Political dialogue between these former Cold War adversaries produced a commercial breakthrough in the summer of 2005: Russian President Vladimir Putin singled out Norway – thanks to the country’s energy sector competence – as a partner of choice for his country’s Barents Sea projects. An agreement in Moscow committed these northern neighbours to joint management and development of the Far North’s petroleum resources.
The Norwegian Ministry of Petroleum and Energy’s map of the Barents region.
At stake are the unexploited oil and gas assets of the Arctic – which are believed to make up one-quarter of the world’s resources. So, in a demonstration of managerial daring, Statoil launched the first subsea development into this polar wealth with the remotely operated Snøhvit (Snow White) field.
The project is sure to have put Statoil onto Russian oil company Gazprom’s shortlist of Shtokman partners. The NOK 51.3-billion Snøhvit project deploys six subsea production systems from ABB to extract the gas flow of 19 wells and send it 160 kilometres southeast to a liquefied natural gas (LNG) plant on Melkøya, near Hammerfest. Norwegian construction outfits Fabricom, Reinertsen and Veidekke helped turn the Arctic island into a mixed land-based and floating LNG complex. Aker Kværner assembled the field’s seabed array and ABB is installing Snøhvit’s automated safety systems.
It’s the kind of seamless contractor assistance that now looks set to play a part developing Russian assets in the Barents. Shtokman, like Snøhvit, is set to develop in stages, with its first stage being LNG production for consumers in the United States. Both fields are, surprisingly, nearer the densely populated US East Coast than the Middle East or West Africa.
They are not, however, near their home littorals: Snøhvit will break distance records for multiphase flow when it starts producing in 2007.
Snøhvit’s Melkøya processing plant for LNG technology and the neighbouring port of Hammerfest will one day attract a great deal of LNG carrier and tanker traffic. Already the biggest gas liquefaction centre in Europe, Snøhvit will acquire an LNG Train II. This expansion is based on new gas discoveries nearby, the work of Norwegian drilling contractor Ocean Rig, and its Arctic-approved drilling rig Eirik Raude. Snøhvit II, around 2012, is expected to process gas before Shtokman I sends LNG to US markets.
Melkøya, near Hammerfest, is the site of the future liquefied natural gas (LNG) plant for the NOK 51.3 billion Snøhvit project.
The giant Shtokman field is part of the reason experts believe Russia will be the world’s foremost fuel supplier in 30 years. Another reason is the oil in the Pechora Sea area of northern Russia. Still more reason to visit Arctic Russia is the gas of a number of Shtokman look-alikes.
Some 60 percent of what oil and gas is not in the Middle East is locked up in northern Russia, where Hydro and veteran supplier/contractor Aker Kværner are exploring and producing. At Pechora, Norwegian production modules for platforms are brisk sellers. At Shtokman, Hydro and Aker Kværner are laying the groundwork for the participation of more Norwegian suppliers and Russian partners. In a boost to the northern Russian economy, Hydro and 160 supplier companies of trade organization Norwegian Oil and Gas Partners (INTSOK) are identifying and training Russian suppliers to help meet Russia’s strict local-content rules. Hydro has set up a Northern Norwegian Supplier Trainer Centre, where Russian crews learn Norwegian ways of doing things. Since 2002, a supplier/developer programme has brought Russians into contact with modern Norwegian industrial practices in exchange for what is hoped will be a sizeable stake in the Shtokman field.
Likewise, Norwegian suppliers like oilfield construction outfit Reinertsen have hired translators, chosen a quayside workshop in Murmansk and hired local skilled workers. Others, like Aker Kværner and Dalseide & Fløysund, have advised in breakthrough talks and helped identify 400 Russian suppliers. Ten of these suppliers have now joined the Norwegian and Danish energy sectors’ databank of qualified companies, Achilles. Hydro and Aker Kværner are also tasked with knowing which Russian outfits might plug into the Shtokman job.
Meanwhile, Russian and Norwegian suppliers are aligning umbrella organizations and sharing project information, all geared towards arriving at a standard contract for successful project tenders. And more is being said at the many matchmaking and specific field workshops in Moscow, St Petersburg, Murmansk, Archangel and Volgograd, where the Norwegian cold-climate experience is making the rounds.
Oil Company Experience
In the 25 years since Norsk Hydro’s first Arctic well, the industrial giant has learned ice management in Canada, installed the world’s first subsea well, brought Troll (gas) Train I into being, and employed horizontal and directional drilling. It’s a wealth of know-how, and Russia’s Arctic planners have taken notice.
The Ormen Lange gas field project, which will also break subsea distance records when its pipelines carry gas to the United Kingdom (1,200 kilometres of pipe), is one reason Hydro is on Gazprom’s list of development partners. While subsea may not be the right field concept for much of the shallow, ice-infested Eastern Barents, it should serve well in areas kept clear by the salt and warmth of the Atlantic’s Gulf Stream.
Advanced Production and Loading’s submerged turret loading (STL) technology is making its mark in LNG
Hydro has a relationship with Shtokman that goes back to 1990, when it first studied the field. Now, 2010 has been plotted for a first Shtokman well, the kick-off for a tight drilling campaign and intense building. The development concept chosen – subsea or platform – will determine costs and which Norwegian companies will participate under the new Russian-Norwegian cooperation agreement.
For now, the biggest foreign investment in Russia remains Sakhalin II, a project on Russia’s Pacific coast where Aker Kværner experts supervised 10,000 workers building two concrete, gravity-base platforms in 16 months. Yet another record.
While no one’s saying what form the planned Sakhalin IV, V and VI will take, similar, iceberg-defeating concrete could dominate the Arctic. It was Russian feasibility favourites Hydro and Aker Kværner which agreed upon a concrete platform for Hibernia, and now Hebron, off eastern Canada. For the same reasons, Shtokman could well feature a concrete base structure.
In the Caspian, where the water is also very shallow, Norwegian contractors – including Aker Kværner – have brought Lukoil and Rosneft the process and utility barges that will help prime another giant field: Kashagan.
Meanwhile, as of this writing, Shtokman is down to final negotiations with two or three partners as preliminary engineering awaits approvals. Norwegian companies will cooperate with international companies at Gazprom’s behest.
Clean-burning Rolls Royce MT30 gas turbines are in place just in time before emission taxes at sea take effect.
With the consumption of natural gas set to double by 2030, just as North American and North Sea production subsides, the Barents Sea and northern Russia are seen as areas that will help stabilize Europe’s gas prices and ensure long-term supplies. To that end, LNG carriers and oil tankers will be criss-crossing the millions of square kilometres of navigable Arctic waterways. Later, after Shtokman I, a Barents pipeline heading southwest to Europe will emerge.
Whatever the LNG concept chosen at Shtokman, it’s now certain that Norwegian technology will play a part. Ships carrying LNG and regasifying technology onboard and LNG carriers plugging into regasifying terminals will both be visiting northern Russia. Based in the southern Norwegian coastal city of Arendal, Advanced Production and Loading (APL) boasts involvement in the first offshore terminal for liquefied natural gas – the Gulf Gateway Bridge Terminal – off the Louisiana coast. LNG ships dock onto a tethered, submerged but floating STL buoy via a specially equipped hull. The ship regasifies the liquefied gas into a high-pressure pipeline.
Norwegian shipowner and operator Leif Höegh & Co. has shipped LNG for over 30 years, and is involved in an offshore LNG port planned for Massachusetts Bay, together with Tractebel. Höegh LNG launched a process for vaporizing LNG onboard in 2001, and its own solution connects to a gas pipeline via flexible riser and the APL-type hull-mounted turret, which is proven in the harsh environs of the North Sea. APL employs a business development officer for Russia.
Det Norske Veritas (DNV), the Norwegian classification society, offers a set of rules for offshore LNG terminals. Norwegian adherence to strict structural safety, fire protection and gas treatment permeate the guidelines. Propelling LNG technology at sea are Rolls-Royce Marine’s gas turbines, as clean burning as the gas they move, and in the nick of time for international taxes on emissions at sea.
Norwegian technology that has impacted oilfield yield rates off Norway is now being brought to bear, helping to bring previously untouchable Arctic oil and gas fields into play. Framo and Aker Kværner, for example, offer multiphase booster pumps that might one day help “lift” the gas of Shtokman, if necessary, or load LNG.
Norwegian survey equipment, including seismic and its variants, is among the most deployed in the world, and partly explains the relatively low number of exploration and appraisal wells drilled this year – just 12. The electromagnetic imaging of EMG can find reservoirs with pinprick accuracy. Developed under Statoil’s wing, the gear is being used alongside the seismic of Norwegian-American firm TGS-NOPEC in Russia’s Sea of Okhotsk and in the Arctic. The interpretation and mapping of Norwegian surveyors explains how we know that a billion cubic metres of oil equivalent lie buried in the Western Barents.
In the Eastern Barents, READ’s PipeTrain Hydrate Tractor might make long-distance runs checking Shtokman pipelines.
At a Russian-Norwegian oil and gas conference organized by INTSOK in January 2005, over 200 Norwegian supplier representatives attended. They were keen to understand the Russian market, ahead of bidding for work or partnering with seasoned Russian suppliers. The presence of ABB’s Process Industry Division at the conference was in line with a stated Russian aim of diversifying downstream into processing and refining.
Norway’s oil and gas industry tends to focus on three key strictures – health, safety and the environment, or HSE – and these tenants hold from politicians to the smallest equipment vendor. The “E” in HSE dominates policy, contracts and operations in the Barents Sea. A “zero emissions” policy of harmful substances will be in force from January 1, 2006 onwards in the spawning grounds of some of the world’s most important fish species.
The tight rules apply to drilling, well operations, production and discharges from pipelines. The strictures will force, among other measures, the reinjection of produced water and cuttings. Answering the call are companies like Midsund Bruk, which makes tanks that separate oil, gas and water; AGR and its trademark RMR, or “riserless mud recovery”; and a host of others.
With exploration seen as the core activity across the Barents Sea in the years ahead, even emissions from the diesel engines and rain wash of offshore rigs has come into scrutiny. “All equipment capable of harmful emissions is to have two barriers,” a Norwegian Ministry of Petroleum and Energy document asserts.
The next oil and gas offshore licensing round in Norway will focus on granting oil companies access to the Barents, where two billion square metres of oil equivalent are in place. Russia – anxious to avoid bottlenecks in the Bosphorus – has promised a round of its own in short succession.
Ahead is a real chance to replace Russian nuclear power in the fragile north with locally produced natural gas.
Both sides can hardly wait.