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Home > Blogs > Anthony Harrington > Arctic oil: Russia rules, OK?

Arctic oil: Russia rules, OK?

Arctic oil: Russia rules, OK? Anthony Harrington

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The heavy handed Russian response to Greenpeace protesters' attempts to disrupt drilling by scaling Russia's flagship Arctic Drilling platform, the Prirazlomnaya, named after the field the platform is located on, should surprise no one. Oil guru and part time adviser to the Russian Energy Ministry, Dr. Kent Moors notes that the stakes the Russians are playing for are astronomically high, and a handful of environmental activists are not going to stand between Russia and its goal, not if Vladimir Putin has anything to do with it. For a glimpse of Putin's grasp of reasonable conduct see my earlier blog on Russia's treatment of the Yukos two - or, read former Yukos finance director.

Let's start with Moors' account of the story. In September 2013, Russia sent a fleet of MIR submersibles to "research" the Lomonosov Ridge, a geographical feature that lies at the bottom of the Arctic sea under 2.5 miles of Arctic ice. In what is likely to turn out to be the coup of the millennium, submersibles planted a titanium flag post on the Ridge, officially claiming large tracts of it as part of the Russian continental shelf. Why? Because the Ridge lies over what Moors says is $43 trillion worth of "Arctic oil", in oil, gas and equivalents. In case you have difficulty visualizing $43 trillion, Moors provides the helpful insight that a sum this large constitutes 80% of all the cash in the world right now. This would be a good time to read my earlier blog post on the threat posed to the Russian economy by the exponential growth of shale oil and gas drilling and prospecting around the world.

The point is that Arctic oil is a massive potential trump card for Russia, one that holds out the prospect of Russia retaining the position of being the dominant provider of oil and gas to Europe for decades to come. Of course, if Europe gets its act together on shale gas and fracking, then Russia's ability to set unrealistically high prices will still be under threat, which means my earlier point about the threat to the Russian economy stands. But, if you were Putin, you would doubtless much prefer to approach that problem with Arctic oil in your pocket, as it were. It is not clear how that plays, as fracking companies in the US have discovered, because when there is a massive surplus of supply over demand, prices crash and no one has pricing control.

Nevertheless, looked at from the Kremlin's perspective, $43 trillion in barrels of oil equivalent exploitable reserves is probably $43 trillion good reasons for jailing 30 activists on trumped up piracy charges. Now for the environmental case. The point made by Greenpeace (one of many, actually) is that, whereas oil companies have some idea of how to clean up an oil spill from a well in the North Sea or the Gulf of Mexico, no one anywhere has any idea how to clean up a spill that happens under the Arctic ice. The Russian oil company Gazprom attempts to refute this by pointing out that it will have icebreakers on hand to break up the ice, at which point standard surface oil clean up procedures can be used, plus much of the infrastructure where spillage could occur is actually located inside the Prirazlomnaya platform itself and so can be contained there. However, Greenpeace argues that Gazprom's safety standards are "a joke" and provides links to a rather scary video hosted on YouTube which show various scenes from the platform which hardly inspire confidence. In one, an escape ladder from the platform is smashed to pieces by the Arctic seas and washed away. Other clips feature deck areas strewn with tangled cables and, in one, a man wanders about the deck clutching a large bottle of blue liquid which the clip suggests could be moonshine. Hardly a fair and unbiased account, but certainly one calculated to alarm.

At the very least we have to recall that it is incredibly difficult to maintain the highest safety standards in a complex and physically challenging - not to say mind-numbingly cold and depressingly harsh - environment. The second law of thermodynamics tells us that you have to keep pumping energy into a complex system to stop it from deteriorating to a simpler, less ordered, more chaotic state. Judging from the clips, the Russian oil platform needs rather a lot of energy pumped into it if the world is not going to see the first ever Arctic oil spill sometime soon. However, considerations of this nature are as straw in the fire when a national government gets a sniff of a $43 trillion bonanza so you can be pretty certain that Putin and Russia are not going to let a handful of environmental activists derail Russia's best shot at economic super-stardom.


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Tags: Arctic oil , Gazprom , Greenpeace , Kremlin , Lomonosov Ridge , Prirazlomalay , Putin , Russia , shale gas , shale oil , Vladimir Putin , YouTube
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