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Home / Issue Archive / 2009 / May #5 / Shtokman Launch 
Proceeding as Planned

№ 5 (May 2009)

Shtokman Launch 
Proceeding as Planned

   Launch forecasts remain on target, including projected costs. Shtokman Development AG (51 percent shares – Gazprom, Total – 25 percent, StatoilHydro – 24 percent), project operator, expects no change and the LNG plant is on target to be put on stream as planned in 2014.

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   Regardless of the fact that the dates of the project’s investment decisions have been shifted from late 2009 to early 2010. The delay (caused by the volume of preliminary work) was announced by Yuri Komarov, Shtokman Development AG CEO, on the Equipment for Shelf conference organised by the Union of Oil and Gas Equipment Manufacturers (SPNGO). “Currently, the contractors are at the basic engineering stage, which would define the concept of the platform and design specific chapters and offers. [We] would put together a package linked to the Russian industry plans on entering the project, this is one of the key factors for decision-making,” noted Komarov. “Technical approval, technical discussions, feasibility study and commercial offer will be ready next march; based on those we will decide on joining the project, with due consideration to other parameters,” he added. According to Komarov, Shtokman Development AG will be ready to order placement in 2010.
   Joint impact of the Arctic climate, the ecosystem vulnerability, ice conditions and icebergs raise up the equipment manufacturing standards for this Barents Sea project. 
   “Whatever the media writes, Total and StatoilHydro really won this tender,” Komarov says. The choice of the companies was based, first of all, on successful project implementation experience, on the project conditions similar to those in Shtokman, Ormen Lange and Snohvit. Currently, the top priority tasks for Shtokman Development AG are the streamlining of engineering solutions, application of high-safety technologies, improving the operational readiness, ensuring competitive environment, and expanding supply opportunities for the Russian producers. The last goal is being lobbied by the SPNGO, which is concerned by the state of contract works on the Russian shelf. “While in the notorious and widely criticised PSA projects at least had the standard 70-percent Russian participation, Shtokman project even this is absent. While previously the announcements about the tenders on PSA projects were published in the main Russian media outlets, now there is no information whatsoever on the choice of the contractors,” says a source in the Union. According to SPNGO president Alexandr Romanikhin, even the offshore platform project – the platform is now being constructed at the Vyborg shipyard – the Russian stake won’t be higher than 25 percent, so what is there to say about other programs. Ostensibly, in other cases Russian exposure to the projects will be even lower. Still, even the named figures are highly approximate as in current conditions it’s impossible to pinpoint the stake of Russian companies in any given project.
   Though the project includes a number of engineering solutions that in the competitive environment could benefit the Russian side. Thus, capabilities of Russian pipe plants are taken into account in drafting the pipelines. The pipes of the given calibre could benefit Russian pipe-laying contractors, just as the usage of power stations with 160 MW wattage (the power has been downgraded from the planned but unattainable locally 220 MW level). According to Komarov, the Russian companies got in total some $107 million, of the orders, while the priority of Russian producers has been embedded in the framework agreement. Well-known Russian companies and institutes have joined the project, such as Arktikshelf, PiterGaz, FREKOM Russia, Giprospetsgaz, VNIIGAZ, VNIIBT.
   On the first stage of the FEED project documentation development, Rubin design bureau and Doris Engineering were selected for undersea production facility and FPU platform, JP Kenny and Morneftegazproekt – for pipeline design and development work. Technip and its subsidiary Technip CIS selected as design contractors for the portal and technology complex, which includes the LNG plant.
   The Vyborg shipyard jointly with Samsung are manufacturing two drilling rigs (the South Korean company is responsible for the upper deck). After completing the first stage of the construction in Vyborg, the rigs will be transferred to Murmansk for erection works. As experts say, yet other drilling rig could be required. According to Komarov, this will be “the fifth generation rig, which so far has not been manufactured in Russia.”
   In Komarov’s opinion, the lack of appropriate industry standards is one of the major roadblocks of the project. Russian national standards, which are currently being developed, use the best practices offered by API and DNV standards.
In order to utilise the foreign experience in offshore projects harmlessly for Russian economy, SPNGO suggests advancing the following cooperation routes: acquisition of equipment production licences, setting up joint ventures, subcontracts (manufacture of separate parts on the orders of western companies), joint supply of equipment to the third countries, training and study placement abroad, creation of regional and central servicing centers. Romanihin also holds that domestic industry must take up the experience of other countries in the field of domestic producer protection. Thus, Norway, which created its oil and gas engineering industry from the scratch, uses up to 80 percent of domestically manufactured equipment in its offshore projects.
   Such impressive figure is due to the support of the state, which in time created the domestic equipment protection program. Vsevolod Kershenbaum, director of the National Oil and Gas Institute, believes that way forward is to devise a federal program for the development of oil and gas complex (engineering). 
The success of Norway, which is currently demonstrating the world how the offshore exploration in severe environment must be done, should be thoroughly analyzed. Starting its offshore projects in 1970s, Norway did not consider it “unpatriotic” to acquire the U.S. equipment, since this equipment proved its worth in the Gulf of Mexico. Using the best international experience, the country was able to ensure progressive advancement of the industry, taking with time highly advanced standing in this field. Technology transfer offers and evident and civilized solution – there’s no need to re-invent the wheel. Most likely, the low SPNGO estimates for the share of the domestic equipment to be used at the Shtokman project reflect the unabridged state of the domestic offshore equipment engineering industry. 
   It’s not that the Russian engineering is good for nothing. To say, 38 sets of equipment for offshore drilling (Uralmash – Drilling Equipment) is successfully exploited offshore Barents, Okhotsk, Black and Caspian seas. Moscow-based VNIIBT has designed well drilling projects for Prirazlomnoe and Shtokman fields. Russian piping is used in the projects run by British Gas, Eni, Chevron, and in underwater segment of Varandey field pipeline, which proves the competitive edge of Russian production.
   The advantages for Russian producers include adaptation to the local environment, durability and versatility of the equipment, compliance to Russian standards, long-term links with the consumer, proximity to oil and gas production regions; from the consumer side – availability of repair facility and human resources. In their turn, the U.S. suppliers have high product quality, financial muscle, corporate culture, more advanced marketing strategies. Competitive position of Chinese production is ensured by the state subsidies, low cost, aggressive merchandising, provision of interest-free credit to the buyer of the equipment.
   Russia’s federal special program for the development of civil naval engineering in 2009–2016 must reduce overall gap in scientific and technological development between Russia and post-industrial states. The program includes development of complex projects for Arctic oil rigs, LNG carriers and VLCC ice-proof tankers, powerful Arctic ice-breakers and other naval hardware. “Over 70 percent of financing for this program will be allocated to the research work,” said Vladimir Putin in early March during the meeting on the development of naval hardware. The necessity to devise solutions for offshore operations implies the development of crucial technologies for oil rigs projects (such as the ice load evaluation, the effective protection against the ice load, the corrosion protection, the development of telemetric complexes to control drilling parameters, etc.) The program also emphasizes the need to develop the subsea and sub-ice technologies for hydrocarbons production and transportation (which include the technologies for submersible crafts, the technologies and systems for subsea exploration and fields’ monitoring, etc.), as well as technologies enabling the construction of new hydrocarbon carriers.
   The maximum total financing required in 2009–2016 for the projects outlined by the program is estimated at some 140 billion rubles. According to Lev Klyachko, the head of Kurs R&D Center, the amount of money allocated for this program is somewhat lower than that allocated for other federal programs (see Table 1). Yet despite the crisis and the need to adjust the 2009 budget, the RF Government cut down the expenses on that particular program only slightly.
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