Rosnedra highlights lack of license awards - Russia

This article is extracted from International Oil Letter, Vol 25 issue 16, published 20 April 2009.

Russian subsoil agency Rosnedra has issued a stark warning regarding the domestic oil and gas industry. The agency believes that "A sharp drop in companies' revenues has already led to a massive refusal of participation in auctions and tenders, and threatens a colossal non-compliance with license agreements in terms of deadlines and volumes of exploration, production start-ups and output."

These predictions are made against the current background of a global economic downturn and lower crude prices, coupled with cuts in state financing in exploration. Rosnedra may have a point as the lack of interest in the first quarter of 2009, a period in which it claims some 90% of all new auctions failed due to a lack of bids, follows the halving of auctions for oil and gas fields in 2008. Earlier in April 2009, Rosnedra issued a caution on the Arctic shelf saying that "As a result of significant cuts to the budget for geological exploration, which were brought on by the financial crisis, the completion of geological and geophysical surveys of the outer boundaries of Russia's continental shelf in the Arctic Ocean is at risk of faltering."

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