No. 3, 2004

Alexander Volzhsky


Phase-I of the LUKOIL-II petroleum products transshipment complex goes into operation in Vysotsk

Most experts agree that owing to a shortage of oil transportation facilities Russia loses $6-8 billion a year. The commissioning of the first phase of the LUKOIL-II terminal will go a long way toward putting this situation right.

A gift to the St. Petersburg forum

The inauguration ceremony of Phase-I of the LUKOIL-II PPTC was held on June 16, 2004 in the town of Vysotsk (Leningrad Region) in the framework of the 8th St. Petersburg Economic Forum. In its size and economic importance, the terminal, designed for the export of the Company's oil and petroleum products, is beyond comparison with any other facility in its class ever built on the Baltic.

The inauguration ceremony was attended by Russian Prime Minister Mikhail Fradkov, Valery Serdyukov, Governor of the Leningrad Region, Dmitry Tarasov, First Vice-President of LUKOIL, Anatoly Barkov, Vice-President of LUKOIL, and other high level officials.

The construction has been done on a 130-hectare site on a turnkey basis by JSC LUKOIL-Neftegazstroy, the general contractor, together with Fluor Corporation, a leading U.S. engineering company with dozens of Russian and foreign companies engaged as subcontractors. Almost 3,000 highly skilled construction workers completed all the jobs up to top quality standards and without a hitch.

The terminal's Phase-I annual capacity is 4.7 mln. tons - nearly a half of the ultimate total rated at 12 mln. The LUKOIL-II PPTC project provides for two docks one of which is already in operation and capable of loading up to 175 tankers a year. As of now, the terminal can service oil tankers with a deadweight of up to 20,000 tons. Tankers with a 50,000-ton deadweight will be able to moor the terminal after the ongoing dredging is completed. The terminal is designed to receive tankers with a deadweight of 80,000 tons when operating at its full capacity. The terminal is also equipped with a system of laser mooring to ensure efficient harbor traffic control. The quality of navigation equipment allows the terminal to network the Global Marine Distress and Safety System. The terminal is dominated by a harbor traffic control tower 104 meters high - part of the Bay of Finland's overall traffic control system.

Crude oil and petroleum products arrive at the LUKOIL-II PPTC by rail, mostly. In summertime, however, fuel oil will be delivered by river-sea class tankers with a deadweight of 6,000 tons.

A two-sided trestle with a capacity of 36 tank cars for each side will be used to discharge products. The terminal will have 17 storage tanks with a capacity of 20,000 m3 each. At present, 8 storage tanks are nearing commissioning, and one of the two discharge trestles is already operational.

Through the Vysotsk terminal, LUKOIL will keep its gasoline filling station network in the United States supplied with petroleum products nonstop. Notably, Vysotsk LUKOIL-II PPTC is registered in the Leningrad Region. In 2005, the Company is expected to contribute to the local budget over 100 mln. rubles in tax payments. The new terminal is to create at least 500 new jobs. This year, LUKOIL has already funded purification and repairs of Vysotsk's water intake facility. In May 2004, the Company allocated 4 mln. rubles for the town school's gym.

A good beginning is half the battle

The need for LUKOIL's own marine terminal on the Baltic was obvious. The Company's export pipeline infrastructure was inadequate to cope with its steadily growing oil production, therefore rail and water transport had to be used. As a result, the Company's transportation costs added up to over $2 bln. a year and already exceed oil production costs. That could not be put up with in a situation where the Company applied itself to raising the efficiency of its vertically integrated structure all along the line. The Company left no stone unturned while looking for investors and conducted a series of difficult negotiations with its foreign partners.

Finally, in September 2003, the Company secured a 12-year $225 mln. loan from the American HBK private investment fund, with OPIC (Overseas Private Investment Corporation) acting as a guarantor of a $130 mln. loan. Credit Suisse First Boston arranged financing and provided a $75 mln. guarantee. It was the first time that LUKOIL attracted a credit facility for such a long period of time without using its export earnings as collateral. As for OPIC, never before had it funded a project with 100% Russian share capital.

The ground had been broken for the terminal before the loan came through Р in June 2002. The designers were the first to realize the scale and complexity of the project.

The specialists of JSC GT Morstroy worked out the design plans and specifications for all the hydraulic installations of the terminal. Leonid Tozik, Cand. Sc. (Techn.), Director of the Morstroy's Designing and Planning Department, pointed out that the company's designers had precisely pinpointed the key problems connected with the construction of that unique facility. First of all, local geological conditions are exceedingly complicated, what with the stratification of loose and rocky grounds, the abundance of underwater rock banks and boulders of various sizes. What's more, the designers had to provide for ice field pressure and the impact of billows.

The Vysotsk terminal is made of a number of functionally different hydraulic structures forming a single whole. These are three shore reinforcement sections, a service dock, a dock for auxiliary port craft and service vessels, and a dock for river-sea tankers. The main service dock consists, for its part, of a trestle over 300 meters long stretching out all the way to the island of Detinets with its intricate grade crossing elimination structure, a bridge section of the trestle frame, and a tanker mooring pier. Besides, facilities were provided for mooring ships of various types and tonnages ranging from 20 to 80,000 tons to the service and maintenance berth. Each structure called for a separate approach, specific design solutions and, what's most important, had to be harmonized with the rest of the complex into a whole. The other no less important components of the complex Р the seabed deepening dredge, the fairway, the water taking facility and a deep water outlet Р have also been designed by GT Morstroy. The designers have found many ingenious engineering solutions for each particular structure. Gravity structures - berths for port craft, auxiliary service vessels and river-sea tankers, shoreline reinforcements and passage spans of trestle No.1 - are being built to our designs, their large-diameter encapsulated supports resting on specially prepared bedplates. Such solutions are uncommon in conventional hydraulic engineering.

Upright and inclined metal tubular piles sunk into rocky seabed grounds and fixed in place with ferroconcrete anchors were used as the substructure for the main service berth with its baffling and mooring pawls, intermediate trestle supports, maintenance floor, and the head pawl. This is Russia's first ever hydraulic installation on the Baltic to feature such a design solution. A new tubular pile insulation procedure was suggested whereby the piles are given an insulation coating after rather than before being sunk into seabed grounds using pressure chambers mounted on tubular piles that have already been sunk in. That helps avoid damage to the insulation coating otherwise inevitable in sinking and prolongs wet seals' service life. This up-to-date process has never been used before, either.

As a result of seabed deepening operations carried out in cooperation with the Netherlands' Ballast Ham Dredging company, over 30,000 m3 of rocky ground have been removed making the harbor open to unobstructed passage of ships. That, too, has been a dredging operation unprecedented in Russia in the amount of seabed rock removed.

Environment protection as a top priority

In the process of the LUKOIL-II terminal's construction unprecedented measures were taken to protect the natural environment of the Baltic sea and coast. An air, water and land pollution control program was worked out, and a special environmental monitoring service created. The leading design organizations of Russia and of its North-Western Region put much effort into the elaboration of the project's environmental section. The project has passed a federal ecological impact assessment test organized by the RF Ministry of Natural Resources. Vladimir Kovanko, Chief Ecologist of Vysotsk LUKOIL-II PPTC, pointed out that the Vysotsk project embodied state-of-the-art technology. At a preliminary estimate made by various Russian and foreign organizations, the potential risks involved in building the terminal (with accident prevention measures taken into consideration) will be on, if not below, the level allowed for facilities in its class. The complex will start functioning only given complete air tightness and multiple duplication of the systems preventing air, soil and water pollution in the process of petroleum products loading and transshipment.

All tankers entering the terminal area must be double-hulled. The tankers must also be equipped with isolated ballast water and cargo holds, modern navigation systems with electronic maps. The LUKOIL-II terminal will only receive vessels equipped with product vapor traps.

The Company's own service fleet consists of five vessels, including oil skimmers capable of spotting and eliminating oil and petroleum product spillages in no time. There are 25 skimming dishes and 4.8 km of slick bar. One of the skimmers is controlled remotely at a distance of up to 40 meters from an oil-gathering barge. There is always a tug-boat on the alert in the terminal's harbor.

The storage tanks are double-walled to prevent leaks. All of them are mounted on special earth and ground-water protecting trays.

The terminal will feature modern sewage treatment systems. After treatment, some of the sewage will be recycled to industrial uses, and the remainder decontaminated to a high-grade fishery state fit for being filtered back into the Gulf of Vyborg.

The fire safety system comprises tank refluxing, foam generating and oil film enveloping systems and a berth-protecting spray curtain.

Expert opinion ranks the LUKOIL-II PPTC among the world's environmentally friendliest facilities of its kind.

On June 29, 2004, another tanker, this time carrying 18,000 tons of vacuum gasoil, left the Vysotsk LUKOIL-II PPTC. Inaugurated with much fanfare, the terminal has already settled down to a busy workaday routine but construction work is going on full blast. Before this year is out, its transshipping capacity is to be increased to 5 mln. tons, and in 2005, to 10 mln. tons a year. There is no doubt that these ambitious plans will be carried out in full and exactly to schedule.

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Oil of Russia, No. 3, 2004
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