The sheer potential of Russian natural resources is enormous. For example, reserves of nearly 1.2 billion barrels of oil and 17 trillion cubic feet of gas in the Piltun-Astokhskoye and Lunskoye fields off Sakhalin Island are soon to be developed. And a new liquefied natural gas (LNG) plant with an annual capacity of 9.6 million tons a year is to be constructed at Prigorodnoye. The LNG produced here will be exported to Japan, establishing Russia as a leading energy supplier to the Asia Pacific market in the very near future.
With so much upside potential, but with comparatively little infrastructure, Russian oil and gas developers have turned to many Norwegian firms to take advantage of their know-how, technical innovation and harsh weather experience – particularly in the far north of the country.
Norsk Hydro and Kharyaga: First Joint Venture Success
For Oslo-based Norsk Hydro, Russia is a core new area of activity. The energy and light metals company has been involved in petroleum exploration for more than ten years in Russia, particularly in the Kharyaga oil project in the northwest part of the country.
The Kharyaga oil field – in which Norsk Hydro owns a 40 % share – is the first onshore production share agreement field in Russia.
Operating under an agreement that gives joint venture partners the right to export output, Norsk Hydro – which owns 40 percent of the Kharyaga field – cooperates with Total (formerly TotalFinaElf), the operator, and Nenets National Oil Company. This cooperative venture is quickly achieving results. In 1999, Kharyaga became the first onshore Russian oil field to produce and export oil in accordance with a production share agreement.
Today, the field produces some 12,000 barrels of oil per day. An ongoing extension of the field is slated to increase daily output to 30,000 barrels per day during 2003. And a third development phase scheduled for 2006 is under consideration, which would boost production all the way up to 70,000 barrels per day.
Elsewhere, Norwegian high-tech solutions are primed to be important players in developing Russia’s vast resources in the near future.
Aker Kvaerner and Sakhalin II: Norwegian Expertise on a Massive Scale
Perhaps the largest-scale Russian-Norwegian cooperative effort is the Sakhalin II project, an undertaking spearheaded by SEIC (Sakhalin Energy Investment Company Limited), which has awarded Aker Kvaerner of Norway a US $150 million contract in the development of Phase 2 of the project.
As with other Norwegian companies, Aker Kvaerner has made strong efforts to bring its engineering and project management expertise to developing markets around the world, particularly in areas where skill in offshore platforms and performance in harsh weather is called upon. Once again, Norwegian firms are leading the way, as the Sakhalin II oil and gas field is the first offshore LNG development in Russia.
Meeting the Challenge of the Roughest Conditions
The field will be developed with two offshore platforms featuring concrete substructures resting on the seabed. The area presents a number of tests for developers – including severe weather conditions, seismic activity, and the pack ice which drifts in from the Sea of Okhotsk every year from October to May. Aker Kvaerner’s experience in the North Sea and off the Newfoundland coast helped them win the contract to create concrete substructures designed to ensure robust foundations in the harshest conditions.
The Norwegian Advantage
Aker Kvaerner Vice President of Corporate Communications Torbjorn S. Andersen is clear over the Norwegian advantage in projects like Sakhalin. “Because many of the fields in the Norwegian Continental Shelf (NCS) are so large, our company and other Norwegian firms have developed best-in-class expertise in large, complex offshore developments. Also, the challenges presented by the NCS have enabled the development of leading-edge technologies and solutions.”
What kind of technology and solutions? Andersen cites high skill levels in deep water environments, harsh weather experience, subsea expertise and world-class knowledge in concrete offshore structures, “In the Sakhalin project, we’re utilizing the experience we’ve gained by delivering solutions to other emerging oil and gas provinces outside the North Sea. Sakhalin has similarities to the work we did in the Hibernia field offshore Newfoundland, for example. That project’s scope also called for us to develop an infrastructure to create the concrete offshore structures.”
Finally, Andersen notes the organizational advantages that Aker Kvaerner and other Norwegian companies have gained by working with multinational companies on the NCS. “Our experience in working with a wide variety of international partners on shelf operations has helped us to develop first-rate project management skills that have proved useful worldwide.”