Russia Lining Up Investors for Arctic Drilling

In April Russian President Vladimir Putin made public his plans to attract foreign investment to Russia’s Arctic. As reported in Oil Change International, Putin has set his sights on exploiting Russia’s Arctic oil fields while their is still a demand for oil.

“Offshore fields—especially in the Arctic—are without any exaggeration our strategic reserve for the 21st century,” Putin told a meeting attended by the heads of Rosneft and Gazprom.

Putin intends to attract international investors with a package of lucrative tax breaks. A new report from Lloyds of London says the region is likely to attract $100 billion investments in the coming decade. Lloyds of London is the world’s largest insurer. The British think tank, Chatham House was also involved in the preparation of the report.

The report explicitly warns that this investment could have harmful consequences on the Arctic’s fragile ecosystem.

Richard Ward, Lloyd’s chief executive, urged companies not to “rush in [but instead to] step back and think carefully about the consequences” of drilling in the Arctic.

The report singles out a potential oil spill as the “greatest risk in terms of environmental damage, potential cost and insurance.” The insurers believe cleaning up oil spills, particularly in ice-covered areas, would present “multiple obstacles, which together constitute a unique and hard-to-manage risk.”

The report also warns that various wildlife would be severely impacted by oil development in the Arctic. This includes the migration patterns of caribou and whales. In addition to spills, ecosystem damage could come from “the construction of pipelines and roads, noise pollution from offshore drilling, seismic survey activity or additional maritime traffic as well as through the break-up of sea ice.”

Lloyd’s says it is essential that there is more investment in science and research to “close knowledge gaps, reduce uncertainties and manage risks.” It has urged companies to “think carefully about the consequences of action” before exploring for oil in the region.

Oil is a destructive resource that is harmful to the planet, but that resource in an environment like the arctic and the possible damage is unacceptable.