In part one I looked at the argument that BP’s superior governance and more developed corporate social responsibility could keep its Russian joint venture partner, Rosneft, on the straight and narrow as far as taking an “environmentally sound” approach to drilling for oil in the Arctic is concerned. In part two, I look at environmental concerns and Russia’s track record on this front.
Many would argue, of course, that at the current stage of technology there is no guaranteed environmentally sound way of drilling for oil in such an ecologically sensitive area and that therefore drilling should not take place, period. This is the stance taken, not surprisingly, by Greenpeace. A spokesman, Ben Stewart, commented: “The Arctic is the most fragile environment in the world in which to drill for oil... Any company that drills for oil in the Arctic forfeits any claim to environmental responsibility. An oil spill in the cold waters of the Arctic would be catastrophic and extremely difficult to deal with.”
According to the Moscow Times, it is not just Western environmental campaigners that are unhappy:
"Russian environmentalists will appeal to BP and Rosneft shareholders to thwart the companies' plans to drill for oil in a remote part of the Arctic, amid concerns that a spill in the icebound sea could be unreachable for up to nine months. “We will work with shareholders and the general public to make sure everyone understands how risky this is. There is no technology today that can clean up oil in ice conditions,” said Sergei Knizhnikov, coordinator on environmental policy in the oil and gas sector at WWF Russia."
The area that BP and Rosneft plan to explore and develop covers a 125,000 square kilometre area of the Kara Sea on Russia’s continental shelf. The three blocks of territory awarded to the consortium by the Russian State are only navigable for less than a third of the year (100 days) because of ice, so a spill at the end of the drilling period could simply keep on gushing until the ice broke in the spring thaw eight months later. According to the Moscow Times, “the remote Kara Sea is a refuge for polar bears, walruses and several commercial fish species”.
For its part, Rosneft has promised that development would “comply with the highest standards of environmental protection” and that BP and Rosneft would set up a research centre in St. Petersburg to develop new technology geared to Arctic conditions. The Moscow Times said that it had been assured by a BP spokesperson that the company ““is interested in developing the Arctic in an environmentally responsible manner and that it believes it can carry out this exploration program safely and responsibly.”
The Times pointed out two existing ventures in environmentally sensitive areas: BP’s operation with TNK, namely TNK-BP, which has managed its environmental risks well in the wetlands in Khanty-Mansiisk, and Shell’s Sakhalin Energy joint venture with Gazprom that has been responsive to environmental concerns “in a way that would have been unlikely had Gazprom worked on the project alone.”
Time, as they say, will tell, though if things go wrong, the cost to us all could make the Gulf spill look small by comparison.
Further reading on emerging markets, Russian economy and environmental issues:
- Public–Private Partnerships in Emerging Markets, by Peter Koveos and Pierre Yourougou
- Review of 2010: Emerging markets, by Ian Fraser and Anthony Harrington (blog)
- Why the World Needs a Green New Deal, by Achim Steiner and Pavan Sukhdev
Tags: BP , emerging markets , energy , environment , oil , oil shale , Rosneft , Russia , Russian economy