Rosneft tells Putin its new Arctic project will be biggest in global oil

The company's Vostok Oil project would include 100,000 new jobs, 15 new industry towns, 800 kilometers of pipeline and total investments of more than €144 billion.

Igor Sechin talks Vostok Oil with Vladimir Putin. (Kremlin.ru via The Independent Barents Observer)

Igor Sechin, head of Russia’s state oil company Rosneft, has worked with Russian President Vladimir Putin since the 1990s and is considered among the most powerful and influential men in the country. When the two close companions with decades of experience working together sat down Tuesday for a talk in the Kremlin, it was the Arctic that was on top of their agenda.

This time, it was the Vostok Oil project that was the key issue of discussion.

Tundra oil

Rosneft intends to develop large oil reserves on the broad tundra lands of the northern Ural region and export it through a projected seaport in the Taymyr Peninsula.

It will be the biggest project in the modern global oil industry, Sechin told Putin.

According to the Rosneft leader, the Vostok Oil will include the development of 15 new industry towns, two airports, a seaport, about 800 kilometers of new pipelines, 3,500 kilometers of new electricity lines and 2,000 MW of electric power capacity.

It will require 100,000 new jobs and lead to a 2 percent annual hike in national GDP, he explains.

To Arctic coast

The project is based on the development of several oil fields, including at least three in the Vankor area. The new pipelines and the projected seaport terminal will enable the partners to export an estimated 25 million tons oil per year through the Northern Sea Route.

The pipeline will also be projected to carry oil from Payakha, the fields located along the Yenisei River. By year 2030, a total of 100 million tons of oil can be exported through the pipeline and the new seaport in Taymyr. A fleet of top ice-class Arc7 tankers are to be built for the project, Sechin has previously explained.

Massive tax cuts

The oil company leader has the support he needs from the Kremlin. New Russian legislation paves the way for massive investments in the company’s new Arctic project, as well as several more giant petroleum investments in the region.

Rosneft and other oil developers will get large tax cuts that are to cover project development costs.

The legislation that in January was hammered through government includes measures that are to trigger the development of nine new huge Arctic hydrocarbon projects with investments a high as 14.7 trillion rubles (€210 billion). The Vostok Oil is the biggest of the projected new projects.

Northern Sea Route

On the backdrop of the new projects lies the Kremlin’s desire for a hike in shipments on the Northern Sea Route. Vladimir Putin in May 2018 made the Arctic shipping route a national priority and requested a total of 80 million tons of annual shipments on the route by year 2024.

According to Igor Sechin, Putin’s stress on the NSR that lies behind the development of the Vostok Oil.

“Vladimir Vladimirovich […], we have been requested to provide for shipping volumes on the Northern Sea Route and as part of our fulfillment of this task our company is along with partners working on developing a new oil and gas province in our country’s north, in the Taymyr Peninsula,” Sechin said.

The resource basis of the province is about five billion tons of oil, he made clear.

Indian buyers

More than 10 trillion rubles (€144 billion) will have to be invested in the area, and 2 trillion in the first project development phase.

Rosneft has over the last years worked actively with Indian partners and that country’s Minister of Petroleum & Natural Gas Shri Dharmendra Pradhan last month confirmed that Indian companies will take part in the Vostok Oil.

In addition to Indian partners, western companies will also take part, Igor Sechin told Vladimir Putin.

“There are a number of other western investors and we expect this to become a big, a huge international project.”

Support from Putin

“We count on the support from your side in this project,” Sechin underlined to the President.

Putin appears full of praise for Sechin’s new initiative.

“Igor Ivanovich, the project is indeed very big, and of course very promising. It includes the boost of national GDP and increase of shipments on the Northern Sea Route, and of course a strengthening of Russia’s positions in the Arctic.”

A the same time, he expresses a certain reservation.

“I wish you the best of luck, [but] make sure that you account for everything in the correct manner.”