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The development of the Arctic oil and gas resources has captured the attention of the world¡¯s leading western economies and major oil and gas companies in recent years. Newly published data about abundant oil and gas reserves on the Arctic shelf and in the deeper zones of the Arctic Ocean is garnering a lot of international attention and will undoubtedly open the next important chapter in the history of the Russian oil and gas industry. Russia stands a good chance of retaining the leading positions in the development of the Arctic resources. This argument is based on the following points.

Compared to other countries, Russia has the largest offshore area (about 4.5 million square kilometers), its oil and gas resources (both confirmed and estimated) far exceeding the Arctic resources of other coastal nations of the Arctic. According to Russian data which was provided on the basis of the results of seismic exploration and drilling performed during the Soviet days in the 1980s, the total volume of Russia¡¯s peripheral maritime facilities is estimated at 133.5 billion tons of standard fuel 100 billion tons of which are proved resources. According to estimates of the US Geological Survey service (USGS), Russia possesses the largest number of oil and gas reserves among the Arctic countries. USGS experts say that oil and gas-rich areas which Russia owns or for which it has put in claims store more than 250 billion barrels in oil equivalent. The largest portion of the Arctic reserves is concentrated in the West Siberian Basin, USGS says.

Russia boasts years-long Arctic shelf exploration experience. Undoubtedly, no other country can challenge Russia in this area. Russia has spent years on unique research related to the Arctic climate, the ice conditions in the Arctic, and hydrological and geological studies in the region. For this reason, Russia¡¯s experience in the study of the Arctic leaves competitors far behind. At the end of the 1970s Russia embarked on an ambitious program of ramping up seismic exploration efforts and drilling operations, mainly in the Barents and Kara Seas. As a result, Russian scientists identified more than 1,000 local sites and discovered 43 deposits, including the oil-rich Shtockman field, the Rusanovskoye gas condensate field, the Leningradskoye field in Western Arctic, and a number of large oil fields on the northeastern shelf of Sakhalin and in the Pechora Sea. The findings enabled researchers to establish the geological structure of sedimentary cover, identify and delineate the structure of geological elements, trace the history of their geological development, and provide qualitative and quantitative estimates of the oil-and gas bearing prospects of Russia¡¯s Arctic shelf. The conducted research enabled scientists to revise their assessments of the Arctic oil and gas potential towards a considerable increase in the future.

Russia has gained considerable experience in the development of oil and gas fields beyond the Arctic Circle and in the construction and maintenance of corresponding industrial, transport, and social infrastructure. The Yamal Peninsula, which has enjoyed the status of the world¡¯s largest gas cluster for decades, holds Russia¡¯s largest natural gas reserves accounting for up to 90% of Russian gas and 12% of oil. As the development of new oil and gas clusters enters a new stage, the attention of oil and gas companies is riveted on the Murmansk Region, where the projects to develop the Prirazlomnoye and Shtockman oil fields are under way.

Significantly, Russia boasts the necessary technology and potential to develop oil and gas deposits in the conditions of the Arctic. Recently, Gazprom started feeding gas in the Bovanenkovo-Ukhta gas pipeline via the Baydaratskaya Bay in order to secure natural gas supplies from rich gas deposits of the Yamal. The climatic and natural conditions in the Baydaratskaya Bay ¨C shallow depths, frequent storms, and complex sediments ¨C allow for gas prospecting and exploration efforts only several months a year. Russia has become a pioneer, both at home and abroad, in the construction of sophisticated gas pipelines on the seabed in the severe conditions of the Arctic.

Russia¡¯s projects to develop transport infrastructure in the Arctic include the creation of a perennial deep-sea hub on the basis of the Murmansk Sea Port, the construction of an unfreezing port in Indiga, a deep-sea port in Arkhangelsk, and a sea port for ice class vessels in Sabetta, one of the key transport infrastructure elements of the ambitious Yamal LNG project.

Russian companies contribute to the expansion of shelf development potential through establishing effective cooperation with foreign partners. The purpose of such efforts is to promote long-term and mutually beneficial integration. Rosneft has signed partnership deals with ExxonMobil, Eni and Statoil with a view to promote joint operations on the Russian shelf. In 2007, Gazprom picked Total and Statoil for partnership in the Shtockman project.

Russia also boasts its own offshore development experience. Lukoil has been successfully drilling on the Baltic shelf for years. In addition, the company is working on the Yuri Korchagin field in the Caspian. The V.Filanovsky field will be next. The Sakhalin 1 and Sakhalin 2 Projects have been as successful.

Since 2003, Novatek has been developing the Yurkharovsky oil and gas field, most of which is located on the Arctic shelf in the Kara Sea. Due to Novatek¡¯s project, Russia has maintained top positions in a marketable oil and gas production on the Arctic shelf since 2005