Russia May Sell Arctic Oil Leases Within 5 Years, McMahon Says

(Bloomberg) — Russia may sell licenses to explore for oil in the Arctic Sea before the end of 2013 as the world’s second biggest producer seeks to boost flagging output, according to Sanford C. Bernstein & Co.

“We will see a Russian Arctic offshore lease sale within five years, mainly as a way of raising money, but also in a nervous reaction to the plateau, or even decline of Russian oil production,” Bernstein analyst Neil McMahon said in a note today.


Rising prices, increasing demand and declining production are encouraging countries to open up their Arctic waters to oil and gas drilling. Last week, the U.S. government said it will make a portion of a 23 million-acre reserve in Alaska available for exploration and President George W. Bush lifted a presidential ban on drilling along some parts of the U.S. coast.

Russian oil production fell 1 percent in June from a year earlier, according to the Energy Ministry, bringing the world’s largest producer after Saudi Arabia closer to its first annual drop since 1998. Domestic oil companies such as OAO Rosneft and OAO Lukoil are struggling with aging fields, rising costs and increasingly challenging new deposits.

Bloomberg