Russia seems intent on selling the world's very last barrel of oil. As other energy superpowers and petro-states around the world scramble to diversify their economies and establish a foothold in the burgeoning green energy transition, Russia has stalwartly refused to ease its reliance on its fossil fuels industry and is vying for the distinction of being the last man standing in an industry whose days are inevitably numbered.
This strategy could pay off for years or even decades to come. While the United Nations and the Intergovernmental Panel on Climate Change sounded the alarm bells that we have reached the point of no return for global warming, with an all-out, no-holds-barred pivot away from fossil fuels absolutely necessary to avoid the most devastating impacts of climate change, this kind of overnight revolution is highly unlikely. It's more than probable that the world still has an appetite for hundreds of billions of barrels of oil, and Russia will be more than happy to supply them, the UN's "code red for humanity" be damned. In fact, in the short term this strategy could provide a considerable boost to the Russian economy as competitors go green and fall away.
As part of Russia's push to dominate the future of the fossil fuel industry, the country is quickly ramping up its operations in the Arctic. This plan, worryingly, is a double whammy for the environment -- extracting and moving more fossil fuels that experts are begging the global community to keep in the ground while also exploiting one of the most vulnerable and essential ecosystems in the world, impacting the entire planet. The issue of drilling and shipping in the Arctic is such a controversial and divisive one that five of the six biggest banks in the United States (a group not typically known for its environmental leanings) have divested completely from drilling ventures in Arctic refuges.
Despite the reticence of the global community to get behind exploiting the Arctic as a source of fossil fuels and as a shipping route for goods including natural gas, Russia and China have leaned into the venture, which some are calling the "Polar Silk Road." At this moment, hundreds of ships are crowding onto the Arctic Coast around the Gydan Peninsula bearing construction materials for new fossil fuel extraction operations in some of the most delicate and essential ecosystems on Earth.
Russian gas company Novatek is currently developing its new Arctic LNG 2 project on the northern peninsula, where they are hard at work building a port terminal that will have the capacity to handle nearly 20 million tons of liquified natural gas per year. The Gydan Peninsula is just one of several strategic Arctic hotspots that Russia is rushing to develop. The Gulf of Ob and the Yamal Peninsula are also top-priority locations for the Kremlin's oil and gas strategy moving forward. Ships are now crowding into all of these locations to deliver construction materials and dredge deeper shipping lanes. "The Gulf of Ob is not the only place for an unprecedented industrial Arctic development," The Barents Observer recently reported. "A bit further east, in the Taymyr Peninsula, both oilmen and coal miners are busy with the development of terminal facilities for new major projects."
As world leaders, scientists, and environmentalists sound the alarms for a "code red for humanity" and warn that we must act now or never to reverse our path toward catastrophic climate change, Russia has made no secret of its plans to take advantage of the melting Arctic ice to open up new shipping lanes for its fossil fuels industry. "By year 2024, Russia intends to boost shipments on the Arctic route to 80 million tons per year," the Barents Observer recounts, "and by 2030 - to 150 million tons."
By Haley Zaremba for Oilprice.com
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Comments
Russia’s strategy to develop the huge oil and gas resources in the Arctic is absolutely right since the global economy will continue to run on oil and gas throughout the 21st century and probably far beyond.
While the catastrophic claims about climate change by the Intergovernmental Panel on Climate Change (IPCC) may or may not materialize, the global economy’s need for oil and gas is a reality, hence Russia’s keenness to develop the Arctic resources.
President Putin has long ago recognized the great importance of the Arctic for the Russian economy and the Russian oil industry. That is why he has been pouring hundreds of billions of dollars into the region. Thanks to the Arctic, Russia will maintain its position as the world’s energy superpower throughout the 21st century.
Despite the most intrusive US sanctions since 2014, Russia has achieved great success in the development of the oil and gas resources in the Arctic or what I describe as Russia’s ‘Wild West’ to borrow a phrase from American history.
Crude oil reserves in the Arctic are estimated at 17 billion tons of oil (equivalent to 124.6 billion barrels of oil) while natural gas reserves are estimated at 85 trillion cubic metres (3004 trillion cubic feet) based on current extraction technology according to Russia’s Ministry of Natural Resources.
If these are added to current proven oil and gas reserves, then Russia’s oil and gas reserves will mushroom to 231.8 billion barrels and 4375 tcf respectively. This means that Russia’s oil reserves will last until 2080 while gas reserves will last until 2101 at 2019 production levels and with current technology. Moreover, advances in oil extraction technology in coming years and a stepping up of exploration in the Arctic could lead to an upward revision of these reserves.
Russia’s success is exemplified by Novateck LNG company’s success. Novatek plans to build out its LNG export capacity up to 70 mtpa by 2030. This, in turn, dovetails into Russia’s plans for LNG production of 80-140 mtpa by 2035, which would be greater than that of the world’s two largest producers Qatar and Australia. Moreover, it will be possible to deliver LNG into northeast Asian markets on a sustained basis for ‘a little over’ $3 per million British thermal units (MMBtu).
By year 2024, Russia intends to boost oil shipments on the North Arctic route to 80 million tons per year (1.61 million barrels a day) and by 2030 - to 150 million tons (3.0 mbd).
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London