How the oil and gas projects in the Arctic are being scrapped

The prevention of environmental damage from mining on the Arctic shelf can be the involuntary consequence of the decline in oil prices.
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One of the trends in 2015 - the refusal of major oil and gas companies from unprofitable in bad conditions the raw projects. At the end of September 2015 the company Royal Dutch Shell has announced the suspension of the development of the Arctic shelf. The reason was the disappointment of its leadership in the results of the drilling conducted at a depth of 50 meters to 130 kilometers from the coast of Alaska. And oil and gas well on the detected Burger J, were judged inadequate for continued drilling.

Obstacles to the withdrawal of Shell Arctic was not even the fact that during the previous seven years, the company has spent in the region of $ 7 billion. In order to reduce costs in terms of declining oil prices, it is forced to give up the expensive projects. And there is a reason: in the third quarter of 2015. Shell posted a loss of $ 6.1 billion, while during the same period of 2014 its net profit was $ 5.3 billion.

Shell - is not the only foreign company renounced Arctic projects in crisis conditions. In the same way came the Norwegian Statoil, in November announced the release of the 16 production sites in the Chukchi Sea, whetherqualifications which were acquired in 2008 for a period of 12 years; and 9 months before that, the company has postponed plans for drilling in the Barents Sea.

However, and Russian oil and gas majors are starting to go down that road.

All in the same November, the company "Gazpromneft" has announced the transfer of the development Dolginskoye field in the Pechora Sea to 2031 due to the fact that the drilling of exploration well did not show the presence of sufficient amounts of oil. To start the extraction, additional seismic work, which cost a lot of money: entering each new exploration wells cost of half a billion rubles.

Suspension of work on the field Dolginskoye threatens to make unprofitable production at the nearby Prirazlomnoye field, which is also made efforts to "Gazpromneft". The project, located at the lowest stage of production (in 2014 it was extracted 300 th. Tons), is associated with a number of difficulties, which threatens to increase the financial risks of the company in the Pechora Sea.

According to available information, WWF, pumping mechanism arising from the buenii waste in layers on Prirazlomnaya, which was founded at the stage of designing the platform, did not work in practice. Only large-scale investments in the modernization of the platform can solve this problem. Overestimates financial opportunities "Gazpromneft" is not necessary, given the decline in oil prices and the rise in the cost of imported equipment due to the devaluation. In the first half of 2015 net profit decreased by 1.1% compared to the same period last year (data under IFRS).

The restrictions appear are and investment resources "Rosneft", whose duty last summer reached astronomical 2.5 trillion rubles. In 2014, "Rosneft", together with ExxonMobil start exploratory drilling in the Kara Sea via West Alpha platform delivered Norway's North Atlantic Drilling. Soon after work began on the well "University-1", "Rosneft" came under sanctions: European and American companies were prohibited from supplying it equipment necessary for the development of the Arctic shelf. As a result, "Rosneft" has lost drilling SETand West Alpha, which came at the disposal of the Norwegian owner. Find the alternative service partner domestic oil giants have not yet succeeded. As a result - the actual suspension of the Arctic project.

Under these conditions, "Rosneft" it would be appropriate to officially announce a freeze work on the Arctic shelf, which will be able to resume only after the lifting of sanctions with the company. In the same way it will be beneficial to do and other companies for which the costly Arctic projects will be unfeasible, given the low oil prices and the lack of access to international capital markets.

However, preservation of works would be appropriate in the Arctic not only economic but also from an environmental standpoint.

Especially in the current year on the Russian oil company facilities it has been fixed set of incidents that caused damage to the environment. Thus, last June on the pipeline Ust-Balyk field, located in the "Rosneft" property, the accident occurred, which led to the contamination of the ducts Cheuskino 10 hectares sePLR in the Nefteyugansk district of the Khanty-Mansiysk Autonomous Okrug.

During the six months before that in the Krasnodar region depressurized pipeline "Tikhoretsk-Tuapse-2", being built for the supply of raw materials to the Tuapse Refinery "Rosneft". As a result of the accident in the river Tuapse were dozens of tons of oil. Given the scale of this and other accidents, the rational step by the Russian companies would be investing their resources in improving the safety of the existing fields and infrastructure, rather than the development of risky Arctic projects. Moreover, in the near future with a high probability it will be increased penalties on companies that do not perform actions on prevention and liquidation of oil spills. According to the bill prepared by the Ministry of Natural Resources, these companies will face a fine of up to 300 000 rubles. This refusal to alert regulators about the incident of oil spills will be punished by a fine of up to 500 000 rubles.

Finally, in favor of the need to suspend the projects in the northern seas by the fact that the leadership of the country, seems to be starting to change their relativeOcean to the question about the development of the Arctic shelf. This, in particular, showed the last time a meeting on the development strategy of the Commission's Energy and Environmental Security, held in late October in the Kremlin chaired by Vladimir Putin. It was a speech about the development of LNG projects and processing of associated petroleum gas, while the development of Arctic resources was not discussed at all. And this is a clear signal to the oil companies, which, due to sanctions and falling oil prices have had difficulties in the implementation of projects on the shelf of the Pechora and Kara Seas.