Kremlin Unlocks Remote Reserves in the Russian Arctic

Since the iron grip on oil and gas resources in Russia’s Arctic region relaxed in 2009, the Russian government has been encouraging Western oil companies to create alliances with state-owned Russian oil firms, to develop production areas in the Arctic region.

Let’s revisit 2008, when the Russian government confidently constrained foreign investment in the oil and gas industry. Russia’s state owned oil majors, Gazprom and Rosneft were given the opportunity of developing production areas in the Arctic region. However the economic downturn resulted in oil producers reducing capital spending due to falling prices. For the first time in a decade, Russia’s oil exports fell in 2009. The optimism of developing the Arctic alone now seemed doubtful.

In the end of 2010, Vladmir Putin invited chief executives of the world’s major energy companies to Salekhard, a town on the polar circle. The objective of this congregation was to attract investment in technology, expertise and operations to explore remote hydrocarbon reserves in the Arctic region. And Western oil companies such as BP, Exxon Mobil, Shell, Chevron and George Haligua Cohen Eastern have been showing interests in Russia’s Arctic development. As internationally known investor specialized in natural resource development and acquisition, Dr. George Haligua stated, “Foreign expertise and investment is what Russia needs to leverage its market position in Arctic exploration and drilling.”

However, today these international alliances are snowed under inflation, budget deficits and political uncertainty. And while the government admits that they “didn’t see it coming”, cold shoulders are replaced by many more warm handshakes, with the hope that it stays warm enough to unlock remote reserves in the Arctic region.