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Gazprom and Rosneft ally on Russia Continental Shelf conquest

Rosneft and Gazprom signed Cooperation Agreement

Gazprom and Rosneft used the opportunity of the XI International Investment Forum in Sochi, Russia, to sign a Cooperation Agreement for the joint pre-development of the offshore oil and gas fields located in the Russia Continental Shelf (RCS).

The exploration and production within the Continental Shelf (CS) of each country is regulated by the United Nations, Oceans & Law of the Sea (UNCLOS) published on August 29th, 1980.

According to the definition of the Article 76, paragraphs 4-7 of the Convention, the rights of a State for exploration and production may go far beyond the maritime Exclusive Economical Zone (EEZ) of 200 nautical miles to reach the outer edge of the continental margin in the limit of 350 miles (500 kilometers).

When voted by the United Nations in the 1980s, the consequences in Russia where limited since oil and gas resources were fully available and at cheap price.

In addition the offshore technology was still in early age for considering drilling in Russia Continental Shelf (RCS) while Russian onshore resources were just ramping up at that period.

But today Russia is in a different context where the oil and gas fields actually in production are maturing and should turn in depletion on the next three-five years.

In parallel the newly elected President Putin is founding the economical and social development of its country on the same period (4% GDP) with the resources expected from its natural resources in beginning with oil and gas.

Gazprom drew lessons learnt from Shtokman

The Shotkman project was supposed to be the spearhead of the new fields conquest, but in fact it revealed all the:

 – Challenges of the exploration in Arctic conditions

 – Limits of the Russian onshore infrastructures to support such a project.

As bad news never come alone, in addition to shelf the Shotkman project Gazprom has to renegotiate some of its natural gas contracts under the pressure of the US shale gas threat.

In parallel Rosneft was signing strategic alliances with international oil companies (IOCs) with ExxonMobil, Eni, and Statoil to explore the Russia Continental Shelf (RCS) in Arctic.

No doubt that ExxonMobilEni, and Statoil will have a significant contribution to overcome the challenges of the Arctic exploration.

According to the term of the Agreement, Gazprom and Rosneft will jointly search the most effective methods, ways and solutions to enhance the exploration and production in the Russia Continental Shelf (RCS) including:

 – Onshore infrastructures

 – Offshore projects frame work

 – Hydrocarbons transportation

 – Storage and offloading facilities

 – Emergency prevention

Rosneft to speed up and reduce costs in Arctic E&P

Gazprom and Rosneft Cooperation Agreement will be supported by a Cooperation Plan covering three chapters:

 – Organization and optimization of the Research & Development and the Engineering services in geology exploration

 – Deployment of joint infrastructures to support offshore operations, such as shipyards and all facilities to build offshore platforms, pipelines and storage facilities

 – Formalization of measures and practices in favor of the Health, Safety and Environmental (HSE) protection.  

This Cooperation Agreement based on sharing technologies, research resources and good practices may pave the way to a second agreement to share equipment and personnel in offshore operations. 

The actual partnership and its potential expansion into offshore operations resources sharing fall under the umbrella of the Strategic Cooperation Agreement signed by Gazprom and Rosneft in November 2006 and enforced up to 2015.

In signing this Cooperation Agreement Gazprom may expect to gear up again in exploration and production activities in Arctic and Rosneft should benefits from the synergies between both companies to boost its alliance with ExxonMobilEni, and Statoil and to reduce the capital expenditure for the development of the onshore infrastructures to support the Russia Continental Shelf (RCS) conquest.



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