Norway, Russia on collision course over Arctic oil drilling
London (Platts)--27May2015/621 am EDT/1021 GMT
* Relations worsen, with Ukraine crisis, sanctions
* Statoil pushes on with Rosneft cooperation
* Oil developments in Arctic seen as key
Norway's previously long-standing cordial relations with Russia have
deteriorated to the point that there is a real chance that simmering
feelings could escalate, leading to a breakdown of cooperation in the
oil and gas sector.
So far, despite the heightened tension between the east and west over
the Ukraine conflict, both countries have managed to maintain their
mutual interests.
But in recent months sharp diplomatic incidents involving the remote
Arctic Svalbard islands have ratcheted up the tensions between Moscow
and Oslo to what some experts say are potentially dangerous levels.
Both sides have a great deal to lose.
In 2010, Norway and Russia agreed on a compromise on the delimitation
line in the Barents Sea, freeing up a 40-year-old border dispute that
had effectively seen the development of oil and gas resources frozen.
Cooperation since then in the oil space has increased.
State-controlled Statoil and Rosneft in 2012 signed a cooperation
agreement to jointly explore offshore frontier areas of Russia and
Norway and to conduct joint technical studies on two onshore Russian
assets.
Two months ago, Statoil said it was continuing its move to deepen its
relations with Rosneft, despite international sanctions against the
latter, confirming it was planning to drill four wells in Russia with
Rosneft in 2015 and 2016.
Statoil argued the activities in Western Siberia and the Sea of Okhotsk
did not breach any of the sanctions and Statoil was in continuous
dialogue with authorities to ensure that it was sanctions-compliant and
to get authority approvals.
There have also been moves in the opposite direction in recent years.
Russia's second biggest oil producer Lukoil has been in Norway for the
last couple of years with an office in Oslo and has taken interests in
two exploration licenses, one with Sweden's Lundin Petroleum as operator
and the other operated by Centrica.
Rosneft also has a stake in a license in the Barents Sea operated by
Statoil.
Confrontation fears
But recent events suggest confrontation about new developments may be on
the horizon.
The Norwegian oil ministry earlier in the year launched its 23rd
licensing round, which included some blocks in waters offshore Svalbard.
This month it emerged that Russia sent a sharp diplomatic note to the
Norwegian foreign ministry saying Norway had violated a treaty by
offering drilling opportunities in those blocks.
Russia claims the Svalbard Treaty of 1920, signed by 40 countries
including it and Norway, covers Svalbard's waters and Moscow must be
consulted about any activity there.
Norway argues Svalbard is part of the Norwegian Continental Shelf and it
needs no one's permission to offer the blocks. So far neither side is
backing down.
Norway's Foreign Minister Borge Brende told a newspaper his government
alone manages resources on the Norwegian shelf, and it was not
interested in consulting with other countries' governments.
Then four weeks ago Russian deputy Prime Minister Dmitry Rogozin, who is
banned from visiting Norway, the US and the EU due to his involvement in
Ukraine's destabilization, suddenly visited Svalbard.
Norway's government summoned Russia's ambassador to explain.
Professor Godzimirski, at the Norwegian Institute of International
Affairs, said Rogozin's visit was clearly designed as a provocation.
Frederic Hauge, president of the Oslo-based Bellona Foundation, said
Norway must back down and withdraw the disputed blocks.
"This is really hot stuff. I am very afraid of what's happening. We must
reduce the geopolitical conflict," he said.
Others take a more measured view, saying that economic self interest and
pragmatism will continue to triumph over politics.
"Of course it can escalate further," said analyst Espen Erlingsen at
consultancy Rystad Energy.
"But my opinion is that they will come to an agreement. They will not
allow it to disrupt oil and gas cooperation. It is too important for
that to happen."
--Patrick McLoughlin,
newsdesk@platts.com
--Edited by Maurice Geller,
maurice.geller@platts.com
© 2015 Platts, The McGraw-Hill Companies Inc. All rights reserved.
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