The New York Times is reporting that Russia is hiring BP to do offshore drilling in the Kara Sea.
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.
Here's the map showing the area leased:
Why are they doing this?
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.
Or to put it more bluntly:
“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.”
Ah, peak oil is hitting Russia. This is especially bad combining since:
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.
And then we had Wikileaks show that the Saudis are overestimating their reserves.
According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described and the timeline for their production not as unrestrained as Aramco executives and energy optimists would like to portray. In a December 1 presentation at an Aramco Drilling Symposium, Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable. He then offered the promising forecast - based on historical trends - that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70 percent recovery.
OK. But why BP?
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.
Since the Americans and the Canadians are wary of Arctic offshore drilling the Russians and BP are striking a Faustian bargain. Shouldn't we be decreasing our demand for oil? It's like the drug problem. The issue is on the demand side since we cannot control what other countries do.