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Oil & gas companies interaction with stakeholders in the Arctic

                Arctic region development has historically taken place in close cooperation between oil and gas companies and regional authorities. When developing natural resources, companies have been faced with the need to create the appropriate infrastructure. The solution to these problems fell on their shoulders. As a result, new rotational settlements appeared in the Arctic territories, which were transformed into settlements.

Thus, the active industrial development of the Nenets Autonomous Area began in the second half of the 20th century, and in a short period, the construction of social infrastructure in the region developed rapidly. The most active construction of housing, educational and cultural facilities was observed from 1990 to 2000, the heyday of oil and gas corporations in Russia. The municipal structure in the region is currently represented by one urban district “Naryan-Mar town” and one municipal district “Zapolyarny district”, consisting of 18 rural settlements.

According to the Ministry of Natural Resources there are 83 hydrocarbon fields in the region, located in the Timan-Pechora oil and gas province. Most of the fields are highly profitable to develop . The Consolidated State Register of Subsurface Areas and Licenses presents data on license issuance in the region since 1993, where on March 20 the Council of People’s Deputies of the Nenets Autonomous Area issued 3 licenses to the “Arkhangelskgeologia” (or “Arkhangelsk Geology”) State Enterprise  for prospecting, exploration, extraction and processing of minerals. And the longest license has been issued to the Public JSC Rosneft Oil Company for geological survey, including prospecting and evaluation of mineral deposits, exploration and extraction of minerals in the Cherpayuskoye field of the Gamburtsev shaft: the expiry date is 31 January 2182. A total of 349 licenses have been issued in the region since 1993, and some 275 licenses have been issued to 70 legal entities for mining and development rights.

Some of the companies present in the region are actively involved in the social development of the territory. Such companies include Public JSC Rosneft Oil Company, Severgazprom, CJSC Pechorneftegazprom, Gazpromneft-Sakhalin, AGD Daimonds, Tatneft-NAO, Surgutneftegaz, Zarubezhneft, RUSVIETPETRO, Bashneft, Vostok NAO Oil Company, LUKOIL-Komi, etc. Thus, OOO LUKOIL-Komi Ltd. is a subsidiary of Public JSC LUKOIL. The company’s participation in social development of Nenets Autonomous Area is implemented through 2 forms: formal agreement and voluntary activities. These forms of interaction make it possible to achieve positive social effects for the region.

For example, the company annually allocates funds to representatives of the Indigenous Minorities of the North under agreements with reindeer herding farms as part of license agreements. The annual amount of financial support has varied from 20 to 30.5 million rubles over the last 10 years. The money allocated has helped to build and maintain roads from the winter road of JSC NPC-Pechoraneft to the Khorey-Ver settlement, build a new slaughterhouse at the Erv JVK, buy snowmobiles and pay for helicopter transportation for the Kharpa JVK. Another equally important project is the Red Tchum (Nyaryana mä), which was relaunched in 2002 to provide health services to indigenous people. This project not only provided medical assistance to the people of the north, but also collected a large data set that contributed to the national science fund. A number of well-known figures (Mariam Wallet Med Abubakrin, a UN representative; Leonid Roshal, a Soviet pediatrician and surgeon) have noted the project as necessary for dissemination to other territories.

Applications from NGOs for the Social and Cultural Projects Competition in the Komi Republic and the Nenets Autonomous Area.  Another area of the company’s involvement in the life of the region is the support of local activists: the company annually accepts directions from February 12 to April 30 – these are preservation of history and cultural traditions, support of scientific and educational activities. For example, in 2019, eight projects from the Nenets Autonomous District received financial support in the categories Sports and Spirituality and Culture. In 2018, the company also took part in the construction of a new cinema and purchased tennis equipment and prizes as part of a tennis tournament. The company also sponsored the Buran-Day races, the traditional winter national games Kanin Mebeta (Friendship Belt), the classical music festival High Music Days in the Arctic, the inter-regional boxing tournament Arctic Lights, and a scholarship program for schoolchildren, school modernization in Krasnoye village (purchase of equipment, purchase of a car), construction of sports grounds with a traumatic safety surface and a skate park in Naryan-Mar, as well as participation of young singers in the Russian Children’s Choir’s New Year concert at the State Kremlin Palace”, and others

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    Figure 1 – Pattern of corporate social activity of LUKOIL-Komi  Ltd. in the Nenets Autonomous Area.  

                When implementing strategic and operational plans in terms of social responsibility, oil and gas companies need to take into account the multi factors based nature of their activities in the Arctic territory. Let us focus on the processes of interaction with the indigenous small nations representatives  of the Russian North. The high sensitivity of ecological systems to external influences, especially in the areas inhabited by the Russia indigenous minorities as a feature of the Arctic zone of the Russian Federation, determining special approaches to its socio-economic development and ensuring national security in the aspect under consideration stands out especially.  The low level of availability of quality social services and comfortable housing located in remote areas, including in the areas of traditional residence and traditional economic activities of small-numbered peoples as the current main danger, challenges and risks for the Arctic zone is emphasized accordingly . 

                In Nenets Autonomous Area these are abandoned drilling rigs in Big Land tundra (eastern part of the region) where oil companies have worked for many years and reindeer get caught in the wires as traps and die a painful death. The problem of overgrazing of reindeer is also typical for Big Land tundra, where geological and then oil production works were most active. The disturbance of the water and vegetation balance could have been a consequence of those works. This is the preliminary hypothesis based on estimates from experts at the Federal Centre for Integrated Arctic Research named after N.P. Laverov. In 2018, the initiative to create a map of the aforementioned ‘hot spots’ in cooperation with oil and gas companies was taken by the leaders of the All-Russian People’s Front of the NAO, then by the deputies of the district assembly. There is no information open to the public about the results of such work, or that it has even started, which shows the importance of forming a responsible team, including independent experts, to address the problems mentioned above.

                We believe that best cases of interaction between subsoil users and indigenous minorities should be replicated with the support of all levels of government and an authoritative public.  In the meantime, it is worth giving another example of the unresolved problem of the development of LLC Rusvietpetro’s Severo-Khosedanskoye field, which belongs to Agricultural Production Cooperative (hereinafter – APC) “Put Ilicha” under a long-term lease. After the Murmansk Land Management Company Ltd has settled the amount of losses, nothing happens.  A similar situation occurred between Bashneft-Polyus Ltd. and APC “Kolkhoz Izhemskiy Olenevod”. Representatives of the oil and gas companies did not cover the damage established during the expert examination, after which the reindeer herders appealed to the prosecutor’s office for the fact of land squatting. Specialists believe that it was all about the failure to agree on the amount of damages for the withdrawal of reindeer pastures.  These examples of journalistic investigation by “Echo Severa” news agency and SM-news into the activities of the Union of Reindeer Herders of Nenets autonomous area headed by Vladislav Vyucheysky should not be hushed up, but become the object of a proper competent investigation into the facts of official crime.

Interaction_pic2-1

In the new context, it is important to monitor best practices both internationally (e.g. the US and Alaska, where oil and gas companies pay US$ 2,072 per year to state residents) and inter-regionally. The interaction between the government, business and the public can be considered advanced in the Yamalo-Nenets Autonomous Area, where, starting from 2020, not only the government subsidy is increased to 5 thousand rubles (in the NAO it is 2 thousand rubles), but also there are over 50 measures under which the indigenous peoples receive subsidies, grants and social support measures. This is a consequence of Rosneft and Gazprom Neft’s oil and gas projects in this area. These are not only Yamal LNG, but also Mesoyakha Neftegaz project. The latter has adopted original adaptive solutions for the environment, such as reindeer crossings on the Zapolyarye-Purpe oil pipeline, ensuring that all pipelines are soundproofed, and sealing the collection, storage and transportation systems for extracted raw materials. Special crossings over the pressure oil pipeline – 6 above-ground and 8 above-ground – were built on the traditional reindeer migration routes. Following consultations with representatives of public organizations and heads of reindeer herding communities, a route was chosen for laying the pipe that does not cross indigenous people’s sacred places and reindeer grazing grounds.  JSC Messoyakhaneftegaz has developed a policy on engagement with the Indigenous Minorities of the North (IMN), which applies not only to employees, but also to representatives of contractors. Employees of the enterprise and contractors regularly provide assistance to indigenous minorities (welding work, transportation services, minor repairs of machinery, free allocation of fuel and lubricants, planks, tools, and spare parts). Fishing, hunting, picnicking, etc., are strictly prohibited in the field. JSC “Messoyakhaneftegaz” works closely with the Yamal for Descendants association. An agreement has been reached on access for the local population to the social facilities of the Vostochno-Messoyakhskoye field: a medical center and a food retail outlet.  

A globally unique experience is being achieved by Gazprom Neft in the Nenets Autonomous Area.  This is the northernmost oil production platform, Prirazlomnaya, and the associated production and social infrastructure of the Varandey settlement.  As part of the Arctic environmental protection policy, an oil spill response program has been developed and can be implemented if necessary, virtually eliminating the risk of environmental and social emergencies.  We believe it is relevant to emphasize the great social and economic importance of oil and gas corporations’ participation in the implementation of investment projects in the Nenets Autonomous Area, which, given the specifics of the territory, will have a target effect in terms of creating jobs, reducing or stopping population outflow, improving public services and housing.

LUKOIL’s greatest contribution is to support culture and sport in the region through sponsorship of public events, as well as to improve working conditions in the region. This is not surprising, as a significant proportion of the population is employed in the mining industry: the share of those employed in this area ranged from 17.3% to 28.2% from 2003 to 2018.

At the same time, the policy transformation has been towards a company focus on solving existing socio-economic development problems and integrating company objectives with those of regional policy.

Thus, oil companies not only make a significant contribution to the economic development of the region, but are also actively involved in the establishment of the social sphere. This situation is twofold. On the one hand, the financial burden on the budget is decreasing in the region, but, on the other hand, the region becomes dependent on company activities. In this situation, a competent policy of interaction between local authorities and companies comes to the fore. It is necessary to indicate expectations and directions of social activity of companies in strategic planning documents. This will make it possible to coordinate the activities of a group of companies and solve existing problems in the most efficient way.

Ulyana E. Yakusheva, Senior Lecturer, State and Municipal Administration Department, Northern (Arctic) Federal State University named after M.V. Lomonosov, Researcher at Russian Academy of Sciences Federal Centre for Integrated Arctic Research named after N.P. Laverov, Member of APECS Russia.

Yan V. Turov, Director, NGO “Economic Programs Foundation”, “Association of the Polar Explorers” member, Expert on the Arctic Zone of the Russian Federation development (https://arctic2035.ru/experts/?PAGEN_1=3)

https://arctic2035.ru/experts/?PAGEN_1=3

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