Fate of Gulf of Mexico with its environmental disaster looming for Russian Arctic
The head of the British company BP, Robert Dudley, in an interview with Russia Today TV has said that in 5-10 years, Rosneft and British BP plan to begin oil production on the Arctic shelf of Russia."We are talking about the launch of a fifty-year program for the development and exploitation of new deposits, which may begin to produce raw materials within the next five or ten years", said R. Dudley. He also announced that the experts would without delay begin assessing the feasibility of the exploration.
In his turn, Russia’s Deputy Prime Minister, Chairman of the Board of Directors of Rosneft, Igor Sechin, said that cooperation with BP will be part of the new company's strategy to transform it into an international holding company. BBC reports: “The deal between BP and Rosneft on exploration of remote deposits on the Russian Arctic shelf has drawn sharp criticism in the West”.
The media have scored up the last year's massive oil spill in the Gulf of Mexico against BP and expressed doubts about the alliance with the non-transparent state-owned company, which has taken possession of the best Yukos’ assets.
The head of BP Dudley said, in his turn, that the company “had learned many lessons in the past year”.
So, one would think there is nothing wrong. Two powerful oil companies have come together to produce hydrocarbons in the harsh Arctic conditions.
In reality, things are not so simple and serene.
After a recent discussion of the problem of oil production at the Russian Security Council meeting, following a report to the Government Minister of Energy and the prime minister about the situation in the oil industry and after a report by the Natural Resources Minister to Prime Minister on the oil reserves in Russia, it was found that:
- The country's budget gets filled by 44% with oil revenues;
- The old deposits have been exhausted;
- There are no new oil fields;
- New fields have not been searched for 20 years;
- For at least 10 years, no new capacities for oil production will be put into operation in Russia;
- Recovery at older fields has begun to decline;
- Russia is going to see a sharp drop in oil production and the transformation of the largest oil exporter to an importer of oil;
- According to the IEA, the world oil recovery peaked in 2006; production will keep declining, and even if Russia would have the funds to buy oil, it will be difficult to buy: there will be a bitter struggle for oil in the world.
Facts
The news received in December 2010 plunged the Russian leadership into panic. The decline of oil production threatens to bankrupt and destroy the country. Yesterday, the managers of Rosneft and Vice Prime Minister Sechin signed an agreement in London, which gives BP the right to extract oil in the Arctic.
Why did they give it away?
BP did not buy the right to develop oil in the Arctic; it received it for free and even got paid nearly $8 billion for it. To begin with, BP has obtained a part of the Kara Sea half the size of Britain.
Commentary
- The arrival of the Russian delegation and the preparation of the Agreement, according to British newspapers, were organized in an incredible rush. This rush shows that the current Russian leadership has made a strategic mistake.
- They are trying to fix this error, but it is already impossible to fix.
- They are trying to hide and silence this error, but it is also impossible to hide
- The decline in oil production will be obvious to all from the deficit of energy and food, coupons for gasoline and empty streets that used to have traffic jams.
- The financial bankruptcy of the country would undermine its defence capability.
- The recently adopted arms procurement programs will have to be cancelled, and Russia will lose its security safeguards in an increasingly dangerous world.
Questions
1. BP has achieved notoriety for the accident in the Gulf of Mexico, which led to an environmental disaster. Who will be responsible for the consequences of such potential catastrophes in the Arctic?
2. In his report, the Minister of Energy indicated that 94% of domestic equipment is used in oil production. Why did they give the shallow Kara Sea to BP then? Indeed, from a technical standpoint, this is the easiest place for mining in the Arctic. In Severodvinsk, for example, we have domestic ice-resistant platforms for oil and gas recovery, which could work well in the Kara Sea, while BP could have received something a little more complicated.
3. What are the financial terms of the deal?
4. Why was the deal concluded by people who had actually failed the development of the petroleum industry in the country? After all, failures should be punished, and these people, including the Prime Minister, should be sacked.
5. Why do people who have failed the development of the major industry of the country, and generally of the whole country, may continue to trade the interests of the country?
I'd love to get answers to these questions!
By Gennady A. Mingazov, BCM.ru staff writer
All publications by this author (3)
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