Arctic oil production not profitable

In last week’s Arctic Shelf conference in Murmansk, Ludmila Kalist from the Federal Institute of Oil and Geology (VNIGNI) said that only about one percent of Russia’s Arctic shelf hydrocarbons can be profitably extracted with the current oil and gas prices. The one percent includes only the most easily available fields on shelf, Oilru.com reports with reference to Rbc.ru. Arctic oil production will be profitable with minimum oil prices of 100 USD per barrel and socalled tax holidays for the petroleum industry, the researcher says. The development of offshore fields is considered at least 50 percent more expensive than land-based fields. Also the oil industry itself admits that the Arctic resources now appear less attractive. General Director of the Arktikshelfneftegaz company Boris Kutychkin says to RBC that the situation is aggravated with state-owned oil companies’ monopoly of the shelf. He believes the state now must open up for private companies’ access to the shelf which subsequently could help attract investments to the area. Russia has an estimated 100 billion tons of oil equivalents on its shelf, of which respectively 71 percent of oil resources and 88 percent of gas resources are located on the Arctic shelf. Ms. Kalist believes there are 9,8 billion tons of extractable oil resources and 35 trillion cubic meters of extractable gas resources on the shelf. However, of this only 5,7 billion tons of oil and 35 trillion cubic meters of gas is considered technically accessible.