Flamboyant Russian Exile may Head Ukraine’s Biggest Oil and Gas Company

cheOne of Russia’s most outlandish opposition figures and fallen businessmen, Evgeny Chichvarkin, may become the head of Ukraine’s largest oil and gas company, Ukrnafta.

Chichvarkin, who is better known for his stunts such as giving away free cell phones to naked customers, is a staunch anti-Putinist, and left Russia in 2008, on the run from kidnapping and extortion charges from Russia’s interior ministry.

If Chichvarkin’s candidacy for the position is accepted, the announcement will be made on July 22 at the company’s shareholder meeting.

Ukrnafta “unanimously determined the two candidates for the position. Both candidates have years of experience in leading international companies and a proven high professional level in managing oil and gas companies,” the energy company said in a statement on July 10.

Chichvarkin is the ex-owner of Evroset, which at the time he sold his shares, was Russia’s biggest mobile retailer. After his self-exile he moved to London, where he owns a luxury wine store named Hedonism.

Ukraine’s biggest oil and gas company oversees 86 percent of Ukraine’s oil production, 28 percent of gas condensate production, and 16 percent of gas production. Naftogaz, a state-owned energy company, owns a 50% +1 stake in Ukrnafta, and Ukrainian oligarch Igor Kolomoisky owns 42 percent.

Global Oil Reserves

The world demand for oil is extremely high, and so far no substitution for the black gold has been established. This brings us to the eternal question – when will the oil run out? Warnings about the imminent depletion of oil deposits have been announced over the past several decades, but so far they haven’t come true – world oil production continues to grow.

According to data from the Statistical Review of World Energy, at the end of 2013 proven oil reserves in the world were equal to 1.6879 trillion barrels.


In 2013, 31.7 billion barrels of oil was extracted from the Earth’s mineral surface. If you divide the total reserves by annual production, this gives us the answer of 53 years left until the earth runs dry of oil. However, this analysis is far too simple. Proven oil reserves continue to increase with the discovery of previously unknown fields, and at the same time new technology continually improves production of hydrocarbons.

In the middle of the 20th century, experts expressed doubts about the presence of oil in Western Siberia, now Russia’s main producing region. Now researchers in Siberia are working to unlock the black gold in the Bazhenov formation, which is estimated to contain more than 1.2 trillion barrels of oil, or 10 times more than North America’s prosperous Bakken formation and more than the rest of Russia’s oil regions combined!

Even more recently, the oil sector has found new and more effective ways to extract oil from shale and sands. Technological advances in development have made inaccessible deposits accessible and has shaken up the leaders of top oil reserves. Venezuela’s “new” proven heavy oil reserves, as well as Canada’s oil sands, are examples of changing dynamics in world leaders. Both surpassed the amount of reserves in the Persian Gulf, which is bordered by Arab states Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.

According to the new data from the Statistical Review of World Energy, Venezuela is the leader with 298.3 billion barrels, followed by Saudi Arabia with 265.9 billion barrels, and Canada at 174.3 billion barrels. Russia’s performance against these three giants isn’t very impressive – 93.0 billion barrels, or 5.5% of total world reserves.


However, Russia remains production king, far ahead of Canada or Venezuela because the reserves in the data are mostly conventional oil deposits. In 2013 Russia produced 10,988 thousand barrels per day, while combined Canada (3,948 thousand barrels) and Venezuela (2,623 thousand barrels) didn’t even come close.

Russia’s Arctic Ambition Moribund Without Foreign Partners

arcticThe Arctic Circle is estimated to be home to 30% of the world’s undiscovered gas reserves and 13% of oil, according to the US Geological Survey. About one third of the total reserves is located in Russian waters, and by 2050 the new cold frontier will provide 20 to 30 percent of total Russian oil production.

So far the only Russian companies that have licenses to even explore the Russian Arctic Shelf are state behemoths Gazprom and Rosneft, which reportedly paid huge cash sums for exclusion extraction rights back in June 2013.

“The Russian Arctic Shelf is a major source of raw materials for hydrocarbon production in the long term,” Igor Sechin, head of state-owned Rosneft, said at the St. Petersburg Economic Forum in June.

Rosneft is jointly working with US ExxonMobil, Italy’s multinational Eni, and Norway’s state-owned Statoil in the Kara Sea. In September of 2014, just weeks before sanctions took hold, Rosneft and partners first discovered a major source of oil at the “University 1” well, in the East-Prinovozemelsky 1 block.

No second well was drilled, due to sanctions imposed by the US and Europe over the Ukraine debacle. Foreign partners were forced to withdraw from the project. Russia’s Energy Ministry expects exploration to continue no sooner than 2016, and Alfa Bank analyst Alexander Kornilov says 2020 at the earliest.

Rosneft will postpone at least 10 sites, as well as reduce exploration by 95 percent, a source from Russia’s  Federal Agency on Mineral Resources told Interfax on Monday.

Sanctions technically bar the US and EU from exporting equipment and services needed to extract oil and gas from the Arctic. Rosneft is unlikely to find a partner that would agree to similar terms that ExxonMobil did, according to Kornilov. Even if sanctions were magically lifted, oil would have to advance to more than $80 per barrel for the operation to be profitable, said Kornilov.

Rosneft has already invested 33.3 trillion rubles (about $600 billion) in the Russian continental shelf, mostly by taking out debt, equity, and investments from partners.

ExxonMobil has said it may lose $1 billion if it isn’t allowed to continue work with Rosneft.

338 billion cubic meters of gas (bcm) and over 100 million tons of oil now lay restive beneath the ice, both due to sanctions and the climbing price of oil, which makes deep sea drilling too costly. According to Rosneft, the oil that is located the province could rival the total current reserves of Saudi Arabia.

Louise Dickson