Trafigura Group, the world’s largest oil trader, was reported this week to have put $1.5bn of its own cash into the $7bn acquisition of a 10% stake in Vostok Oil ‘province’, Russian oil giant Rosneft’s vast new flagship Arctic oil project on Siberia’s Taimyr Peninsula. With proven liquid hydrocarbon reserves of six billion tonnes (44 billion bbls), the development could be producing as much as a million barrels a day by 2027, according to Rosneft CEO Igor Sechin; and, thanks to its strategic location on the Northern Sea Route connecting Siberia to both North America and the Far East, Sechin is also confident that it could supply 30 million tonnes for export to Europe and Asia over the next three years alone.
If he is right, the Vostok project will soon be making a material contribution to Russia’s balance of trade, and Moscow is hoping it will also play a key role in the development of the Russian Arctic’s economy. On completion, its interconnected patchwork of oilfields will be serviced by two airports and 15 ‘industry towns’ and will have cost more than $111bn to develop. Its construction is expected to give work to 400,000 staff and long-term employment to at least 130,000 of them.
The sheer scale of the Vostok development and the financial lengths that Trafigura has been prepared to go to secure a piece of the action is a salutary reminder of just how dependent on fossil fuels the global economy is likely to remain for at least the next two decades. Russia’s long-term oil and gas strategy is based on the premise that global demand for oil and gas will carry on growing between until at least 2035, although it also predicts that natural gas will partially replace oil and coal over that period. “Mineral resources will remain a competitive advantage of Russia’s economy, and will determine the place and role of the country in the world,” it states.