(EnergyAsia, July 31 2012, Tuesday) — Russia will undertake an expensive and challenging venture into its Arctic region to counter the declining production from several of its major oil and gas fields, according to a report by UK-based business intelligence providers GlobalData.

The Russian government has deemed it necessary to tap the Arctic as part of a long-term strategy to boost the country’s hydrocarbon reserves.

Production at Surgutneftegas, one of Russia’s largest oil fields, fell by about 8% to 433 million barrels of oil equivalent (mmboe) last year from 472 mmboe in 2006. The Urals has seen its natural gas output fall by six percent from more than 18.5 billion cubic feet (mmcf) in 2006 to 17.363 billion cubic feet last year.

According to GlobalData, Russia’s 142 oil fields and 35 gas fields produced 7.2 billion barrels of oil equivalent (bboe) in 2009, down from 7.64 bboe in 2006.

Speaking at a media forum of the United Russia Party in September 2011, Natural Resources Minister, Iury Trutnev, said Russia’s Arctic Shelf held enough hydrocarbon resources to meet 100 to 150 years of domestic consumption.

But to exploit these massive reserves, oil and gas firms will have to invest heavily to operate in hazardous conditions and freezing temperatures.

As a strategy to meet the Arctic projects’ high cost and demand for cutting-edge technology, Russia’s state oil companies have partnered with foreign firms that could help liberalise the country’s offshore oil and gas sector. A proposal submitted to Parliament last October calls for the abolition of export duties on offshore oil projects for between five and 15 years. There are also plans to lower related taxes, such as the mineral extraction tax.

In May, Rosneft signed up to work with Norway’s Statoil and Russia’s Lukoil, following through on its April announcement to team up with Italy’s ENI to develop exploration licences in the Black Sea and the Barents Sea.

Rosneft has also made deals with India’s ONGC Videsh Ltd, and China’s CNPC, CNOOC, and Sinopec to begin exploration in Russia’s hydrocarbon rich Arctic region.