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Unwanted Riches: Russia’s Continental Shelf Remains Unpopular among International Investors

This is an abridged version. The full text is avaiable to subscribers to The Russian Energy weekly.

Oil and gas resources on the Russian continental shelf account for almost one-third of the world’s offshore total, but foreign investors are not particularly enthusiastic about developing this wealth. If the Russian government actually wants these resources explored and developed, it will have to do something radical with the investment climate in their country.

A Modest Interest

According to a global survey of senior executives, polled by the Economist Intelligence Unit, Southeast Asia offers the greatest opportunities for oil and gas business in the next twelve months, followed by North America, Middle East, East Asia and Latin America. Only 13% of the polled executives admitted that opportunities may exist in Eastern Europe and CIS.

This modest interest does not fit the proportion of Russian oil and gas in the worldwide balance especially on the continental shelf. Initial inplace resources in Russian seas are estimated by the Ministry of Natural Resources at 90.3 bln toe, and initial recoverable reserves, at 16.5 bln t of oil and 73.8 trillion cubic meters of gas. It equals 22-27% of global offshore reserves.

The progress of bringing these reserves onstream leaves much to be desired. The world over, more than 1,300 offshore fields have been discovered and 300 of them are producing oil and gas. Production is underway in 60 countries, totaling at least 1 bln t of oil and 800 bcm of natural gas annually.

Russia’s offshore development is in a nascent stage. It is limited to two PSAs off Sakhalin and a few projects of Lukoil in the Caspian Sea and off Kaliningrad in the Baltic Sea.  

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