BP, Rosneft Face ANWR-Esque Issues

Todd Shriber
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For those that are champions of oil drilling in exotic, frozen locations, or better yet, someone that is hoping to land a job on such a project, you probably will not be rushing off to your local zoo anytime soon to checkout the polar bears. Polar bears, a regal, yet endangered species, sure have a way of becoming an issue for oil companies looking to tap into resources in the Arctic Circle.

In an interesting turn of events, the already controversial $16 billion share swap between BP and Russian state-run producer OAO Rosneft has met with even more controversy as the World Wildlife Federation (WWF) opposes the companies' plans to drill in three exploration blocks in the Russian part of the Arctic Circle. One might say this has the potential to be a repeat of the Alaska National Widlife Refuge (AWNR) controversy for BP and Rosneft.

Go back to President George W. Bush's time in office to remember just how sensitive an issue ANWR was. Bush had a Republican majority in the House for all eight years he was in office and enough time with Republicans running the Senate to pass a bill authorizing drilling in ANWR and was never able to get it done, partly because politicians were worried about polar bears and caribou.

Fast forward to 2011 and the WWF is saying that part of the area that BP (BP) and Rosneft want to drill encroaches on a 17-square mile slice of protected land. Apparently they have environmental laws and national parks in Russia, too, and BP and Rosneft violated the boundaries of two such parks, according to the WWF.

The Russian Arctic Park is a critical breeding ground for polar bears and a haven for walrus and whales, Reuters reported, citing Russia's natural resources ministry. Surely you'll find this interesting: It was Mr. Oil himself, Prime Minister Vladimir Putin, that designated the Russian Arctic Park.

BP and Rosneft are not going to lay down lightly on this issue. There is $16 billion that says so and an estimated 60 billion barrels of reserves in the area. That is enough to motivate any oil major to say whatever it has to say to start drilling.

For its part, BP is certainly trying to assuage environmentalists. The company says it believes it can carry out the drilling program in the Russian Arctic in a safe, responsible manner and ''lessons learned from the Gulf of Mexico incident will be carried through to this project.''

I am willing to bet the WWF is just a tad skeptical about that line, but I am also willing to bet the BP/Rosneft project does not go the way of ANWR. If Putin wants to change the area's designation he can and will. That is basically how Russian politics work. Polar bears or not, BP and Rosneft and very likely to be getting their hands on some Arctic oil in the next few years. They should be careful though. Polar bears are not friendly.