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Putin backs Russian oil disaster contingency fund

Prime Minister supports bill aiming to create up front escrow accounts

If made law the bill will increase upfront costs for IOCs. GETTY IMAGES
If made law the bill will increase upfront costs for IOCs. GETTY IMAGES

Russian Prime Minister Vladimir Putin today backed a bill that if passed will require oil companies seeking offshore exploration licences to set aside financial reserves to be tapped in the event of an oil spill.

Putin told a government meeting that the bill, if approved by the parliament, would only allow those companies with "sufficient resources and (financial) reserves" to work on the arctic shelf.

Russia is one of many oil producing countries looking to tighten safety regulation in the aftermath of last year's oil-spill disaster at BP's deep-water Macondo well. Iceland already has a $2 billion bond requirement for IOCs seeking exploration and production licences.

The law will apply to all offshore zones on Russia's continental shelf including Arctic waters, which hold Russia's largest untapped oil and gas reserves, Reuters reported.

Only state-controlled energy companies Rosneft and Gazprom can obtain Arctic shelf licences, but because neither company has sufficient technological expertise or offshore experience to develop complex offshore projects, they are in partnership talks with foreign companies, who would have to put up the cash.

The new law could push up exploration costs significantly.

Rosneft is talking to Chevron about a possible Arctic oil partnership after the collapse of a deal British oil major BP.

Gazprom picked Norway's Statoil and France's Total to develop Shtokman gas field in the Barents Sea.

Rosneft has also said that oil majors Shell ExxonMobil, China's CNPC, Malaysia's Petronas and Brazil's Petrobras are candidates for Arctic deals.

Natural Resources Minister Yuri Trutnev told reporters after the cabinet meeting that before an energy company is allowed into an offshore project, it will have to estimate the project's spill risks and then prove that it has the cash, insurance policies or bank guarantees sufficient to cover them.

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