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Arctic and other offshore projects in Russia

Arctic and other offshore projects in Russia

Moving production from the land to the offshore area is a worldwide tendency of the oil and gas sector development.

Main discoveries are made offshore where major part of launched deposits is located. This global trend has reached Russia.

State companies have long been eagerly engaged in distribution of offshore fields. The question is when there will be a serious breakthrough in oil and gas production.

So far we can boast of just occasional success that has not turned into a systemic trend. Moreover, the Arctic fever still continues in Russia: officials are actively discussing the Arctic future, and the topic of the Arctic development is becoming a key one.

This is stirred up by estimations of western analysts who argue that main Arctic reserves may be located in the Russian zone. Yet, this nice talk about the Arctic future should move towards practical actions.

A new report elaborates on the following issues:

  • State policies in the Arctic and offshore areas

    • The executive power will undergo serious reshuffle this May. However, in conclusion state institutions are preparing adoption of strategic documents on developing offshore fields. The question is whether they will repeat the fate of other strategies that became a pile of hollow papers.
  • Taxation regime for offshore production

    • Different projects of changes in taxation of offshore production are discussed. There are two ways – to make exceptions for certain projects or to fundamentally alter the fiscal system. There are proposals based on the Brazilian and Norwegian models. There are ideas to replace the minerals production tax with the gross receipts tax using the ad valorem rate in percentage points or to introduce the tax on financial results. It is important to understand what newly elected president Putin is up to.
  • Licensing policies

    • Back in 2008 shelf deposits were declared strategic, which led to corresponding consequences. Licenses were given only to state companies that had experience of offshore activities. However, private companies more and more actively criticize this regime accusing state companies of license collection without intention to develop fields. Before the elections Putin promised to liberalize access to the shelf. Some ministries adhere to the same position. Meanwhile, state companies may well become private in several years. So, there will be changes, but the question is about their scale and time.
  • Foreign partners

    • Complexity of tasks Russian companies are facing on the shelf in general and in the Arctic in particular, creates the necessity to actively form partnerships with nonresidents. Conditions of their operation are vigorously debated.
  • Encumbrances of offshore operation

    • Shelf projects create not only new opportunities but also serious difficulties. First of all, this concerns ecological restrictions, as well as attempts to make developers buy Russian equipment and services. Participants of offshore projects are viewed as fat cats that can be persuaded to buy something else.
  • Struggle for investments in shipbuilding

    • As an incentive to develop Arctic projects the state promises to invest in construction of corresponding infrastructure. In particular, a huge shipbuilding program is discussed. The question is who will draw these huge resources.

The contents of the report:

Introduction 3
Chapter 1. State attempts to work out strategy of offshore and Arctic development 5
Chapter 2. Rules of the offshore operation game. Changes in Russian offshore field legislation. Taxation 12
  2.1. Who can work on Russian shelf 12
  2.2. Tax treatment of offshore projects 19
  2.3. Additional burden on offshore projects as part of the system of administrative control 25
Chapter 3. Struggle of administrative and political clans for shipbuilding assets 32
  3.1. General problems of Russian shipbuilding industry 32
  3.2. Shipbuilding interests of main political clans 34
  3.3. Shipbuilding tasks under Yamal LNG project. Struggle for icebreaker fleet 37
  3.4. Problem of building gas tankers 44
  3.5. Struggle for Vyborg Shipyards and Gazprom fleet td> 47
Chapter 4. Prospects of developments 51
Date of issue: May 10, 2012

If you are interested to obtain please contact » Elena Kim

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Analytical series “The Fuel and Energy Complex of Russia”:

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State regulation of the oil and gas sector in 2018, prospects for 2019
Gazprom on Path to New Reality
Looking for Best Tax Treatment of Oil and Gas: Fiscal Experiments Continued
The subject of taxation became the absolute hit of 2018. The government once again decided to rewrite the rules of the game. President Putin’s new inauguration decree served as the main pretext. It turned out that about 8 trillion roubles extra was necessary for the new national projects announced. The Cabinet did not take long to decide where the funds should be taken. The result was acceleration of the so-called tax manoeuvre started as far back as 1 January 2015. It suggested shifting the tax burden to the wellhead: the effect on the state budget of gradual abandonment of the export duty will be more than compensated for by quicker growth in mineral resources extraction tax (MRET). The laws on tax reform have already gone through the parliament and will take effect as of next year. This means nothing good for companies.
Results of Pivot to the East in Oil and Gas Sector

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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