2014 November 20
Sanctions, low energy prices and increasing competition in LNG market make Russia think hard about optimization of Arctic activities regulations and facilitation of import substitution. There are proposals to establish a Ministry for Arctic Development and to integrate all northern regions into a single Arctic cluster.
Unite and rule
As it is known, western sanctions affect the supply of technologies and equipment for the continental shelf development. It is about the hi-tech products the localization of which in Russia is not sufficient so far. However, there is no need to “whistle for a wind” – if geological exploration and development of the discovered fields is slowed down Russia risks to find itself “back at the bottom of the ladder”, that is dwindling hydrocarbon reserves in conventional production areas and global LNG market divided between other players.
It may be said that Russia has no comprehensive approach to the development of the Arctic zone. The activities are carried out by different companies and constituent entities of the Russian Federation competing with each other. For the optimization of Arctic activities regulation it was proposed to establish a Ministry for Arctic Development. The proposal was made at the III International Business Week in Murmansk by Arthur Chilingarov, special presidential representative for international cooperation in the Arctic and Antarctic, President of the Russian Association of Polar Explorers and member of Rosneft BoD. Among the candidates to head the Ministry was Chilingarov himself or, for example, Yamal Governor Dmitry Kobylkin. It should be noted that the Ministry for the Development of the Russian Far East was also established basing on the territorial principle.
In her turn, Murmansk Region Governor Marina Kovtun suggested that the Northern regions sign an agreement to coordinate the activities of the regional governments in order to exclude unhealthy competition and prioritizing of own interests. Shelf development is possible only through integrated efforts with the use of the resources of all constituent entities of the Arctic zone.
Produce from the North
Nevertheless, the development of Russia’s Arctic shelf is not an empty phrase. Though the project of Shtokman field development has been frozen, there are other projects underway. As Aleksey Fadeyev, Head of Production Support Directorate at Gazpromneft Sakhalin, said at the 7th International Conference “Arctic Shelf Development: Step by Step”, first oil from the Dolginskoye field (Pechora Sea) would be shipped in early 2020-ies. According to him, the company is currently analyzing the data from the drilling of a 3.5-km well (completed in late August 2014), the reports are nearing completion. The development of the Dolginskoye and Prirazlomnoye fields will be performed within the framework of a single cluster which will allow for optimization of cargo supply logistics.
Besides, Gazprom has already commenced exporting oil from the Novoportovskoye field. From the beginning of the year oil production at the field totaled 150,000 t. The new type of oil, “Novy Port” is superior to Brent oil in quality as it has a lower sulphur content (roughly 0.1%). Full scale development of the Novoportovskoye field is scheduled for 2016.
In its turn, Rosneft has successfully completed the drilling of the northernmost well in the world – the Universitetskaya-1 well in the Arctic and first oil/gas-condensate field has been discovered in the new Kara sea oil province. According to Rosneft President Igor Sechin, the resource base estimate of just this oil trap is 338 bcm of gas and more than 100 mln tones of oil.
Moreover, Rosneft has entered the Pechora LNG project in the Nenets autonomous region. Under the project, a floating LNG plant is to be located in the area of Indiga, with a 300-km-long pipeline linking it with deposits in the Pechora. Port Indiga was planned as a deep-water port with depths of about 17 m.
Implementation of the Yamal LNG project is in full swing with NOVATEK holding 60 per cent, Total - 20 per cent, and CNPC - 20 per cent in the company. According to NOVATEK head Leonid Mikhelson, investments into the project will total $8 by the end of 2014. He says 100% of LNG has been contracted already: 27% – China, 36% - Asia Pacific Region, some 3 mln t of LNG will be delivered to India via Gazprom Export.
No help from abroad
The development of the Arctic shelf is an extremely demanding and innovative task requiring enormous R&D efforts and introduction of hi-tech equipment which is manufactured in few countries today. Amid sanctions, Russia has to fulfill localization of its technological and production base in the nearest time.
Aleksei Tyukavin, First Vice-Governor of Murmansk region, says special attention should be paid to the existing national technologies and domestic equivalents, to R&D financing, mostly from the budget and from off-budget sources as well.
When speaking about Russia’s challenges in the Arctic at the 7th International Conference “Arctic Shelf Development: Step by Step” in Murmansk, Anatoly Vinogradov, Deputy Director of the Geophysical Service of the Russian Academy of Sciences, said that Russia needs a system to monitor icebergs (Russia has no polar satellites) and bottom fiber-optic technologies to monitor deepwater processes leading to unfavorable phenomena (like funneling). The scientist believes that Russia could create an integrated system for iceberg monitoring in conjunction with Norway and speed up the development of domestic fiber-optic technologies.
In general, the experts say that the production of equipment and facilities for operation in extreme conditions of the Arctic are technologically comparable to the space equipment, sometimes they are even more sophisticated. Thus, Russia has to meet great scientific, engineering and production challenges.
Nevertheless, Russia and Norway will continue their cooperation in the Arctic. Murmansk Region and Norway have just signed a Memorandum of Understanding confirming the intent of the parties to maintain interaction in educational, cultural, environmental and social projects. Whatever the political situation is everybody understands that the development of the Arctic, just like space exploration, is practically impossible without international cooperation.