Sergey Aplonov: ’The Arctic is rich in hydrocarbons, but we don’t know the exact location of these resources’

Mr Aplonov, the Arctic shelf is one of the most promising hydrocarbon regions in the country. Despite this fact, its mineral and raw material resources have not been fully exploited for the Russian economy. In your opinion, what is the main reason for this situation?

There are two basic concepts in geology: projected resources that are only expected to be found based on indirect indications; and proven reserves that can be extracted from the ground. Resources are converted into reserves through geological exploration. Only then can we talk about the economic efficiency of a particular oil and gas project. In the Arctic, unlike anywhere else in the world, there is a huge difference between projected oil and gas resources and the small number of exploration sites where these resources can be found. In other words, we have reasons to believe that the Arctic is rich in hydrocarbons, but we do not know where these resources are located.

To find it out, it is necessary to conduct geological exploration works, which, as noted by the Deputy Prime Minister of the Russian Federation Yury Trutnev, have not been carried out to a sufficient degree in the Arctic. According to current legislation, geological exploration (seismic surveys, followed by exploratory drilling) shall be carried out by oil companies within the territories assigned to them under the licences issued by the state. The territory of the Russian Arctic shelf is over four million square kilometres, more than half of which are prospective oil and gas fields. To give an example, the cost of one exploration drill on the Sakhalin shelf, where climatic conditions are much milder than in the Arctic, is about five billion roubles. It might require dozens or hundreds of such drills before we locate a field. Considering the costs of geological exploration on the shelf, it is impossible to conduct high-quality works in all of the licensed sites in the Arctic.

Which current scientific developments can solve this problem?

Geology and exploration methods for oil and gas fields have developed over the last 30–40 years. The theory of hydrocarbon systems, principles of genetic analogue extension, and other methods have made it possible to conduct qualitative and, sometimes, quantitative analyses of some fields within the vast Arctic shelf of Russia. This has been achieved while having only a limited amount of data to predict the relative possibility of oil and gas reserves. Once these sites have been identified, the expensive geological exploration works may begin.

This, of course, does not mean that all oil and gas found on the shelf will be immediately extracted and sold. Of course, the commercial production of Arctic oil and gas is mostly unprofitable so far, and these projects are a matter for the future. However, a resource base is not created in one or two years. For example, one of the most successful recent business projects in the Arctic, Yamal LNG, is currently exploiting gas fields in the northern part of Western Siberia discovered 30–40 years ago. This means that the resource base should be prepared now to implement future offshore projects. The projected hydrocarbon resources allow us to take pride in the inexhaustible mineral resources. In fact, the explored oil and gas reserves, even if not yet extracted from the ground, already form an important economic category. They increase the capitalisation of Russian oil and gas companies by boosting the value of their shares, which in its turn contributes to the growth of the Russian economy.

Nowadays, ecological activists have a great influence on the formation of public opinion. They speak of the harmful impact of oil platforms in the Arctic shelf on the environmental situation in the region. As a geologist who has worked in this industry for a long time, can you tell us how justified their fears are?

It is too early to talk about Russian offshore drilling sites. There is only one full-scale production platform at the Prirazlomnoye oil field in the Pechora Sea. Offshore fields in Norway and the USA are developing more intensively. Environmental requirements for offshore oil production are extremely high around the world. Moreover, it is closely monitored by independent environmental services. Therefore, I think there is no reason to suggest that any oil drilling on the shelf is necessarily connected with a risk of environmental disaster similar to the one that happened in 2010 at the Deep Water Horizon drilling rig in the Gulf of Mexico. The oil companies themselves are most concerned to prevent such terrible accidents: British Petroleum has paid about 20 billion dollars for the elimination of the ecological damage in the Gulf of Mexico caused by the explosion.

However, it is largely public opinion that has led to the establishment of such high environmental standards for oil companies. I recall oil and gas production in the 1980s in the north of Western Siberia, where I went to work as a young specialist. I remember abandoned rusty drilling rigs and drive pipes, hundreds of kilometres of moss torn by cross-country vehicles, salt-covered ponds, and barbed wire left behind by the camps. Now such a thing is impossible to imagine. Oil companies observe ecological legislation to the letter. I would like to believe that this is largely due to pressure from the environmental activists.

In conclusion, I would like to say that the Russian Arctic shelf is still waiting for full-scale geological exploration. Once a reliable resource assessment of the shelf's hydrocarbons has been made, other issues of its economic development will also become clear. This will include the environmental impact on individual regions, cargo logistics, transport infrastructure and many others.