Last month, the Russian government pushed through new legislation creating $300 billion in new incentives for new ports, factories, and oil and gas developments on the shores and in the waters of the Arctic ocean.
The incentives are part of a broader plan to more than double maritime traffic in the Northern Sea Route, on Russia’s northern coast — and give a boost to state energy companies like Gazprom, Lukoil, and Rosneft.
But analysts say their immediate impact will be increased exploration and development for offshore oil and natural gas.
With Canadian and U.S. offshore oil developments still on ice, here’s what Russia’s big spending could mean for the Arctic — and Canadians.
How is the money being spent?
Russia’s government is offering tax incentives for offshore oil and gas developments, including a reduced five per cent production tax for the first 15 years for all oil and gas developments.
Projects in the east Arctic, closer to Canada’s Beaufort Sea, receive an even greater incentive — no extraction tax for the first 12 years of operation.
Russia may be borrowing a page from Canada’s book in drafting the policy. Doug Matthews, a Canadian energy writer and analyst, said the incentive package sounds “rather like our old national energy program in the … Beaufort [Sea] back in the ’70s and ’80s.”
The Prirazlomnaya oil platform is towed to the Arctic seaport of Murmansk in November 2010. The platform is currently the only offshore Arctic oil operation in Russian waters, but the incentive package is expected to result in three new developments. (Andrei Pronin/The Associated Press)
What new projects are getting the go-ahead?
Russia’s minister of the Far East and Arctic, Alexander Kozlov, said in a press release that those incentives are resulting in three new massive offshore oil projects.
Currently, there is only one producing offshore oil platform in Russian waters — the Prirazlomnaya platform, located in the Pechora Sea.
Russia’s state oil companies are also expected to massively intensify their onshore Arctic operations.
Rosneft’s Vostok Oil project, billed as the “biggest in global oil,” will involve the construction of a seaport, two airports, 800 km of new pipelines, and 15 new towns in the Vankor region.
“The project is expected to become the stepping stone for large scale development of Arctic oil,” said Nikita Kapustin, an energy researcher with the state-funded Energy Research Institute of the Russian Academy of Sciences, in an email.
Developments in the Laptev, East Siberian and Chukchi Seas — nearer to Alaska — are “more distant prospects,” Kapustin said.
But massive incentives for Arctic ports and pipelines could make exploiting those regions more feasible in the future.
Ice is broken up by the passing of the Finnish icebreaker MSV Nordica as it sails through the Beaufort Sea off the coast of Alaska. Scientists say increased marine traffic through the Arctic may reduce emissions from shipping overall, but any fuel spills would be difficult to clean up. (David Goldman/The Associated Press)
What could the environmental impacts be?
Simon Boxall, an oceans scientist at the University of Southampton, said sending more goods via the Northern Sea Route could actually have a positive environmental impact.
“You’re knocking thousands of miles off of that route, and that of course saves energy, it saves fuel, it saves pollution,” he said.
The problem, Boxall says, comes with what those ships are carrying. Any spilled oil degrades slowly in cold Arctic waters, and is easily trapped beneath ice.
Boxall is optimistic that moderate spills from Russia’s offshore oil projects could be contained to “a fairly small locality,” and would be unlikely to affect Canadian shores.
Basically, it’s everybody’s problem.– Tony Walker, associate professor, Dalhousie University
But Tony Walker, an assistant professor at the School of Resource & Environmental Studies at Dalhousie University, disagrees.
“Any petroleum products released into surface water could easily get to the Northwest Territories in just a matter of days,” he said.
“Basically, it’s everybody’s problem.”
Walker says most Arctic nations have limited capacity to perform cleanups in the region. Russia’s fleet is mostly based in Murmansk, near its western border, he says, and is mostly decommissioned anyway.
“So it would really be virtually impossible,” he said.
A pumpjack works at a well head on an oil and gas installation near Cremona, Alta. Canadian businesses are unlikely to either benefit or suffer from increased Russian oil activity in the Arctic. (Jeff McIntosh/THE CANADIAN PRESS)
How could this affect oil and gas prices?
Despite enabling access to more than 37 billion barrels of oil — equivalent to about a fifth of Canada’s total remaining reserves — analysts say the effect on prices should be negligible.
“The main intention of Arctic oil is to replace production of some of the more mature Russian fields,” said Kapustin.
“I don’t see much of an effect on price,” said Matthews.
The primary market for Russia’s Arctic oil and gas is China. Canada’s market share there is so small, Matthews says, it’s unlikely to make a difference.
Could Canadian businesses benefit?
Since U.S. and EU sanctions were put in place in 2014, international oil companies have been reluctant to co-invest in Arctic oil projects. Sanctions prohibit collaboration on offshore oil projects with Russia’s biggest companies.
Canadian businesses also might not have the expertise needed any longer, according to Matthews.
“We were really the leaders back in the ’70s and ’80s for technology for Arctic exploration,” Matthews explained. But “when the oil industry in the Beaufort [Sea] shut down in the mid-’80s … we really lost that technological edge.”
Canada’s recent investment in pipelines means some Canadian companies have built expertise in their construction, including in cold-weather environments.
But Matthews and other analysts say Russia is more likely to look to the East for expertise and investment — to Japan and China, and to India, which Kapustin said has already invested in the Vostok Oil project.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
