RS Brief news Continental shelf, precious stones await private investment

Continental shelf, precious stones await private investment

September 2012

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Private companies may be allowed to work on the continental shelf, if Prime Minister Dmitry Medvedev's suggestion from early August is taken on board. The Premier requested that a development programme for the shelf should be finished within three months.

According to Mr. Medvedev, the economic effect of the development of the continental shelf up to 2030 will amount to 8 trillion roubles, with the socioeconomic (or indirect) effect reaching 1.1 trillion roubles (34,5 billion USD). The annual oil production volume on the continental shelf will grow to 66.2 million tonnes by the end of the programme, compared with 13 million tonnes mined in 2011, and gas production will grow to 230 billion cubic metres, compared with the 2011 figure of 57 billion cubic metres.

The Prime Minister stated his view that the programme must include highly developed solutions to environmental issues that could be encountered when working on the shelf, as well as defining responsibility for correcting environmental damage and tax incentives, including for private companies. Also, according to Mr. Medvedev, a detailed study must be carried out regarding issues of exploring the continental shelf, and a proper system of control over already-issued licences must be introduced. Finally, the Russian Prime Minister drew attention to the issue of national security related to the development of the shelf.

The current law allows only state-run companies with over five years' experience to carry out work on the continental shelf. The companies that comply with these requirements are Gazprom and Rosneft, which have already concluded partnership agreements on developing the shelf with ExxonMobil (USA), Eni (Italy) and Statoil (Norway).

Meanwhile, the Russian Ministry in charge of natural resources, acting according to the instructions of Deputy Prime Minister Arkady Dvorkovich, has prepared amendments to the legislation to enable foreign companies to participate in the development of large deposits of gold, diamonds and platinum. This comes as a response to cases where foreign companies carrying out exploration work have discovered large deposits of precious metals and stones. Under the present legislation, a foreign investor in this position does not receive the right to develop the deposits they find. Moreover, the government can also remove the investor's right to subsoil use.

These draft amendments are meant to change the existing practice. According to them, if a foreign investor carrying out exploration, development and mining and using its own funds discovers a deposit containing up to 250 tonnes of gold, diamonds or platinum, then that investor is entitled to develop that deposit. RS