Norway, Russia to Restart Barents Dispute Talks

OSLO Oct 13, 2005 (Dow Jones Commodities News Select via Comtex)

Mid and high-level Norwegian and Russian officials will next month restart negotiations over the disputed Barents Sea area, diplomats close to the situation told Dow Jones Newswires Wednesday.

"We have agreements to restart the process...and there are meetings planned for the next several months," including a first meeting in November, a diplomat familiar with the situation told Dow Jones Newswires.

But, the person added, "We have no clue whether these talks will take us to a solution, or if we are starting again a long, drawn-out process."

Another official close to the situation said, "We are now catching up to speed again...and we hope the moment has approached for the two sides to resolve the dispute."

Disagreement between Moscow and Oslo about how to demarcate the border stretching into the arctic sea has made the 173,000 square kilometer disputed area - estimated to hold 12 billion barrels of oil equivalent - all but untouchable for exploration and development the past 30 years.

But in the past year, the frozen energy dialogue between the two countries has thawed as they recognize that their cooperation would help unlock Barents Sea resources estimated to total 40 billion boe.

Russia wants the expertise and technology Norway has developed over four decades of working in its own frigid waters, while Norway wants access to the vast resources thought to lie under the sea as its own reserves mature.

Diplomats and industry experts say recent signals from the Russian government indicate a marked change in its stance. The countries' leaders recently signed a memorandum of understanding to cooperate on Arctic oil and gas exploration.

Although few believe it is likely the border dispute will be resolved within six months - as Russia's Minister of Natural Resources Yuri Trutnev said in August - Trutnev's comments and the MOU show a clear desire to move towards a resolution.

Vladimir Ryashin, Moscow's representative for Norwegian oil organization INTSOK, says Russia's comments, "are a reflection of an attitude that their general intention is positive, and an invitation to be very active."

"It's a hint that Russia is ready for compromises, and they expect the Norwegians to take the same position," Ryashin said.

Bjoern Brustad, an analyst at Oslo-based think-tank Econ Analysis, says the two sides might be more ready than ever to compromise. Norway, he says, sees its maturing resources and wants to make sure it gets in early on Arctic oil and gas development. "There's may be more of a sense of urgency for opening up new resources," he says.

And with a clearly-stated political desire to maintain control over its national resources, Russia may see cooperation with the Norwegians as more palatable than allowing free access to U.S. oil giants, which have traditionally taken a more dominant role in developing other countries' natural resources, he said. "That might help motivate Russia to compromise," Brustad says.

Arild Moe, Russian energy expert and deputy director of research organization The Fridtjof Nansen Institute, says for a long time Russia didn't even recognize the possibility of a compromise.

But recent comments, "show a more progressive and optimistic attitude than we've seen in years...and could be interpreted as the Russians being more willing to find a solution now," said Moe.

He said the significant growth of a U.S. liquefied natural gas market - which allows natural gas to be transported distances previously restricted by pipelines - "suddenly gives Barents development a new focus and makes it much more interesting for them." The U.S. is the fastest growing LNG market in the world.

Russia's state-owned natural gas company OAO Gazprom (GSPBEX.RS) last month announced a shortlist of potential partners to develop its 3.2 trillion-cubic-meter Shtokman natural gas fields, much of which will be sold as LNG into the U.S.

The unresolved border dispute may create enough of an element of uncertainty in investors' minds to inhibit further investment in the region, says Moe.

Prior to an agreed cessation of activities in the disputed area of the Barents Sea in the 1970s, Russian ships surveyed much of the area and some maps show a tantalizingly large geological structure almost four times the size of Shtokman, the largest offshore gas field in the world.

Prior to the 1970s, the Soviet government drew a maritime line from its northwestern coast straight up to the North pole. Norway is seeking to start negotiations based on an internationally-recognized "median line principle," that creates a border equally distant from each others' coastal borders.

One diplomat close to the situation said Norway wasn't trying to force a "median-line or nothing" stance. The person said a compromise that created cross-boundary cooperation "maximizing cooperation and synergy," appeared the most likely way towards a solution. He wouldn't elaborate.

Norway's Ministry of Foreign Affairs declined to comment. (C) 2005 FWN Select. All Rights Reserved