Heading North

Despite disappointment at Korpfjell, there’s optimism in the far North.

The Christophe de Margerie LNG carrier in icy conditions. Photo from Total.

High hopes were pinned on the multi-billion-barrel potential Korpfjell prospect, at the northeastern margin of the South Barents Sea. While the well, drilled by Norwegian operator Statoil, failed to prove commercial quantities, finding just a small amount of gas, the industry’s continued move further north appears to be unchanged.

By 2040, a majority of Norwegian oil and gas is expected to be produced in the North, says Kåre Storvik, of Storvik & Co., an independent consultant for business development in Northern Norway and Northwest Russia, with activities focused on Norway and neighboring Russia.

Indeed, the Norwegian Petroleum Directorate estimates that 68% of the remaining petroleum resources in Norway will be found in the Norwegian Barents Sea. Meanwhile, “The European Arctic has enough resources to cover the world’s energy needs for one hundred years,” Anatoly B. Zolotukhin of Moscow’s Gubkin Institute told participants at the Arctic Europe seminar during SPE Offshore Europe in September 2011.

Total shows the path of the Northern Sea Route, the Christophe de Margerie will take during the summer months.

The region is already home to the Hammerfest hub, which serves Statoil’s Snøhvit gas development and Eni’s Goliat oil field. Further developments are coming, with Statoil expected to issue a positive decision on its Johan Castberg development this month (October) with first production targeted for 2022. Lundin Alta/Gohta project and OMV’s Wisting oil field are expected to follow, with first production expected before 2030.

All these fields are expected to be developed by floating production, storage and offloading vessels (FPSOs) with the oil either shipped directly to the markets or by shuttle tankers via a land terminal in Veidnes, North Cape, says Storvik.

The activity is attracting industry to Hammerfest, including offshore support from NorSea Polarbase and ASCO, as well as a cluster of international oil industry service providers.

Thanks to continued acreage availability, the activity is set to continue. As part of the 23rd round, the Barents South East, close to the Russian border was opened. “This area is considered very promising,” says Storvik. “The first well on the Statoil Korpfjell license in this area proved, however, dry. But, this is just one well in an area the size of the Norwegian North Sea. It has to be remembered that there were 33 dry wells in the Norwegian North Sea before anything was found. Both knowledge and tools were poorer 50 years back. But in fact, the Barents Sea geology has proved complex. Next year, three more wells will be drilled. One by Statoil, one by Aker BP and the third by Rosneft-Eni, the latter on the Russian side of the border. Exploration in these waters is technically supported from Hammerfest with crew transport, medical and SAR support from Kirkenes and Vardø. A likely scenario is that oil production in this area will be handled by FPSOs and shipped by shuttle tankers via Veidnes.

Meanwhile, the 24th round licenses are due to be offered in November, with awards during 1H 2018.

While arctic exploration maybe seen as challenging, “with large finds and good productivity, the fields in the Barents Sea can be profitable, such as Statoil’s Johan Castberg, with a break even at US$35/bbl,” says Storvik. “Operational conditions may be different from other parts of the Norwegian shelf, but they’re not difficult. Researchers and industries in the North are working on Arctic climate and survival technologies to secure safe work conditions.”

There are 18 operating companies cooperating in the Barents Sea Exploration Collaboration (BaSEC). Building on existing knowledge and experience, the cooperation working on high and cost-effective HSE standards for Norwegian Barents Sea exploration, particularly in the new areas opened for oil and gas activity in the 23rd round.

The Christophe de Margerie during its naming ceremony in St. Petersburg, Russia. Photo from Sovcomflot.

Looking East

However, while Western firms are involved in the North, the region is also looking to the East. Recently the Sovcomflot-owned icebreaking LNG carrier Christophe de Margerie – named after the charismatic Total CEO who died in a plane crash in Moscow in 2014 – sailed from the Snøhvit LNG export terminal in Hammerfest, Norway, to Boryeong, South Korea in 19 days using the Northern Sea Route (NSR).

Russia’s Sovcomflot said back in August that the ice class Arc7 vessel set a record crossing the NSR in six days, averaging approximately 14 knots, and encountering ice fields 1.2m thick.

“The LNG carrier covered 2193nm (4060km) from Cape Zhelaniya of the Novaya Zemlya archipelago to Cape Dezhnev at Chukotka, Russia’s easternmost continental point,” the company said in a 22 August statement.

Chinese seismic vessel Hai Yang Shi You 720 in Kirkenes. Photo from Henriksen Shipping Services.

The voyage is the first unescorted (i.e. without an ice-breaker) merchant LNG vessel ever to take this route. The route makes it possible to reach Asia via the Bering Strait in 15 days, versus 30 days via the Suez Canal.

“For the past 30 years, Northern Norway has built up business expertise and relations with Russia and served both Russian vessels and Western vessels working in Russian waters,” says Storvik.

The Christophe de Margerie is part of an LNG fleet being built up to transport LNG from Yamal LNG in Sabetta, Russia, to Asia. Yamal LNG’s stakeholders are Russian firm Novatek (50.1%), France’s Total (20%), China’s CNPC (20%) and the Silk Road Fund (9.9%).

Yamal LNG was the first to demonstrate Chinese ambitions in the North. Since then, the Chinese have, assisted by Western sanctions, taken over from Western companies the market for oil and gas exploration activities on the Russian shelf, including seismic surveys and drilling activities, as witnessed by the seismic research vessel Hai Yang Shi You 720 working in the region.

“Northern Norway has, however, been able to continue their support services to the Russian shelf activities,” says Storvik. “The Chinese seismic vessels and drilling rigs are getting their services from Kirkenes. Whereas, Hammerfest is in position to offer technical support. This proves, in our opinion, Northern Norway’s strong position as a supporter of Russian logistics and industrial activities, developed over the last 30 years.”