Medvedev Discusses Arctic Drilling, Telecoms With Norway

APPresident Dmitry Medvedev shaking hands with Norwegian Prime Minister Jens Stoltenberg, right, in Oslo on Monday, April 26.

President Dmitry Medvedev invited Norway's Statoil to explore the Prirazlomnoye oil field during a two-day state visit Monday, as Russia seeks to harness foreign expertise for drilling in the Arctic.

"We will together explore the Prirazlomnoye oil field in the Pechora Sea and [carry out] a number of other projects," he said Monday during a meeting with Norwegian businessmen in Oslo.

The announcement came as a surprise because the last time Gazprom mentioned a chance of joining forces with a foreign partner at the field was in 2008. Prirazlomnoye, long hoped to be a testing ground for developing Russia's own Arctic-proof technology, is estimated to contain 46.4 million metric tons of extractable oil resources.

Gazprom, whose 100 percent subsidiary Sevmorneftegaz fully owns the field, has already done some preparatory work since announcing plans to produce oil there in 2001. It's been building some onshore facilities and commissioned a giant drilling rig that is expected to sail to the site next year.

Sevmorneftegaz is the same company that holds the license for the Shtokman gas field in the nearby Barents Sea, which Gazprom and partners — Statoil and France's Total plan to tap together. They earlier this year pushed back the start of production by three years to 2016.

After Medvedev's announcement, Statoil looks set to have another challenging project to tackle in Russia in the meantime, depriving Russia of the chance to fully boast homegrown Arctic development technology.

Russia needs the foreign participation as it lacks expertise in drilling in Arctic projects, said Alexei Kokin, senior oil analyst at Metropol.

"Russia has drilled on the far eastern shelf, for example, but never extracted oil fr om the Arctic sea shelf like that one," he said. "So it will appreciate Norwegian knowledge and experience in the project."

The project could cost roughly $10 billion, he said, and Russia may likely give up to 50 percent minus one share participation in the project to motivate Norway.

"The logistics of the project have not been calculated, so it is still a question as to whether Norway will agree to it," he said.

Statoil chief executive Helge Lund reacted positively to the invitation. “This is a project we’ve discussed for many years, so I think this was a positive signal,” Lund said, Bloomberg reported. “We will certainly review it and discuss it with our colleagues in Russia.”

Calls to Gazprom press service went unanswered Monday evening.

Medvedev is slated to discuss a bevy of other bilateral issues, presidential aide Sergei Prikhodko said Sunday. "Among the key issues is cooperation in energy, fishing, environment protection, nuclear and radiation security. The delimitation of sea territories in the Barents Sea and the Arctic Ocean will be given special attention."

Near the top of the list may be cooperation on nuclear security, which the Norwegian side sees as the key issue in bilateral relations. Norway has assisted Russia in dismantling five decommissioned nuclear submarines and replacing highly radioactive strontium batteries with solar panels in 180 lighthouses in northwestern Russia. Oslo also provided training and safety equipment to nuclear power plants in the Kola Peninsula and Leningrad region, Foreign Minister Jonas Gahr Store said in a statement April 23.

Since 1995, Norway's parliament has allocated about 1.5 billion Norwegian kroner ($254 million) for nuclear safety cooperation with Russia.

Another key issue will be Russia's border with Norway in the resource-rich Barents Sea, a topic Russia is especially concerned with, Prikhodko told journalists Sunday.

The two countries have been in talks for about 30 years on divvying up the Barents Sea territory, which is located on the oil- and gas-rich Arctic shelf. A number of Russian fishing vessels have been detained by the Norwegian coast guard over the years for various violations, raising tensions between Moscow and Oslo. In 2006, Russia temporarily banned the imports of fish from four Norwegian enterprises in what was largely seen as a political move.

Russia and Norway can find a “reasonable compromise” to the dispute, Medvedev said in an interview with Norway's Aftenposten, which was posted on the Kremlin web site.

The border issue will be an important discussion point during Medvedev's visit, but there is not likely to be any agreement signed this time, said Indra Overland, head of Russian and Eurasian Studies at the Norwegian Institute of International Affairs, as the negotiations are complex and still ongoing.

A more pressing concern for the Norwegian business community will be discussions about Russia's investment climate, Overland said.

"The recent resolution of the Telenor and Alfa Group dispute is a good achievement, but the Norwegian side wants to know how predictable Russia's business climate will be in the future," Overland said.

Norwegian Telenor and Altimo, a telecoms subsidiary of Russia's Alfa Group, both shareholders of a Russian mobile operator VimpelCom, agreed to end a five-year disagreement last October by settling up a joint venture Vimpelcom Ltd. Critics say Alfa used the Russian court system to punish Telenor for not allowing VimpelCom to expand into Ukraine.

On Tuesday, the countries are expected to sign a number of bilateral agreements, including a document to provide easy border crossing for 40,000 Russians and 9,000 Norwegians living within 30 kilometers from the 200-kilometer border. Other deals to be signed include agreements on energy efficiency, environment protection, education and cooperation between law enforcement agencies, Prikhodko said.

Medvedev, accompanied by his wife Svetlana, arrived in Gardermoen Airport in Oslo Monday morning, wh ere they were received by King Harald and Dag Terje Andersen, president of the Norwegian parliament.

Medvedev paid homage to Norwegian war veterans at the National Defense Museum. Later in the afternoon, the first couple, accompanied by King Harald and Queen Sonja, visited a monument erected in memory of fallen Soviet soldiers.

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