Kremlin in bid for Arctic supremacy with huge oil push

Russia is to launch a vast oil project in its frozen far north as part of the Kremlin’s push into the Arctic.

Igor Sechin, head of the state-run oil giant Rosneft, announced the start of the £83 billion (NZ$158b) Vostok Oil project during talks with President Vladimir Putin at the Kremlin yesterday. It will rank among the biggest engineering feats in Russian or Soviet history.

The scheme will be centred around the Taymyr peninsula, about 3000km north of Moscow. It will involve the construction of 15 towns or villages and at least two airports, as well as a 800km pipeline and a big new port to handle oil tankers on the coast of the Kara Sea.

Sechin, a former KGB agent who is one of Putin’s closest allies, has previously described the Vostok Oil project as the biggest in the history of the modern global oil industry.

He told Putin that 400,000 workers would be needed to carry out construction work. He also promised that the project would create 130,000 permanent jobs and lead to a 2 per cent increase in Russia’s GDP. The Kremlin has made it a priority to expand Russia’s military and economic presence in the Arctic. It has reopened Soviet-era Arctic airbases and moved missiles to the region, while a new Russian nuclear-powered icebreaker, the Arktika, completed its maiden voyage to the North Pole last month.

The scheme would prove an economic boost to communist-era settlements that were impoverished after the collapse of the Soviet Union. Russia is the only country in the world with more than two million citizens living above the Arctic Circle.

Rosneft, which is 19.5 per cent owned by BP, says that its Arctic oilfields will eventually produce more than 730 million barrels of oil per year, 20 per cent more than current UK North Sea output. Gerhard Schroder, the former German chancellor, is chairman of the company’s board of directors.

In August, Sechin, 60, gave Putin a bottle containing a sample of the first oil produced at the Vostok project’s Zapadno-Irkinsky oilfield. He boasted that it was ‘‘premiumquality – the best in the world’’.

Russia’s plans have, however, prompted fears among environmentalist groups hoping to protect the remote Taymyr peninsula, which is home to millions of wild reindeer, as well as a protected nature reserve. Rosneft says the Vostok project will transform the region into a ‘‘new oil and gas province’’.

The peninsula, which is inhabited by the Nentsy, Dolgany and Entsy indigenous peoples, was blighted in May by a massive oil spill after a fuel tank collapsed near the city of Norilsk. It was the Arctic’s worst environmental disaster.

The oil will be exported through the Northern Sea Route, a shipping lane that stretches from Europe to Asia along thousands of miles of Russia’s Arctic coast. Rapidly melting ice cover in the Arctic means that the route is being touted as a potential rival to the Suez Canal for cargo heading from Asia to Europe.

The Kremlin hopes that Rosneft’s project will help Russia to achieve its targets for shipping on the Northern Sea Route. Putin has said he wants to see up to 80 million tonnes of goods per year on the route by 2025.

‘‘Our country needs to develop its competitive advantage – the ability to successfully supply oil both to the West and to the East,’’ Alexander Frolov, an analyst at Russia’s National Energy Institute, said.