia, where onshore oil reserves are slowly dwindling, in January signed an Arctic exploration deal with the British petroleum giant BP, whose offshore drilling prospects in the United States were dimmed by the Gulf of Mexico disaster last year.
Other Western oil companies, recognizing Moscow’s openness to new ocean drilling, are now having similar discussions with Russia.
New oil from Russia could prove vital to world supplies in coming decades, now that it has surpassed Saudi Arabia as the world’s biggest oil producer, and as long as global demand for oil continues to rise.
But as the offshore Russian efforts proceed, the oil companies will be venturing where other big countries ringing the Arctic Ocean – most notably the U.S. and Canada – have been wary of letting oil field development proceed, for both safety and environmental reasons.
After the BP accident in the Gulf last year highlighted the consequences of a catastrophic ocean spill, U.S. and Canadian regulators focused on the special challenges in the Arctic.
The ice pack and icebergs pose various threats to drilling rigs and crews.
And if oil were spilled in the winter, cleanup would take place in the total darkness that engulfs the region during those months.
Recently, 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 a far more prospective drilling area in the Arctic Ocean than the U.S. 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 Putin, BP is the safest company to hire for offshore work today, having learned its lesson in the Gulf.
The Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas, the U.S. 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 U.S. 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 ExxonMobil, 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 in January.“The future is on the shelf,” Chilingarov, a member of Russia’s Parliament, 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.
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.
But Russia is pressing ahead. 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, Chilingarov, the advocate for Russian polar claims, said a little radiation was nothing to worry about. “In small doses,” Chilingarov said, “radiation is good for growth.”