“Rosgeologiya” would deny benefits after receiving a letter from Sechin to the Kremlin

The Ministry of environment is preparing to deprive “Rosgeologiya” privileges in obtaining subsoil for oil and gas exploration. In a draft order of the Ministry, after approval of which any company can get for no more than three exploration sites on land and offshore on the basis of an application in Rosnedra.

On a tip from Sechin

From March 2015 the advantage over other companies, including “Rosneft” and “Gazprom”, when you receive the rights to oil and gas exploration of mineral resources without proven reserves of hydrocarbons — the “Rosgeologia”. Then according to the order of the Ministry a license to unexplored areas of Unallocated funds, potentially containing hydrocarbons, can be obtained without auctions and tenders 100-percent state-owned companies whose primary activity is exploration. This company is only “Rosgeologiya”.

The monopolist in the bowels

Rosgeologia was established by the government in July 2011 for the exploration of the subsoil, to expensive to sell licenses for development of fields with reserves. It is a joint stock company with 100% state participation, in 2014, introduced by presidential decree in the list of strategic. The company is the sole executor of the state order for studying the subsoil and in 2015 has received from Rosnedra orders (including for the exploration of solid minerals) to 15.2 billion rubles, reported the chamber.

In October 2015, the Federal Antimonopoly service (FAS) has filed a lawsuit against the Ministry of environment with the requirement to cancel the order, citing violation of antitrust laws. In case of third party involved in the process of “Rosgeologiya” and “Rosneft”. Judicial hearing is scheduled on 18 April 2016.

The President of “Rosneft” Igor Sechin in July 3, 2015 wrote a letter (got) to President Vladimir Putin with the complaint to the Ministry of environment. According to Sechin, for oil and gas companies created unreasonable barriers in exploration. There is a threat of violation of their rights, since new sites can be next to already explored fields in which the company operates (see incision). Putin instructed the government to investigate.

Monopoly as a threat

Sechin says Putin that until the monopoly of “Rosgeologiya” oil and gas companies in the competition had proved the right to obtain prospecting licences for areas, the list of which was published by Rosnedra. “The establishment of pre-emptive rights “Rosgeologiya” to obtain space on a declarative principle without including them in the corresponding list for the Agency will lead to monopolization of the industry and exploration would jeopardize the fulfillment of the tasks of the state policy in the sphere of geological exploration and reproduction of mineral resources”, — said in the letter. Monopoly Rusgeology may lead to the emergence of mediation schemes of obtaining the bowels and reduce revenues, Sechin warns.

In early March the Deputy head of FAS Andrey Tsarikovsky has told TASS that the Agency looks forward to an amicable agreement with the Ministry of environment. “The Ministry itself has done a great job on this case, change the order and bring it back to normal. I’ll be glad to stop business in connection with voluntary elimination of infringements” — he said.

New order

The new edition of the order of the Ministry of environment stipulates that any company can choose interesting her plot and send a request to Rosnedra, preparing proposals for geological study and justification of the boundaries. If applicants on the site a few, we held the auction. Rusgeology will be able to claim oil and gas areas on a common basis.

It will be possible to obtain areas which have not conducted geological exploration at the expense of the state and the area of which is not more than 500 sq. km. the defense Ministry and the FSB should confirm that the land has no strategic importance, and the Ministry of natural resources — that it has no reserves and protected areas. The applicant may receive more than three sections from this list. However, the document does not limit the number of “daughters” the companies that can apply for obtaining plots.

The draft order the Ministry of justice must approve and be signed by the Minister of natural resources Sergey Donskoy. In early March he promised that declarative procedure will work in the second half of 2016. The representative of the Ministry on Tuesday evening said that the document is now being reviewed by other offices.

The representative of “Rosneft” Mikhail Leontiev said that the company needs to examine the draft order of the Ministry of environment. “Rosneft” will satisfy the compromise in the form of equal rights for market participants to obtain licenses for geological exploration, says Leontiev, and says that in this case, the court may terminate the settlement agreement. According to the representative of “Rosgeologiya” Anton Sergeeva, the company is satisfied with the current version of the order, but she is ready to any decisions of its shareholder.

In anticipation of the effect

Don said that declarative procedure will help to increase the investments of subsoil users in exploration by 30%. The report of the Committee on the results of last year stipulates that the state spent in 2015 on exploration of oil and gas 13.5 billion rubles (a decrease of 18%), and public and private companies — 270 billion rubles (a decrease of 15%).

Analyst of Sberbank CIB Valery Nesterov careful in forecasts. Because of the crisis there is no doubt that major oil companies will increase investment in exploration of sites with missing oil and gas reserves. But this possibility gives them a choice, says Nesterov, or not to invest funds in the projects, taking into account the geography of sites, logistics and possible production volumes. Nesterov reminds that according to statistics, the increase in reserves is only 6% give new open fields, and 14% of revaluation reserves from existing fields and 80% — further exploration of old oil fields.