December 13, 2011
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№ 10 (October 2011)

Russia’s Offshore – Challenges and Solutions RAO / CIS OFFSHORE 2011 Conference Roundup

   The world community’s concerns about securing energy resources result in a search for new energy sources and development of conventional hydrocarbon resources in hard-to-reach regions that in the first place include the Arctic.

By Antonina Petrova

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The Arctic development trend is among the top foreign policy priorities of Russia. The document entitled “Fundamentals of the RF State Policy in Arctic Until 2020 and Further Perspectives”, which was approved by the RF President in September 2008, define preservation of the Arctic as a peace and cooperation zone among the primary national interests of Russia.
The continental shelf of Russia is the most extensive one in the world. According to the RF Ministry of Nature, the area of the RF continental shelf is 6.2 million square kilometers. The initial recoverable oil and gas resources within this area are estimated at 90-100 billion tons of oil equivalent, which corresponds to 20-25  percent of the global hydrocarbon (HC) reserves. A significant portion of the initial total HC resources of Russia – nearly 30  percent of gas, over 22  percent of condensate, and approximately  12  percent of oil fall to the continental shelf. Major hydrocarbon resources (over 80 percent) are concentrated in subsurface areas of the Barents, Pechora, and Kara Seas and the Sea of Okhotsk. While the Barents and Kara Seas contain mostly gas and condensate, oil prevails in the Pechora Sea, and the Sea of Okhotsk features both oil and gas deposits.
Thus, the Arctic zone of Russia is a basis for the RF economic development, and processes occurring therein are of special significance for the Russian state.
In his welcome speech at the 10th International Conference of RAO/CIS Offshore 2011 held by Restec Exhibition Company on Sept. 13-16 in Saint Petersburg, Evgeny Velikhov,  the member of RAS and president of the “Kurchatov Institute” Research Center, reminded the participants about the shelf development’s history in Russia, which had its own “rises and falls”. Evgeny Velikhov mentioned an outstanding event, which had been anticipated for 15 years: on Aug. 17-27 a unique offshore operation took place in the Barents Sea – “Prirazlomnaya” offshore ice resistant platform, of the total weight amounting to 240,000 tons, was transported to its permanent location at the Prirazlomnoye field. It was the first national project for the development of Arctic shelf resources. The platform was delivered and installed in the field located in the Pechora Sea on Aug. 28, 2011, with the first oil to be produced in 2012. Oil recoverable reserves are 46.4  million tons, which allows achieving the annual production  of nearly  6  million tons.
Velikhov believes that activities in the Northern shelf depend mainly on Russia – in the Barents and Kara Seas and in the Far East. Meanwhile it is impossible to disregard the interest being revealed now to the Arctic shelf by the international community, and primarily, by the North countries. “North countries are being consolidated. Everybody understands where hydrocarbon production activities shift,” RAS member noted.
Today, the environmental safety is the paramount challenge, given the sad experience of the Gulf of Mexico. First of all, it is essential to ensure safety and prevent any spills such as oil, condensate, etc. For Russia, this challenge must be among the top priorities. “So we won’t face another Chernobyl, because in the open sea at least 30  percent of oil can be collected, but in the ice conditions, this percentage will be equal to zero. Thus, the only way out is to prevent all and any spills. There are technologies being developed in Russia to solve these problems, especially bottom technologies – they will beto be presented at the conference. This is an important moment of a new problem emerging, a solution of which must ensure full absence of incidents. If we admit a serious incident in the Arctic shelf, it will become a more serious catastrophe for the industry than Chernobyl for the nuclear industry, since any opportunity to work in the Arctic shelf will be closed,” Evgeny Velikhov pointed out.
Velikhov expressed a hope that plans stated for Yamal and Shtokman would be implemented.
Vsevolod Cherepanov, Gazprom Board member, Chief of the Gas, Gas Condensate, and Oil Department reported that in April 2011, Gazprom’s Board of Directors had approved the updated “Program for Hydrocarbon Development in the RF Shelf Until 2030”. According to the Program, application of integrated approach will enable the more expedient use of technical facilities and infrastructure in case of offshore projects implementation. Special attention is paid to the integrated development of the Shtokman field in the Barents Sea and transformation of the area into a new gas producing region. (In 2010, Shtokman Development AG, the operator of the Shtokman Development Phase I, stated that it could start gas production for pipeline supplies in 2016 and even in Quarter 4 of 2015 if needed, and launch LNG production in 2017. The project dates were already shifted once – earlier, pipeline gas supplies from Shtokman were planned to start in 2013, and LNG in 2014).
Cherepanov also listed the company’s achievements up to date. Four gas condensate fields were discovered at Kamchatka, with seismic survey carried out and drilling of prospect well No. 1 started at Pervoocherednaya structure. With regard to Sakhalin-2 Project, it’s the LNG export (the first in Russia LNG plant operates), and three offshore platforms are serviced by the onshore processing facility. In the near-term outlook, Sakhalin-3 Project will become one of the main gas supply sources. Also, Gazprom is currently developing Kirinskoye gas condensate field. Given the severe environment and harsh climate typical for the area, it is suggested to use subsea production systems. According to the reporter, Gazprom added new reserves of more than 130 billion cubic meters of gas in Sakhalin-3 Project last year, and these will be increased by another 100 billion cubic meters of gas based on this year results.
Anatoly Zolotukhin (deputy principal of the Gubkin State Oil and Gas University) presented his vision of the outstanding problems and prospects of hydrocarbon resources development in the Russian Arctic. He mentioned that proved reserves would be sufficient for 30-40 years, and by 2035 the demand would increase from 18 to 44  percent. By estimate, about 154 ВТОЕ are concentrated in the Arctic Ocean, which is 58 percent of total resources. “Our potential is non-conventional resources, namely, shale gas and gas hydrates, reserves of which are 10 times higher than in the U.S.,” he said.
With regard to the Arctic shelf development, there are still many problems,  and the main one is a high production cost.  According to Sergei Bogdanchikov’s estimation made in 2009 (Rosneft), a cost of 1 ton of oil produced offshore will be $500-700. A high cost of hydrocarbon production is connected with obsolete technologies in many sectors of the industry and with specific natural environment. Severe conditions in the Russian Arctic, such as low temperatures, ice, and icebergs that do not exist anywhere else in the world, require expensive equipment, expensive vessels, expensive infrastructure, special safety arrangements, etc. Since meteorological conditions strongly affect the equipment, in Zolotukhin’s opinion, “it is necessary to have an opportunity to disconnect the equipment and move it aside in case of certain conditions changing”, i.e. to use a “tunnel technology” concept.
Anatoly Zolotukhin paid special attention to the issue of specialists training for offshore operations. Thus, development of the Shtokman field will require 2,000 employees  with specialized higher education. Overall, 12,000 specialists are required. The necessary training programs are available at the Gubkin State Oil and Gas University. Besides, some other universities are setting up similar specialized departments.
Speaking of shelf development, the leading oil producers (Rosneft and LUKOIL) and Gazprom (in essence, monopolists in the Russian oil and gas industry) prefer working with local designers and manufacturers of a wide range of equipment, as well as of technical and marine facilities. Only in March 2008, the RF Government approved the “Federal Special Purpose Program for Development of Civil Marine Facilities for 2009–2016”, thus providing an opportunity for state-owned companies (mainly, former companies of the defense industry) to use scientific and industrial potential for creating new equipment and facilities. Yuri Simonov (Krylov Shipbuilding Research Institute, KSRI) made a detailed report thereon.
Within the framework of projects in the Barents Sea to ship oil from Kolguev island, from Varandey settlement, to ship LUKOIL’s oil through an ice-resistant terminal, various technical facilities were built, such as onshore tank farms, subsea pipelines, shipment terminals, ice-class tankers with deadweights of 20,000 and 70,000 tons, floating storages to transship to larger vessels, and support icebreakers and vessels.
The largest project is an offshore loading of natural gas from the Gulf of Ob to be liquefied at the Yamal peninsula. The following must be constructed under the project: an LNG plant and an LNG storage, the port infrastructure, arctic vessels for LNG transportation (liquefied-gas vessels), and support fleet. KSRI developed a conceptual design of a mobile ice-resistant drilling unit for year-round drilling in the Gulf of Ob. According to plans, in 2011 the design of an ice-resistant process platform should be completed. Also, the institute started working out on pipe-laying vessels for deep and shallow waters. Gazprom VNIIGAZ,  “Korall” Design Center,  St. Petersburg Marine Machine Building Bureau “Malakhit”, Gazflot, and other companies are involved in development of technical facilities in cooperation with KSRI or independently.
It should be stressed here that the most important task to be considered is the implementation of projects to develop technical facilities, and the orders should be placed with local companies, such as Sevmash, Zvezdochka (Severodvinsk), Vyborg Shipbuilding Yard, Baltiysky Zavod, Admiralteiskie Verfi (dockyards, St. Petersburg), Amur Shipbuilding Plant, etc.
Nearly 600 delegates representing 19 countries and 250 companies participated in this jubilee forum, with about 180 reports presented.
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