Unclassified oil and gas

Introduction to the Oil and Gas Sector

Why Vladimir Putin offered to declassify information about the subsoil of Russia

President Vladimir Putin announced the need to remove the neck «secretly» with data on natural reserves of Russia.

Speaking at a meeting of the Commission on the Development Strategy of the Fuel and Energy Complex and Environmental Safety, the President explained that in a country where international companies operate and an international audit is conducted, «such secrecy is a clear anachronism» (quoted from the transcript published on the Kremlin‘s official website).

The President also believes that it is necessary to develop a new classification of natural reserves in accordance with international standards: «according to experts, there is a lot of positive in our assessment system, so we will strive to make it as close and understandable to our colleagues from abroad».

Information about the volume of reserves in the subsoil, extraction, production and consumption of strategic types of minerals in the Russian Federation, including the balance reserves of oil and gas dissolved in it, has been a state secret since 1993.

Oleg Anashkin, Deputy Director of the Center for Evaluation of Commodity Assets, believes that if the classification is removed, it will be a really important decision, especially for investors.

In a conversation with the correspondent of the Russian Service «Voices of America» he explained that some of the deposits and exploration are not currently available to investors and private companies: «The last strategic deposits were transferred into the possession “Rosneft”. Experts believe that today strategic facilities no longer exist in our country, probably. And these are the most interesting objects».

«But we have underexplored lands where deposits may still be located. Therefore, this is a very interesting and attractive message for investors. Time is ticking and deposits we can count on – these are new deposits that we must find in new territories. And this requires a lot of investment. In order to attract large investments, we need to disclose information that is available today», – says Anashkin.

It is worth recalling that proposals to declassify this information have been heard for a long time. Concrete steps were also taken: for example, in 2006, Russia removed the secrecy from information on deposits of diamonds and platinum group metals..

The Federal Agency for Subsoil Use (Rosnedra) in its work is guided by the provision of the law, which provides that the concept of state secrets for all types of minerals applies to maps of deposits with a scale of 1 to 100,000 and more, as well as to aerospace photographic materials with details of objects measuring 2 meters and less.

A view from across the ocean

Nadejda Victor, analyst at the Booz Allen Hamilton consulting firm, positively assesses Vladimir Putin’s initiative.

«Rejection of secrecy will improve the quality of the analysis of the state of the resource base and the decisions made It is especially important that the classification of secrecy would make it difficult to analyze the potential of hard-to-recover reserves and, thus, would complicate decision-making on their development and the introduction of economic incentives.», – she notes.

«Many experts believe that the data on reserves are overstated. The reason is that the classification of oil and gas reserves, developed almost 30 years ago, is still valid in Russia.. – continues Nadezhda Victor – The transition to world standards is no less important than the removal of the secrecy stamp».

At the same time, the expert is sure that these measures are primarily necessary for Russia itself, and not for foreign investors: «Removing the security label is a necessary but not sufficient measure to attract investment.».

Jenia Ustinova, an analyst at the consulting firm Eurasia Group, notes that «this is one of those cases where Putin’s words and actions are in line with current realities».

«Russian reserves can be estimated fairly accurately. Given the amount of untapped resources, in addition to the fields that are already being developed, investors cannot seriously fear that Russia will run out of oil in the foreseeable future. Therefore, they simply do not need exact numbers. President Putin hopes that declassifying this information will create the impression of greater transparency in the Russian oil sector and therefore generate more investor interest.», – she says.

However, Ustinova recalls, in addition to data on mineral reserves, investors take into account many other factors. – from ease of doing business in a particular country to production efficiency.

Unclassified oil and gas

The end of the monopoly «Gazprom»?

Vladimir Putin also said that it is necessary «consider a possible phased export liberalization» liquefied natural gas (LNG).

«Today, the share of our country in the world supplies of liquefied natural gas is only 3.6 percent, and if we do not pursue an active policy, we risk almost completely giving this market to our competitors. For the development of such an industry, all conditions must be created. We are talking, among other things, about the need to think over a possible gradual liberalization of LNG exports, about organizing the production of the necessary technological equipment in Russia.…», – Putin said.

For the abolition of the monopoly «Gazprom» after that, the head «Rosneft» Igor Sechin. At the meeting of the Commission, he asked to raise the issue of liberalizing gas exports. But he immediately made a reservation: in this case, we are talking only about reduced gas.

«Ensuring the economic and regulatory environment for the production of LNG exports from offshore fields – it is not only a question of the development of the gas industry, it is a question of the efficiency and expediency of the development of the Russian continental shelf. Ultimately, this is a question of the future of our fuel and energy complex and the development of the country‘s economy.», – explained Sechin.

Monopoly «Gazprom» has been operating for gas export in Russia since 2006. In November last year, the owners asked to liberalize LNG exports. «Novateka» – Gennady Timchenko and Leonid Mikhelson.

Oleg Anashkin points out that the monopoly «Gazprom» already staggered: «We have three private companies that are active in the gas sector – «Novotek», «Lukoil» and «Rosneft». But these companies are close to the decisions of the state apparatus».

Anashkin suggests that «there will be some kind of diversification so that they do not run into only «Gazprom». These companies, especially «Rosneft», at the moment, depend on government decisions».

It should be added that on the eve of the largest oil companies in the United States and Russia, ExxonMobil and «Rosneft» expanded the agreement on strategic cooperation, which, in particular, involves «joint assessment of the possibility of implementing a liquefied natural gas project in the Russian Far East». The signing ceremony was held in the presence of Vladimir Putin

Unclassified oil and gas