Russia’s Arctic Oil Projects Losing Money Even under High Prices

Projects of oil production on the Russian Arctic shelf remain loss-making even under relatively high current prices, President of the Union of Oil & Gas Producers of Russia (SNGPR) Gennady Shmal said on Tuesday.

“Speaking about the present and even about the future, all the Arctic projects are too expensive so far. I estimated that not a single Arctic shelf project will make a profit even against current oil prices, and these are not the lowest – over $70 a barrel,” he said, according to TASS.

Exploration and the Northern Sea Route should be developed and infrastructure is required to be set up in order to make Arctic production profitable, Shmal added.

Hydrocarbon reserves in the Russian Arctic are estimated at 100 billion tons of oil equivalent. According to experts, oil production in the Arctic shelf of Russia by 2030 will increase by 3.6 times – up to 2.2 million barrels of oil equivalent per day.

Extraction on the shelf requires significant investment, but because of the fall in oil prices and international sanctions, Russian companies began to review their plans, and their Western partners – to freeze joint projects on the shelf. In 2016, the Russian government decided to introduce a temporary moratorium on granting licenses to the Arctic shelf, which is still in force.

Russia’s Energy Minister Alexander Novak said earlier that the profitable oil price for production on the Arctic shelf is $70-100 per barrel.