July 27, 2010
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Home / Issue Archive / 2010 / July - August #7 / INTSOK Chief in Russia, Vladimir Ryashin – “Norway’s Offshore Is Open to All”

№ 7 (July - August 2010)

INTSOK Chief in Russia, Vladimir Ryashin – “Norway’s Offshore Is Open to All”

   For the past 40 years, Russian-Norwegian relations have been colored by the discovery of rich hydrocarbon fields in Arctic waters. Negotiations over the wealth of oil and gas in the Barents Sea finally bore fruit on April 26 this year when an historic agreement delimiting the maritime border was signed by Russian President Dmitry Medvedev and Norwegian Prime Minister Jens Stoltenberg.

By Bojan Šoć

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   This opened the doors to investment in the region which will benefit both sides. Ahead of the ONS oil and gas exhibition and conference to be held on August 24-27 in Stavager, OGE spoke with several top managers of Norwegian companies to get their take on the opportunities promised in the new business climate.

   In this issue, we feature a series of interviews with INTSOK Country Manager in Russia Vladimir Ryashin, Thermtech sales director Rocco Valentinetti, Aker Solutions’ sales director for Russia and Caspian Sea Region Heikki Välitalo and DNV general manager in Russia Morten Solnørdal.

   Five years ago, the prime ministers of Russia and Norway signed a declaration on cooperation in the energy sector to facilitate sharing experience among market players in the two countries’ petroleum industries. Shortly after the document was signed, INTSOK – Norwegian Oil and Gas Partners – launched a partnership project with Russian companies. At the end of 2010 the project will draw to a close, but its participants can already be proud of their achievements so far: during the project’s execution industry reps have established firm ties, several dozen Norwegian companies have entered Russia and some of them are already operating in the market under running contracts.

   What drives demand in the Russian market, who is interested in Shtokman bids and how can Norwegian companies’ technologies help boost levels of associated gas utilization – these are just some of the questions OGE asked INTSOK сountry manager in Russia Vladimir Ryashin.

OGE: The Russian-Norwegian cooperation project under the aegis of INTSOK is nearing completion. How would you rate its results?

RYASHIN: The results were fairly predictable as Russia is a priority market for Norway’s oil and gas sector. Many Norwegian companies want to develop their business here. During the project’s Stage One we introduced Norwegian companies which could take part in Russia’s offshore projects to local firms involved in those projects.

   Stage Two involved setting up groups of Norwegian companies for which we individually created market-entry strategies. Ultimately, we ended up establishing four groups, each of which featured approximately 15 businesses. Of those, around 70 percent were strictly implementing our recommendations, displaying initiative and are currently based in Russia. Some of them opened up representation offices, some have forged partnerships with Russian firms that they will be working with. Several companies secured orders from Russian clients, such as Gazprom, LUKOIL, Rosneft, for their existing projects. This provides ground to assert that we have largely accomplished the tasks we set. After these companies have established themselves to a certain extent in Russia, we now need to present a strategy for further developing and expanding their presence here.

OGE: It was reported earlier that some of the companies participating in the project had signed contracts with Russian customers. Could you specify the kind of jobs they are performing here?

RYASHIN: LUKOIL, for example, hired Norwegians to build the Yury Korchagin platform in the Caspian Sea. Contractors from Norway are also building the platform at the Arkutun-Dagi field, which is part of the Sakhalin I project. Several Norwegian companies are talking to Gazprom about working at the Kirinskoye oil and gas condensate field under the Sakhalin III project.

   As far as future projects like Shtokman field development are concerned, we see big interest among Norwegian companies, many of which are already participating in Shtokman tenders and design work. Some of them want to gain a foothold in Russia’s north-west, set up manufacturing facilities in that region and open representation offices there. Among those interested in winning Shtokman contracts, let me mention large companies such as Aker Solutions (which is currently building the base of the offshore platform for Sakhalin I), FMC Kongsberg Subsea, Norwegian subsidiaries of international firms such as Siemens Oil&Gas Sulutions, ABB, midsize companies like Multiconsult, Reinertsen AS, Authronica Fire&Security, Scomi Oil Tools, Bussring, and small-sized businesses such as Rapp&Bomek, Olen Betong, as well as companies that are directly related to oil and gas production such as Roxar and SPT Group.

OGE: Recently, a delegation of representatives of Norwegian businesses visited Russia’s key oil-producing centers in West Siberia. What do the Scandinavian partners who specialize in offshore projects find appealing in Russia’s onshore industry?

RYASHIN: You are right – Norwegian suppliers are primarily competitive offshore. At the same time, Russia is a country with an oil industry going back over a hundred years and boasting a rich tradition. The core oil production today takes place in West Siberia, which will remain Russia’s key producing region for the next 30 to 40 years.

   We visit West Siberia from time to time with the goal of understanding the situation there and learning about what kind of Norwegian technology could be in demand and what growth potential onshore production holds for the market. During one recent visit we discussed two issues: the utilization of associated gas, which is high on Russia’s agenda today, and a presentation of Norway’s enhanced recovery technologies.

OGE: How can Norwegian experience be applied in practice in this environment?

RYASHIN: In Norway, the issue of associated gas utilization was dealt with a long time ago. For technological needs, Norwegian firms burn no more than 0.5 percent of all associated gas produced. In Russia, utilization level ranges from 97 percent at Surgutneftegaz to 55 percent at other companies.

   With regard to enhanced recovery technology, I can say that Norway has a long tradition in that field, with average recovery rates reaching 60 percent for oil and 70 percent for gas, whereas in Russia the rate for oil stays within the 40- to 50-percent range. Governed by these figures, we thought Norwegian expertise could come in handy in West Siberia. During our tour, we met with both local authorities (including the Tyumen region and Khanty-Mansiysk autonomous district governments) and the representatives of two of Russia’s largest oil companies, Surguntneftegaz and Rosneft’s production subsidiary, Yuganskneftegaz. Also, we met with the management of Gazprom Neft Khantos and RITEK.

   Yuganskneftegaz is en route to solving the issue of associated gas utilization, while in Surgut that problem has practically been solved already. However, the issues of enhanced oil recovery and increased production efficiency still remain on the agenda. I want to note that we were warmly welcomed everywhere we went and our hosts demonstrated a genuine interest in what Norwegian businesses can offer. After wrapping up the trip, we decided to put together a program for Norwegian companies and invite them back in October for a tour of Moscow, Khanty-Mansiysk, Surgut and Nefteyugansk. During that tour they will be able to present to Russian oilmen those technologies and equipment, which, in our opinion, could operate efficiently in a finely tuned oil and gas production process in West Siberia. This group of companies will be specially selected according to a number of parameters that include both technology and staff capable of developing business in Russia. This should not be a solitary effort – we wish to believe that in the future Norwegian companies will be able to act on their own while offering services to potential Russian customers.

OGE: In April Russian President Dmitry Medvedev and Norwegian Prime Minister Jens Stoltenberg signed a long-awaited agreement on the principles of division in the Barents Sea. Do you expect that deal to speed up the process of developing offshore reserves in the Barents Sea?

RYASHIN: Long-term investments require clarity and this step will undoubtedly provide a boots to new oil and gas production projects in the Barents Sea. The border agreement will allow the Norwegian sector to develop within the designated zone. Naturally, the lack of clarity on this issue over many years provided no stimuli whatsoever for the exploration and production of hydrocarbon reserves in the area. However, the Norwegian side hopes to perform together with Russian companies in the Barents Sea and is ready to make a joint effort to determine the geological potential and develop reserves in this sector. Taking into account that Norwegian firms produce oil and gas exclusively at sea, the Oslo agreement has a strategic significance for them. Norwegians’ activity in their own sector of the Barents Sea could, perhaps, serve as a booster for Russia to develop its own oil and gas industry in the country’s northwest and efficiently develop existing reserves.

OGE: According to latest information, 94 percent of oilfield equipment used in Russia is manufactured locally. Can you see the time coming when Russian equipment producers become competitive suppliers to Norway’s oil and gas sector?

RYASHIN: First of all, let me say that Norway’s contitental shelf is open to all. It offers opportunities for production companies from all over the world, and for suppliers, too. However, it is more difficult for suppliers since they have to comply with mandatory certification standards and possess clearly-defined qualifications for work in Norway. Through the development of the cooperation project between suppliers from the two countries, we strive not only to provide technology transfer and promote joint cooperation in Russia, but also inform Russian firms about the legal framework for operating in the Norwegian market, the qualification rules, the national system of management and planning. The progress here will depend largely on equipment manufacturer’s competitiveness in the domestic market, provided competition is fair. Only then will it be able to be competitive in a foreign market.

   With regard to oilfield equipment used for onshore production in West Siberia and other parts of Russia, it is modern and highly competitive and the manufacturing process and delivery to market are organized pretty well. However, there is another important issue here – progress and modernization are not only about implementing the latest technology (though that is a natural process), but also about improving work organization, planning, quality control, project management and the strict execution of tasks set forth. In Russia, these segments have traditionally been the weak link in the chain.

   The introduction of new technology in Russia is largely hampered by existing procedures. In any developed country in the world, an inventor who has an idea appealing to the market, ultimately always finds sponsors. Such projects can be financed by oil and gas companies, venture capital investors, but regardless of the source of financing the mechanism is finely tuned. Meanwhile, poor Russia inventors go knocking on door after door, offering their solutions to oil companies, but most often get the following response, “Why don’t you produce a test model first and convince us it is working properly and then we may, perhaps, consider options on how to put your product to practical use.” In order to introduce the latest ideas quickly and efficiently, you always need certain procedures and starting capital. For the time being, that mechanism in Russia is in the initial stage and that largely slows down efficient, practical implementation of domestic R&D solutions and their subsequent commercialization.

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