RusEnergy

18 May 2007 - Upstream OnLine - Norway and Russia are nearing agreement over a small part of their long-disputed Barents Sea border zone, an area potentially rich in untapped oil and gas resources, sources familiar with negotiations said today. A Norwegian government source told Reuters a deal could soon be signed demarcating ownership of a swathe of sea near the coast - a step forward in negotiations over an area half the size of Germany which have dragged on since the 1970s. "There has been progress in regards to a small area in the vicinity of our coast," said the source, who asked not to be named. "It is reasonable to expect that an agreement will be reached quite soon." The source stressed that the expected deal would not necessarily lead to a breakthrough on the entire disputed area, but said "the drawing of any boundaries is a benefit because it provides predictability and clarity." Foreign ministries in Oslo and Moscow declined to comment. Some estimates suggest up to a quarter of the world's undiscovered oil and gas deposits lie in the Arctic region. Petroleum has been found both to the east and west of the disputed zone off the northern tip of Europe. Norway's claim to at least part of the area would attract interest from oil majors struggling to replace oil and gas reserves in a world growing nationalistic over resources. A private-sector source said the time may be right for Russia to strike a wider border deal with Norway as it seeks to overcome bad publicity over energy disputes with neighbours that have shaken European confidence in its biggest energy supplier. It would also be the last chance for President Vladimir Putin to directly oversee the deal before his term ends in 2008. "We are hearing that something is on the cards," said the source. "It may be the right time for Russia to make a deal now and show how well it's co-operating with its northern neighbour." Norway and Russia have been deadlocked over the roughly 175,000-square-kilometre area since a change in international sea law in the 1970s extended rights to petroleum finds further away from coastlines. The disputed region has been off limits for drilling and both countries in the 1980s agreed to stop taking seismic surveys there to pinpoint where hydrocarbons may be found. Still, old seismic maps of the seabed, taken mainly by Soviet vessels, have been in circulation for decades and some have been re-analysed using new computer technology. "Some people have (a) very strong belief that there are interesting finds in this zone but we don't know for sure until more exploration activity takes place," Arild Moe, deputy head of the Fridtjof Nansen Institute in Oslo, told Reuters. Norway has seen output from its North Sea fields decline and is struggling to find major new hydrocarbon deposits. Its Arctic exploration has yielded a handful of economically viable deposits, the largest of which is Statoil's Snoehvit gas field in the Barents Sea which will start LNG production later this year. Analysts say, however, that the eastern part of the Barents Sea looks more promising. Sources say Oslo wants a deal for the entire disputed area before allowing new seismic scans or drilling, arguing that more information about the location of potential deposits would make a final decision even harder. It has also reportedly rejected Russian attempts for joint exploration and possibly production.