No. 2, 2006

Increasing oil exports from Russia's Arctic regions requires development of ports throughput capacity

Russia's oil production and exports are expected to increase in the next few years. This calls for expanding existing export routes and creating new ones in order to access new markets. One of the most attractive oil export options would be shipping oil along the northern coast of Norway. The key items on today's agenda are the development of port facilities in the Barents region and assuring safety of shipping operations.

Problems related to growth

Russia's annual oil production has been growing steadily since 1999, reaching 470 million tons million tons in 2005. According to the RF Ministry of Natural Resources, annual oil production will reach 490 million tons in 2010 and 520 million tons in 2020.

Russia's total cargo turnover - carried by pipeline, rail, road, internal water, marine, and air transport - exceeds 4,500 billion tons a year. Most of the total cargo is carried by pipeline and rail. In 2005, Transneft's trunk pipeline system carried 458 million tons of oil, exports and transit shipments accounting for 255 million tons of that amount.

According to plans of oil transporting and oil producing companies, up to 30 million tons of oil may be carried from the Timan-Pechora oil- and gas-bearing province to the Barents Sea coast by a Kharyaga-Indiga pipeline planned to be constructed. Such a pipeline would make it possible to carry oil from Timan-Pechora to Western countries without using the Baltic Pipeline System, which is already filled to capacity.

About 40 million tons of crude oil and refined products may be brought by rail to ports in the Barents Sea and the White Sea. About 1 billion tons of freight a year is carried by rail in Russia, with oil and refined products accounting for about 18% of the total turnover. In 2004, more than 10 million tons of export crude oil was delivered by the Northern Railroad Company and the Oktyabrskaya Railroad Company to the ports of Arkhangelsk, Vitino, and Murmansk. In 2005, the volumes of oil delivered to those ports were about the same.

Besides, up to 20 million tons of oil will come from fields in the northern parts of the Nenets Autonomous Area and the Pechora Sea. About 30 million tons of oil may be shipped via terminals in the Kara Sea to be transloaded in the Barents Sea coast of the Kola Peninsula.

It is not guaranteed that the above oil volumes will be shipped via the Barents Sea ports by the year 2015. But when government and private companies' plans to construct and expand pipelines, railroads, ports, and terminals are implemented, Russia will have transportation facilities to export about 150 million tons of oil by northern routes.

Sea gates and sea doors

There are several existing and planned terminals intended for exporting Russian oil.

The Peshchanoozyorskoye oil, gas, and condensate field in Kolguyev Island was put on stream back in 1987 by Arktikmorneftegazrazvedka. All the oil produced in Kolguyev Island, some 100,000 tons a year, is exported by 20,000-ton deadweight tankers directly to markets or via a transshipment complex in the Kola Bay.

Since 1999, JSC RITEK has been transshipping oil into export tankers in the Gulf of Ob in the Kara Sea. Oil produced by RITEK in Western Siberia is taken by pipelines to terminals in the Ob River, to be loaded into 2,000-ton river tankers which take it to the offshore transshipping complex in the Gulf of Ob. There oil is loaded into 20,000-ton tankers to be taken to the Belokamenka storage tanker in the Kola Bay. RITEK has plans to build an oil pipeline and terminal in the Gulf of Ob to handle 3 million tons of oil a year.

In 2000, Varandeyneftegaz and the Murmansk Shipping Company built an offshore oil-loading facility in the Pechora Sea off the town of Varandey. Oil is brought to the terminal by pipelines running from several fields in the north-eastern part of the Nenets Autonomous Area and is loaded into ice-class 20,000-ton shuttle tankers, which take it to the Murmansk Shipping Company's offshore oil transshipment complex in the Kola Bay. The Varandey terminal is operated by LUKOIL on a year-round basis, its current capacity being 1.5 million tons a year. By 2007, LUKOIL plans to launch a new offshore terminal, 12 km off the town of Varandey, to handle 12.5 million tons of oil a year. In March 2006, the oil-transshipment complex at Varandey was certified as a port.

The specialized seaport of Vitino in the Kandalaksha Bay of the White Sea has been shipping oil to foreign destinations since 1995. Oil is brought to the White Sea oil terminal at Vitino by the Oktyabrskaya Railroad. At Vitino, oil is loaded into tankers with deadweights up to 60,000 tons and taken to the transshipping complex in the Kola Bay or to Western Europe directly. Oil is shipped from Vitino on a year-round basis. The terminal's annual capacity is 8 million tons of oil, and there are plans to expand it to 12 million tons.

There are two terminals near Murmansk (in the Barents Sea) operating on the same basis as Vitino: one is at the Murmansk fishing seaport and the other is at Ship Repair Yard No. 35. Both transloading facilities receive oil brought to Murmansk by rail and load it into shuttle tankers with deadweights from 15,000 to 45,000 tons. The shuttle tankers take oil to Transshipment complex No. 1 in the Kola Bay operated by the Murmansk Shipping Company. The annual capacity of the oil export terminal at the Murmansk fishing port is about 1.5 million tons, to be expanded to 2.5 million tons. The other terminal has a capacity of 3.5 million tons, which may be expanded to 7.5 million tons in 2006.

Status and plans

Since 2002, JSC Rosneft-Arkhangelsk-nefteprodukt has been exporting crude oil and refined products via its oil terminal in Talagy (in the White Sea). Oil produced in Timan-Pechora by the Northern Oil Company is taken by Transneft's Usa-Ukhta-Yaroslavl trunk pipeline to the rail station of Privodino near Kotlas, where it is loaded into rail tank cars and is carried by the Northern Rail Company to the oil terminal at Talagy. At the terminal, oil is loaded into 20,000-ton shuttle tankers which take it to the Belokamenka transshipment complex in the Kola Bay. The Talagy terminal has an annual capacity of 4.1 million tons of oil, and Rosneft has plans to increase it to 7.2 millions by 2010.

Since 2004, JSC Kommandit Servis has been constructing a terminal in the Mokhnatkina Pakhta Bay to export fuel oil. Fuel oil is to be brought there by rail and loaded into a 60,000-ton storage tanker anchored at the pier, from which it will be taken by export tankers to European markets. The transshipment complex will handle 2.5 million tons of fuel oil a year.

An offshore oil-transshipment complex in the Kola Bay has been operated by the Murmansk Shipping Company since 2002. It receives oil brought by shuttle tankers from the terminals at Varandey and Murmansk into a 127,000-ton storage tanker and loads it into 100,000 shipping tankers. The facility handles 5.4 million tons of oil a year.

The largest-capacity offshore transshipment complex, Belokamenka, was built by Rosneft in cooperation with Bergesen d.y. ASA of Norway in 2004. The Belokamenka transshipment complex is the key component of Rosneft's northern-route oil export system. The backbone of the transshipment complex is the Belokamenka storage tanker, with a deadweight of 360,000 tons. Oil is brought there from oil terminals in the Gulf of Ob and Arkhangelsk. The complex's annual capacity is 5 million tons, expandable to 10 million tons.

In 2005, the first transloading terminal to handle Russia's oil exports was built in northern Norway. Bergesen d.y. ASA had obtained permission to anchor the Berge Enterprise supertanker, with a deadweight of 360,000 tons, in Bokfjord near Kirkenes, to be used as a floating storage, similar to the Belokamenka tanker operated jointly by Bergesen and Rosneft in the Kola Bay.

By 2008, Rosneft plans to construct an oil pipeline to carry 30 million tons of oil a year from the Vankor group of fields in Western Siberia to the Kara Sea ports of Dudinka and Dikson, as well as an oil-transshipment complex in Dikson. Oil from the Talakanskoye field in the southern part of the Republic of Sakha will be taken east by the trunk pipeline currently constructed by Transneft.

Environmental aspects

Russia's Arctic oil shipping infrastructure has been rapidly developing over the past three years, and the process is only starting. It is imperative that oil pollution control systems should be developed ahead of the growth of oil and refined product shipping volumes. Any hydrocarbon shipping operations are fraught with pollution risks. Cleaning up oil spills in coastal or offshore areas is quite a challenge. Experience shows that only 10-15% of the oil spilled can actually be removed in an Arctic environment. Therefore, any oil spill control strategy should focus on prevention of oil spills.

The key elements of an oil pollution control system to be used in shipping operations should include improvements of rules and regulations, personnel training, use of reliable equipment and competent shipping operators, a dangerous goods notification system, shipping operations monitoring, control, and management, tugging services, and the development of oil spill management resources.

All those factors are indispensable components of an effective oil-pollution control system, and many of them are certainly interlinked. The main challenge, however, is to demonstrate that oil-spill control costs are justified and prevention measures are necessary, although it is obvious that economic losses from potential accidents and emergencies are very much greater.