Norway has been exploring for petroleum deposits in its Arctic waters for decades. The Norwegian Barents Sea South was opened for oil and gas activities more than 30 years ago. The first discovery, the Snøhvit gas field, came on-stream five years ago. And oil field Goliat, discovered in 2000, is set to start production in 2013.
However it was the recent discoveries Skrugard and Havis, roughly 100 kilometres north of Snøhvit, which have awakened interest in these cold waters known more for gas discoveries. The two oil finds are expected to be the third profitable development in the Norwegian part of the Barents Sea with an estimated volume of 400-600 million barrels of oil equivalents.
“The optimism regarding the High North today is based on the actual discoveries, development projects and exploration activity in the Barents Sea,” said Ola Borten Moe, Norway’s oil minister, at the Arctic Energy conference in Trondheim this June. “Fifteen years ago, this area seemed to be without any future.”
Stepping up Activities
As a consequence, the major player on the Norwegian Continental Shelf plans to step up its Arctic drilling activities. Norway’s Statoil aims to drill nine wells as part of a non-stop 2013 Norwegian Barents exploration campaign, starting in Nunatak in the Skrugard area, and ending in the most mature province of the Barents, the Hammerfest Basin, close to the Snøhvit and Goliat discoveries.
“The Skrugard discovery has reignited interest in the Barents,” said Tim Dodson, Statoil exploration executive, in connection with the announcement of its ambitious drilling programme this August. “A number of major companies that had left the area will be looking to make its way back in.”
Statoil plans to participate in the High North focused 22nd licensing round on the Norwegian Shelf, which will be up for award in spring 2013. Out of the 86 blocks, 81 are located north of the Arctic Circle, and 72 of those are located in the Barents Sea. Some 181 blocks in the Barents Sea were originally nominated, the highest-ever number for a Norwegian licensing round.
“This underlines the fact that Norway as a petroleum nation is moving north and that the industry is doing the same,” said Borten Moe, in connection with the announcement of the new acreage this June.
RU-NO Barents Project
A major reason for the increased enthusiasm up north is the strengthened links with neighbouring Russia. The two countries ratified a historic maritime delimitation treaty in 2011 that split the disputed border in the Barents Sea and Arctic Oceans, and opens up for increased petroleum collaboration on both sides.
The recent political thaw has inspired the Norwegian government-industrial petroleum partnership INTSOK to launch a new project, RU-NO Barents (Russian-Norwegian oil and gas industry cooperation in the High North), focusing on the challenges the two countries face in exploring in these icy waters and environmentally sensitive eco-systems. The goal of the three-year bi-lateral project is to help the growth of Russian and Norwegian companies in future petroleum activities in the Barents, Pechora and Kara Seas.
The RU-NO project started last year after receiving funding by Norway’s foreign ministry. It is the largest project of its kind for INTSOK. As of September 2012, it boasted a budget of NOK 18 million and a total of about 45 participants in the project, which includes the Norwegian government, Norwegian and Russian companies, organizations and research institutes, but also international oil majors with activities in Norway, such as Exxon Mobil, Total and Shell.
“A lot of the Arctic knowledge is based in Canada or Houston,” says Thor Christian Andvik, RU-NO Barents project director.
“We are gaining knowledge and experience from other parts of the world, such as Alaska, Greenland, and Sakhalin through the participation of international oil majors in our project.”
The RU-NO project started its work programme this March with logistics and transport, the first of its five task force groups. The participants include North Energy, Shell, Tschudi Shipping, Gazprom, Murmansk Shipping, Norwegian Coastal Administration, Marintek/Sintef, ExxonMobil, Barents Secretariat, Statoil, Krylov Shipbuilding Research Institute, and CSJC Belomortans.
So far, this task force has identified more than 20 different arctic challenge areas. The main challenges facing logistics and transport are the meteorological conditions, the ice exposures, the maritime transport facilities and transport of personnel, the distance to and state of current onshore infrastructure, the emergency response facilities and cross border governmental traffic regulations. These will all become more relevant issues as companies shift from operating in the Barents Sea from a seasonal basis to year-round operations.
“West of the Barents Sea is fairly ice free, but the more eastwards the more ice and the more challenges you have,” says Andvik.
The logistics and transport workshop will meet in Kirkenes, Norway this October and Murmansk, Russia in December. The task force group will present its findings in January at INTSOK’s Russian-Norwegian Oil & Gas Conference in St. Petersburg and make them available on the website www.instok.ru. The drilling, well operations and equipment workshops are also underway this year.
The next workshops will be in environmental protection, monitoring systems and oil spill contingency (2013), pipeline and subsea installations (2013/2014), and floating and fixed installation (2014). The hope is that the industrial collaboration will encourage companies, both small and large, to offer solutions to problems not highlighted and open up for business opportunities in Russia.
“We really want to map the challenges when we are moving petroleum development into the Arctic,” says Andvik.
Exploring Both Sides
Another positive consequence of the Russian maritime delimitation agreement has been increased cross exploration efforts on both sides.
In August, Statoil and Rosneft signed shareholder and operating agreements that establishes joint ventures for the four offshore Russian license areas in the Barents Sea and Sea of Okhotsk included in the cooperation agreement signed in May. The Norwegian oil company plans to drill six wells during 2016-2021 at licenses Perseevsky, Kashevarovsky, Lisyansky and Magadan I.
As part of the May agreement, the two companies will conduct joint technical studies on two onshore Russian assets: one in West Siberia and one in the Stavropol area in south western Russia. It also opens for Rosneft to acquire interests in selected Statoil exploration licences and assets in the North Sea as well as in the Norwegian sector of the Barents Sea.
Statoil has been in Russia since the late 1980s. It is currently active as a partner at the Kharyaga oil field in North West Russia and still trying to find a solution, which will allow the company to participate in the Shtokman gas field project. The company recently handed back its 24% shareholding in the Shtokman Development AG (SDAG) joint venture to Gazprom after the current agreement expired on June 30, 2012.
On the Norwegian side, Lukoil is in the process of collaborating with Norwegian companies to secure access to new acreage in the Barents Sea. The company was pre-qualified last year as an operator on the Norwegian shelf, opening up the possibility for it to bid on future blocks.
Andrei Kuzyayev, head of Lukoil Overseas, told Reuters this year that the company has plans to bid for licenses in the 22nd round via separate alliances with Norwegian oil companies Det norske and North Energy and Swedish company Lundin.
RU-NO Barents Participants
- The Norwegian Ministry of Foreign Affairs
- The Norwegian Ministry of Petroleum and Energy
- Innovation Norway
- Barents Secretariat
- Finnmark County Council
- Rogaland County Council
- Akershus County Council
- Nordland County Council
- Troms County Council
Industry financing and allocation of resources in Task Force Core Teams:
- A/S Norske Shell
- ConocoPhillips Scandinavia
- GDF SUEZ E&P Norway
- North Energy
- Chevron Norge
- ExxonMobil Production & Exploration Company
- ENI Norge
- Norwegian Oil Industry Association (OLF)
- The Federation of Norwegian Industry (oil & gas)
- FMC Technologies/FMC Kongsberg
- Total E&P Norge
- GE Oil & Gas
Major industry in-kind contribution (allocation of resources in Task Force Core Teams):
- Rubin Design Bureau for Marine Engineering
- Tschudi Shipping Company
- Murmansk Shipping Company
- Norwegian Coastal Administration
- Krylov Shipbuilding Research Institute
- All Russian Geology Exploration Institute
- Gazprom Exploration
- Technip Norge
Partners & Supporters:
- Petroarctic – network of petroleum suppliers for projects in the north
- Mumanshelf – association of suppliers for oil and gas industry (Murmansk region)
- Sozvezdye – association of oil and gas suppliers (Arkhangelsk region)
- Union of Oil and Gas Industrialists of Russia
- University of Nordland/High North Center of Business and Governance
- Gubkin Russian State University of Oil & Gas
- OG21 (Norwegian Oil & Gas technology strategy for the 21st century)
- Greater Stavanger Economic Development
- Det Norske Veritas
- The Norwegian Confederation of Trade Unions (LO)
- A/s Norske Shell
- Statoil Asa
- Eni Norge AS
- Exxonmobil Exploration And Production Norway AS
- SINTEF Ocean
- Total E&P Norge AS
- Seadrill Norge AS
- DNV GL AS
- Akastor Asa
- Norsk Industri
- Innovation Norway
- North Energy Asa
- Gdf Suez E&p Norge AS
- Conocophillips Skandinavia AS
- Landsorganisasjonen I Norge
- Olje- Og Energidepartementet
- Greater Stavanger Economic Development AS