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Russia CP Solvency

Arctic

Russia is moving ahead with Arctic drilling projects—more oil and natural gas fields than the US—perm fails disagreements about standards


Kramer and Krauss 11 [Andrew E. Kramer is the Moscow correspondent for The New York Times and Clifford Krauss is the New York Times energy correspondent , “Russia Embraces Offshore Arctic Drilling”, 2/19/11, http://www.nytimes.com/2011/02/16/business/global/16arctic.html?pagewanted=all] alla

MOSCOW — The Arctic Ocean is a forbidding place for oil drillers. But that is not stopping Russia from jumping in — or Western oil companies from eagerly following. Russia, where onshore oil reserves are slowly dwindling, last month signed an Arctic exploration deal with the British petroleum giant BP, whose offshore drilling prospects in the United States were dimmed by the Gulf of Mexico disaster last year. Other Western oil companies, recognizing Moscow’s openness to new ocean drilling, are now having similar discussions with Russia.¶ New oil from Russia could prove vital to world supplies in coming decades, now that it has surpassed Saudi Arabia as the world’s biggest oil producer, and as long as global demand for oil continues to rise.¶ But as the offshore Russian efforts proceed, the oil companies will be venturing where other big countries ringing the Arctic Ocean — most notably the United States and Canada — have been wary of letting oil field development proceed, for both safety and environmental reasons.¶ After the BP accident in the gulf last year highlighted the consequences of a catastrophic ocean spill, American and Canadian regulators focused on the special challenges in the Arctic.¶ The ice pack and icebergs pose various threats to drilling rigs and crews. And if oil were spilled in the winter, cleanup would take place in the total darkness that engulfs the region during those months.¶ Earlier this month, Royal Dutch Shell postponed plans for drilling off Alaska’s Arctic coast, as the company continued to face hurdles from wary Washington regulators.¶ The Russians, who control far more prospective drilling area in the Arctic Ocean than the United States and Canada combined, take a far different view.¶ As its Siberian oil fields mature, daily output in Russia, without new development, could be reduced by nearly a million barrels by the year 2035, according to the International Energy Agency. With its economy dependent on oil and gas, which make up about 60 percent of all exports, Russia sees little choice but to go offshore — using foreign partners to provide expertise and share the billions of dollars in development costs.¶ And if anything, the gulf disaster encouraged Russia to push ahead with BP as its first partner. In the view of Russia’s prime minister, Vladimir V. Putin, BP is the safest company to hire for offshore work today, having learned its lesson in the gulf.¶ “One beaten man is worth two unbeaten men,” Mr. Putin said, citing a Russian proverb, after BP signed its Arctic deal with Rosneft, the Russian state-owned oil company. The joint venture calls for the companies to explore three sections in the Kara Sea, an icebound coastal backwater north of central Russia.¶ The BP agreement touched off little public reaction in Russia, in part because the environmental movement is weak but also because opposition politicians have no way to block or hinder the process.¶ The Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas, the United States Geological Survey estimates. According to a 2009 report by the Energy Department, 43 of the 61 significant Arctic oil and gas fields are in Russia. The Russian side of the Arctic is particularly rich in natural gas, while the North American side is richer in oil.¶ While the United States and Canada balk, other countries are clearing Arctic space for the industry. Norway, which last year settled a territorial dispute with Russia, is preparing to open new Arctic areas for drilling.¶ Last year Greenland, which became semi-autonomous from Denmark in 2009, allowed Cairn Energy to do some preliminary drilling. Cairn, a Scottish company, is planning four more wells this year, while Exxon Mobil, Chevron and Shell are also expected to drill in the area over the next few years.¶ But of the five countries with Arctic Ocean coastline, Russia has the most at stake in exploring and developing the region.¶ “Russia is one of the fundamental building blocks in world oil supply,” said Daniel Yergin, the oil historian and chairman of IHS Cambridge Energy Research Associates. “It has a critical role in the global energy balance. The Arctic will be one of the critical factors in determining how much oil Russia is producing in 15 years and exporting to the rest of the world.”¶ Following the template of the BP deal, Rosneft is negotiating joint venture agreements with other major oil companies shut out of North America and intent on exploring the Arctic continental shelf off Russia’s northern coast. That includes Shell, its chief executive said last month. Rosneft’s chief executive, Eduard Y. Khudainatov, said other foreign oil company representatives were lining up outside his office these days.¶ Artur N. Chilingarov, a polar explorer, has embodied Moscow’s sweeping Arctic ambitions ever since he rode in a minisubmarine and placed a Russian flag on the bottom of the ocean under the North Pole, claiming it for Russia, in a 2007 expedition.¶ “The future is on the shelf,” Mr. Chilingarov, a member of Russia’s Parliament, the Duma, said in an interview. “We already pumped the land dry.”¶ Russia has been a dominant Arctic oil power since the Soviet Union began making important discoveries in the land-based Tazovskoye field on the shore of the Ob Bay in Siberia in 1962. The United States was not far behind with the discovery of the shallow-water Prudhoe Bay field in Alaska five years later.¶ What is new is the move offshore.¶ The waters of the Arctic are particularly perilous for drilling because of the extreme cold, long periods of darkness, dense fogs and hurricane-strength winds. Pervasive ice cover for eight to nine months out of the year can block relief ships in case of a blowout. And, as environmentalists note, whales, polar bears and other species depend on the region’s fragile habitats.¶ Such concerns have blocked new drilling in Alaska’s Arctic waters since 2003, despite a steep decline in oil production in the state and intensive lobbying by oil companies.¶ In Canada, Arctic offshore drilling is delayed as the National Energy Board is reviewing its regulations after the gulf spill.¶ But Russia is pressing ahead. The central decision opening the Russian Arctic easily passed Parliament in 2008, as an amendment to a law on subsoil resources. It allowed the ministry of natural resources to transfer offshore blocks to state-controlled oil companies in a no-bid process that does not involve detailed environmental reviews.

Russia solves arctic oil development--only country to have acquired and shipped Arctic oil


Gertz 14 [Emily, Editor at Guardian News and contributor at Popular Science, “Russia Ships The World's First Load of Offshore Arctic Oil”, 4/18/14, http://www.popsci.com/article/science/russia-ships-worlds-first-load-offshore-arctic-oil] alla

Russia has announced its first shipment of Arctic offshore oil. Russian President Vladimir Putin watched oil loading from the Prirazlomnoye drilling platform onto a tanker Friday via video link, according to state-run ITAR-TASS, and celebrated the shipment as the beginning of a bigger Russian presence on world energy markets.¶ The 70,000 metric ton load (roughly 490,000 gallons) is, as far as we know, the world's first market-sized shipment of oil extracted from the floor of any marine body above the Arctic Circle. Offshore oil extraction has only become commercially viable in recent years, as advances in petroleum technologies have combined with warming temperatures to ease, slightly, the physical and financial challenges of drilling in the harsh Arctic environment.¶ Greenpeace and others have charged that the potential for an oil spill is too risky in the easily damaged Arctic environment, which includes important fisheries in the Barents Sea. They also argue that untapped supplies of fossil fuels should be left underground, in favor of developing energy sources that won't create greenhouse gas pollution and further destabilize the climate.¶ The Prirazlomnoye field is located about 38 miles off Russia's northwestern coast, in the Pechora Sea, the southeastern section of the Barents Sea. It holds an estimated 72 million metric tons of recoverable oil. The oil company Gazprom Neft operates the field, and has partnered with Shell on its overall Arctic offshore oil development.¶ Russia already produces more than 10 million barrels (420 million gallons) of oil daily, but intends for Arctic offshore strikes to maintain this level of production as its Western Siberian oil fields run dry, reports Reuters.¶ The Prirazlomnoye platform was the site of an anti-drilling protest last September, which ended when masked Russian paratroopers boarded the Greenpeace vessel Arctic Sunrise and arrested all 30 crew and activists. The demonstrators were ultimately released without criminal prosecution thanks to a parliamentary amnesty. But Russia has not given up the ship, which remains in Murmansk.¶ President Putin's apparent satisfaction about this offshore Arctic oil shipment seems particularly newsworthy set against his nation's recent, retro-futuristic geopolitical relations with Ukraine, which feature the seizure of Ukraine's Crimea peninsula in March, and subsequent threats to cut off natural gas shipments to Ukraine and the rest of Europe. (Russia is the major supplier of fossil fuels to Europe, according to the European Commission.) The former Soviet republic yesterday hosted a a renewable energy conference at its embassy in Washington, D.C.

Russia has major incentive to increase Arctic oil and natural gas drilling in the Arctic—new tax exemptions for drilling companies in the Arctic solve tech acquisition


Bennett 12 [Mia, is pursuing a PhD in Geography at the University of California, Los Angeles (UCLA). She received her MPhil (with Distinction) in Polar Studies from the University of Cambridge's Scott Polar Research Institute, where she was a Gates Scholar, “Russia looks to step up Arctic offshore drilling to reclaim oil-production throne”, 5/27/12, http://www.alaskadispatch.com/article/russia-looks-step-arctic-offshore-drilling-reclaim-oil-production-throne] alla

According to data from the Joint Organization Data Initiative, Saudi Arabia has surpassed Russia as the world’s largest oil producer, a position which the latter country held for six years.¶ The Middle Eastern kingdom’s oil production rose to a 31-year high last year, while Russia’s dropped. As Matthew Hulbert writes in his analysis for Forbes, “If we wanted any further evidence why the Arctic really matters for Russia, we just got it.” Declining production in Western Siberia can only be replaced by drilling for offshore oil, in Russia’s Arctic. Whereas Saudi Arabia has spare capacity, allowing it to ramp up production, Russia is already producing to the fullest extent possible.A drop in production is a scary thing to contemplate for President Vladimir Putin, who began his third presidential term earlier this month. He has succeeded in large part by placating the middle class with economic growth and stability. Since oil and gas compose two-thirds of Russia’s exports, both the price of oil and volume of oil the country exports are crucial to maintaining his power. The price of oil has held steady lately at over $100 per barrel.¶ But what has changed in recent years are two things. First, Putin keeps promising more and more, requiring a higher cost per barrel of oil to make ends meet. With increases to pensions and a 33 percent hike in the defense budget, the Economist reports that the country will need oil to sit at $130 a barrel to balance its budget, which is funded about 60 percent by oil and gas taxes. Second, the discovery of new sources of oil has slowed down, and offshore oil production will not begin in earnest until 2020.¶ The Kremlin reports that Russian oil production has has remained near the highs reached after the fall of the USSR, but latest figures show that not only has production slowed, it has actually decreased.¶ As you can see from the chart above, the difference between Saudi and Russian oil production is minimal.¶ However, the recent drop in Russian oil production is quite large, at 5 percent between December 2011 and January 2012 -- a decline of 500,000 barrels, which Mark Adomanis of Forbes says is “the equivalent of the total production of a country like Argentina or Ecuador disappearing overnight.” He questions whether the data is accurate, since there were no reports of problems within the Russian oil industry that would cause such a dramatic drop.¶ Regardless of whether production has fallen off that much and that quickly, Putin knows that new sources of oil need to be exploited. He has announced that exports from new offshore fields will enjoy business-friendly tax rules for at least the next 15 years, and he is even considering allowing private companies to receive licenses to drill. This would be a big change for a country in which the oil and gas industries are controlled by state-owned companies Rosneft and Gazprom.¶ The new tax rules, which will tax exports less the more difficult the oil is to extract, are designed to foster $500 million in investment in offshore oil. Production will be ranked according to four different categories, with the most challenging areas being the Laptev Sea, East Siberia, Bering Sea, the northern part of the Kara Sea, and the Sea of Okhotsk, and the second most difficult areas in parts of the Arctic such as the Barents Sea, Pechora, and the southern part of the Kara and Okhotsk seas, including the continental shelf of Sakhalin.¶ In recent weeks, Rosneft has announced that it will team with Exxon Mobil in the Kara Sea and the Italian oil company Eni in the Barents Sea. Tax breaks will also probably encourage Statoil and Total to resuscitate the Shtokman natural gas project, in which they have stakes. It had been put on hold due to uncertainty with regard to tax regulations.¶ All of this could bode well for Russian offshore oil and gas production, but if the government lowers taxes, the country’s budget will not get as big a boost as it otherwise would have from such development.¶ Putin will have to strike a balance between inviting investors to help exploit resources on the continental shelf -- which Russia does not have the know-how to do alone -- and balancing the budget.¶

Russia solves Arctic exploration and development


Ebinger et al 14 [Charles Ebinger is the director of the Energy Security Initiative at Brookings Institute, John P. Banks is a senior fellow at Brookings Institute, Alisa Schackmann is a researcher at the Brookings Institution's Energy Security Initiative, “Offshore Oil and Gas ¶ Governance in the ¶ Arctic”, March 2014, http://www.brookings.edu/~/media/Research/Files/Reports/2014/03/offshore%20oil%20gas%20governance%20arctic/Offshore%20Oil%20and%20Gas%20Governance%20web.pdf] alla

In February 2013, Russia released its first Arctic ¶ strategy through the year 2020, emphasizing the ¶ importance of the Arctic region for national security, economic growth, and improvement of ¶ jobs and quality of life.29 In particular, the strategy focuses on regional infrastructure and the ¶ development of oil and gas deposits in the continental shelf. Russia has the greatest potential for Arctic ¶ offshore oil and gas with 52 percent of all assessed ¶ oil, natural gas, and natural gas liquids in the region. By 2020, Russia intends to study and develop ¶ the offshore fields in the Barents, Pechora, and Kara ¶ Seas as well as in the Yamal and Gydan Peninsulas. ¶ The government is also establishing a state program ¶ for mineral exploration and development in the ¶ Arctic shelf to tap known resources of chrome, zinc, ¶ manganese, titanium, aluminum, tin, and uranium. ¶ Offshore hydrocarbon production has already ¶ commenced: the Kirinskoye gas field in the Sea of ¶ Okhotsk began production October 2013, and the ¶ Prirazlomonoye oil field in the Pechora Sea started production in December 2013.31 ¶ Other projects are also moving forward. Moscow is seeking ¶ partners for Rosneft and Gazprom to develop off-shore oil and gas, and there has been considerable ¶ interest. In the wake of a settlement of Norway’s ¶ disputed maritime boundary with Russia, Rosneft ¶ signed a $2.5 billion agreement in May 2012 with ¶ Norway’s Statoil to explore a field in the Barents ¶ Sea.32 ¶ The China National Petroleum Corporation ¶ signed a deal in March of 2013 to explore three ¶ offshore oil fields with Rosneft, and China is assessing other arrangements to increase its oil and ¶ gas links with Russia.33¶ In perhaps the most significant development, ExxonMobil signed a Strategic Cooperation Agreement with Rosneft in August 2011 which was subsequently expanded in February 2013. While little ¶ noted at the time, the original agreement included ¶ exploration rights for hydrocarbon resources in ¶ three blocks in the Kara Sea covering more than ¶ 125,000 square kilometers, an area equal in size to ¶ the total leased acreage in the U.S. Gulf of Mexico. Under the extended agreement, ExxonMobil ¶ received access to an additional 600,000 square ¶ kilometers across seven new blocs in the Chukchi, Laptev, and Kara Seas, all regions considered ¶ among the world’s most promising and least explored offshore areas. The agreement also offered ¶ Russia participation in some of some of ExxonMobil’s acreage in Alaska. As part of the February ¶ 2013 agreement with Rosneft, ExxonMobil agreed ¶ to study a prospective LNG project in Russia’s Far ¶ East and to collaborate with Rosneft in establishing ¶ an Arctic Research Center.34


No chance the perm solves—Crimean tensions, military buildup, and conflicting interests


Friedman 14 [Uri, a senior associate editor at The Atlantic, where he oversees the Global Channel, “The Arctic: Where the U.S. and Russia Could Square Off Next”, 3/28/14, http://www.theatlantic.com/international/archive/2014/03/the-arctic-where-the-us-and-russia-could-square-off-next/359543/] alla

In mid-March, around the same time that Russia annexed Crimea, Russian officials announced another territorial coup: 52,000 square kilometers in the Sea of Okhotsk, a splotch of Pacific Ocean known as the "Peanut Hole" and believed to be rich in oil and gas. A UN commission had recognized the maritime territory as part of Russia's continental shelf, Russia's minister of natural resources and environment proudly announced, and the decision would only advance the territorial claims in the Arctic that Russia had pending before the same committee.¶ After a decade and a half of painstaking petitioning, the Peanut Hole was Russia's. Russian officials were getting a bit ahead of themselves. Technically, the UN commission had approved Russia's recommendations on the outer limits of its continental shelf—and only when Russia acts on these suggestions is its control of the Sea of Okhotsk "final and binding."¶ Still, these technicalities shouldn't obscure the larger point: Russia isn't only pursuing its territorial ambitions in Ukraine and other former Soviet states. It's particularly active in the Arctic Circle, and, until recently, these efforts engendered international cooperation, not conflict.¶ But the Crimean crisis has complicated matters. Take Hillary Clinton's call last week for Canada and the United States to form a "united front" in response to Russia "aggressively reopening military bases” in the Arctic. Or the difficulties U.S. officials are having in designing sanctions against Russia that won't harm Western oil companies like Exxon Mobil, which are engaged in oil-and-gas exploration with their Russian counterparts in parts of the Russian Arctic.¶ In a dispatch from "beneath the Arctic ocean" this week, The Wall Street Journal reported on a U.S. navy exercise, scheduled before the crisis in Ukraine, that included a simulated attack on a Russian submarine. The U.S. has now canceled a joint naval exercise with Russia in the region and put various other partnerships there on hold.¶ This week, the Council on Foreign Relations published a very helpful guide on the jostling among countries to capitalize on the shipping routes and energy resources that could be unlocked as the Arctic melts. The main players are the countries with Arctic Ocean coastlines: Canada, Denmark (Greenland), Norway, Russia, the United States (Alaska)—and, to a lesser extent, Finland, Iceland, and Sweden. These nations have generally agreed to work together to resolve territorial and environmental issues. But some sovereignty disputes persist, including American opposition to Russia's claims to parts of the Northern Sea Route above Siberia.¶ Here's CFR's infographic on where the Arctic's shipping and natural-resource potential is, and where the "Arctic Five" are most at odds with each other (you can even layer summer sea ice onto the map!):¶ "Few countries have been as keen to invest in the Arctic as Russia, whose economy and federal budget rely heavily on hydrocarbons," CFR writes. "Of the nearly sixty large oil and natural-gas fields discovered in the Arctic, there are forty-three in Russia, eleven in Canada, six in Alaska, and one in Norway, according to a 2009 U.S. Department of Energy report."¶ "Russia, the only non-NATO littoral Arctic state, has made a military buildup in the Arctic a strategic priority, restoring Soviet-era airfields and ports and marshaling naval assets," the guide adds. "In late 2013, President Vladimir Putin instructed his military leadership to pay particular attention to the Arctic, saying Russia needed 'every lever for the protection of its security and national interests there.' He also ordered the creation of a new strategic military command in the Russian Arctic by the end of 2014."¶

Russia is defending its Arctic territories—new in investment in security and governmental cohesion


RT 14 [RT is an international multilingual Russian-based television network, “Russia to create united naval base system for ships, subs in Arctic – Putin”, 4/22/14, http://rt.com/news/154028-arctic-russia-ships-subs/] alla

A united system of naval bases for ships and next-generation submarines will be created in the Arctic to defend Russia’s interests in the region, President Vladimir Putin said.¶ He urged the government to provide full state funding for the socio-economic development of the Russian Arctic through 2017-20.¶ Putin said that a separate state agency should be created to implement Russian policy in the Arctic and to improve the quality of governance and decision-making in this area.¶ “We do not need a bulky bureaucratic body, but a flexible operational structure, which will help better coordinate the activities of ministries and departments, regions and businesses,” he said.¶ At a Russian Security Council meeting Tuesday, the president said that suggested “strengthening of the naval component of the Federal Security Service (FSB) border guard group.”¶ “At the same time, we should strengthen the military infrastructure. Specifically, I’m referring to the creation of a united system of naval bases for ships and next-generation submarines in our part of the Arctic,” he added.¶ Putin emphasized that even the smallest aspects of the integrated security system in the Russian Arctic needed attention.¶ “All security issues should be thoroughly worked out during multiagency exercises and training sessions, in which the units of the Defense Ministry, Emergencies Ministry and other structures should take part on a regular basis,” Putin said.¶ “Russian oil and gas production facilities, loading terminals and pipelines in the Arctic must be protected from terrorists and other potential threats,” he added.¶ "It makes sense to create a body similar in status to the state commission with broad authority, as it was previously done for the Russian Far East," the president said, adding that he would await specific proposals from the government.¶ ‘Moscow must safeguard every part of Russian Arctic shelf’¶ The president urged Russian experts to “be active in bilateral and multilateral consultations with governments of the Arctic states and assert every piece of the continental shelf of the Russian Arctic marine areas.”¶ Putin said that Russia is already successful in this field, as the country managed to come up with a strong argument to prove its indisputable right to a piece of land in the Sea of Okhotsk.¶ During the 33rd session of the UN Commission on the Limits of the Continental Shelf in March, Russia staked a claim for the area of “52,000 square kilometers in Sea of Okhotsk, which is a continuation of Russia’s continental shelf,” he said.¶ The problem of establishing the international legal border of the Russian continental shelf in the Arctic Ocean requires urgent and careful attention, the president said.¶ ‘Northern Sea Route to become effective and profitable’¶ Putin said that the construction of new nuclear and diesel icebreakers should be accelerated to develop an effective economic model for the Northern Sea Route. ¶ “The turnover of the Northern Sea Route must be at 4 million tons by 2015,” he said. ¶ The president urged the speedy completion of modern navigation infrastructure, communications, technical services and emergency care to be established along the Northern Sea Route – from Russia’s Far East to Murmansk on the Barents Sea.¶ “We need to make sure that it would be profitable and convenient for shipping companies to operate under the Russian flag, so that the majority of transport in the Arctic would be carried out by vessels under our jurisdiction,” he stressed.¶ The discovery of large hydrocarbon deposits in the Arctic has sparked international competition over the region’s resources. ¶ Regional powers are quickly filing claims for the sea shelf, with Russia preparing to preparing to file a bid for 1.2 million square kilometers of Arctic waters to the UN later this year.¶ The melting Arctic ice cap has opened shipping routes and made the exploration for resources at the bottom of the world’s smallest ocean a real prospect. ¶ The North Pole icecap has decreased by 40 percent since 1979, opening up two shipping routes, the North Sea route and the Northwest Passage, with extremely high economic potential. ¶ Approximately 30 percent of the world’s undiscovered natural gas and 15 percent of its oil lie in the Arctic. ¶ But an estimated 84 percent of the Arctic’s 90 billion barrels of oil and 47.3 trillion cubic meters of gas remain offshore. ¶ According to the UN’s sea convention, countries have sovereign rights to resources within 200 nautical miles of its territorial waterways. ¶ There are five countries with territories near the Arctic: Canada, Denmark, Norway, Russia and the US. ¶ Russia has been seeking to secure and reinforce its military presence in the Arctic for some time now, after other nations started to express interest in the region’s vast resources. ¶ The Basic Concept of State Policy in the Arctic, approved in 2009, outlined the creation of a dedicated military force as a primary objective.


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