Arkhangelsk Seeks Economic Revival

A number of oil, gas and forestry projects are being launched that could revive the flagging economy of the northern Arkhangelsk region, Governor Anatoly Yefremov said Monday.

But inadequate investment in the region, which is rich in forests, oil, natural gas, bauxite, diamonds and fish, has hindered the development of the region’s industries and kept standards of living low, Yefremov told a news conference in Moscow on Monday.

Total investment in the region totaled 4.2 billion rubles ($174 million) last year, according to figures from Yefremov’s administration.

Asked why the region was still heavily subsidized by the federal budget, Yefremov said, "We could become a donor [to the federal budget] today, if budgetary polices were revised."

The Arkhangelsk region is a shareholder in Rosshelf, a subsidiary of natural gas monopoly Gazprom, which is developing oil and gas fields on the shelf of the Barents and Karsk seas in the Arctic.

Yefremov said enterprises at the Severodvinsk defense complex have been contracted to construct drilling rigs at two Arctic fields, Prirazlomnoye and Shtokmanovskoye. The governor praised the project as a source of new jobs and a means to preserve the defense enterprises of Severodvinsk.

The Prirazlomnoye oil field, containing 80 million tons of oil per year, and the Shtokmanovskoye field with deposits of 3 billion cubic meters of natural gas are being developed on the basis of production sharing agreements, or PSAs.

PSAs are agreements on tax breaks made between the state and investors developing mineral resources.

Investment required for the Shtokmanovskoye project has been estimated at some $10 billion to $20 billion to build three marine gas production platforms and create the necessary coastal industrial infrastructure.

Yefremov complained that construction of the rigs has been delayed on account of inadequate financing.

The governor said Rosshelf has accumulated debts of $7 million and 4.34 million Deutsche marks ($1.88 million) to the defense enterprise Sevmash.

Yefremov identified foreign investment as a possible solution. Negotiations are being carried out with the German company Wintershall to provide investment for the development of Prirazlomnoye. A consortium of companies, including international participants, will develop Shtokmanovskoye.

Yefremov did not mention a two- year-old dispute between Canadian firm Archangel Diamond Corp. and domestic firm Arkhangelskgeoldobycha, or AGD, over who should possess the license to a $6 billion diamond field in the region. The Stockholm arbitration court is to rule on the rift in December.

Yefremov noted that the oil reserves in fields, to be developed jointly with the administration of the Nenets Autonomous District, are "colossal."

The Arkhangelsk region’s oil projects are concentrated in the Timan-Pechora region, which extends into the Komi Republic.

Sergei Yezhov, of the Independent Fuel and Energy Institute, said the distance of the fields in the Nenets district from markets and the lack of transportation infrastructure were major barriers to development. Only one field is under production, he said.