Putin gives Shell shot at Arctic oil

27th May 2011, Comments 0 comments

Anglo-Dutch energy giant Shell on Friday won the vital vote of confidence it needed from Prime Minister Vladimir Putin as it took direct aim at Russia's vast northern seas oil wealth.

Putin said he found Shell a "comfortable" and familiar partner with which Russia could jointly develop the massive Arctic energy fields held by the state-owned oil firm Rosneft.

But the country's de facto leader also left the door open for a return to Russia by Britain's BP after its $16 billion alliance with Rosneft spectacularly collapsed last week.

"It could," Putin said of the Anglo-Dutch company when asked if Shell might be Russia's new partner.

"We have been working with Shell for a long time and feel quite comfortable with them as a partner," news agencies quoted Putin as saying.

"But our work with BP is not finished either," he added.

The guessing game of who gets Russia's next mega-project carries immense implications as the world seeks to reduce its dependence on oil from the Middle East.

The untapped reserves of the Arctic have been estimated at above 400 billion barrels of oil equivalent -- more than 10 times the size of the Santos Basin fields now being developed by Brazil.

Rosneft's three Kara Sea fields are not expected to come on line for another two decades but BP was willing to hand over five percent of its shares and pay for the entire project for the chance to develop the hidden wealth.

Analysts say that several other companies have the same deep-sea drilling experience as BP and are now courting Putin with their best sales pitch.

The odds of US multinational ExxonMobil winning the contract have grown longer amid speculation that it was not ready to assume the domestic political risk of associating itself so closely with the Kremlin.

A spokesman for Shell said that company chief Peter Voser did not broach the subject of a stock swap when he flew into Moscow this week to meet the head of Rosneft and Russia's energy tsar Igor Sechin.

But government and Rosneft officials told the Vedomosti daily that Shell was now Russia's exclusive negotiating partner, suggesting it had got the inside track after BP dropped out.

Shell had already signed a "strategic agreement" with Rosneft in 2007 -- a deal that has yet to grow beyond joint work off Sakhalin Island in the Far East -- and is a known quantity to Putin.

News agencies also quoted Putin as saying that Shell "could" become Rosneft's partner on the same terms as BP.

Rosneft has long set its sights on becoming the world's largest oil producer and the deal negotiated with BP would have given the state champion its coveted prize.

Putin was careful too not to remove the British firm from the picture entirely by noting that BP had a long-standing history in Russia which would not end with the lapse of a single deal.

"Yes -- even in the Arctic," Putin said when asked where BP might work with Russia again.

"We have different options," he said. "But I think that these problems should be decided at the corporate level and not here."

Some analysts have suggested that BP may be hired as a contractor in the Arctic but not granted a stake in the fields themselves.

© 2011 AFP

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