No. 2, 2008

The conference in Kaliningrad confirmed the excellent prospects for cooperation between Russia and Norway

From 30 to 31 January, 2008, the 6th Russian-Norwegian conference “Partnership of companies in the oil and gas sector of Russia and Norway in developing the shelf” was successfully held at the Museum of the World Ocean in Kaliningrad. The event was organized by the Union of Oil and Gas Industrialists of Russia, the Norwegian Oil and Gas Partners INTSOK and the Government of the Kaliningrad Region.

Shtokman as the focus of attention

Kaliningrad was selected to host the Russian-Norwegian conference in follow-up of the Kaliningrad Region presentation given in Oslo in September 2006, when the heads of the leading ministries and departments of the Region brought its trade and economic potential to the attention of Norwegian business circles. The results of this top-level event confirmed the correct choice of the “Capital of the Amber Land.”

The conference considered matters of key significance for the further development of Russian-Norwegian cooperation in the oil and gas sphere. The representatives of leading Russian oil and gas companies and design institutes who participated in the forum apprised themselves of Norwegian experience and technologies for developing hydrocarbon basins under the conditions of the Far North, which might be needed for development of fields in the Barents Sea, in Eastern Siberia and on Sakhalin.

The high status of the conference was confirmed by the speeches given by the Deputy Minister for Natural Resources of Russia, Alexey Varlamov, the Governor of the Kaliningrad Region, Georgy Boos, Norwegian Deputy Petroleum and Energy Minister, Liv Monica Stubholt, as well as representatives of leading oil and gas companies of both countries.

One of the key themes of the conference was joint development by Russia and Norway of the hydrocarbon resources of the Barents Sea. The first step in this direction was the signing, on October 25, 2007, by Gazprom and StatoilHydro, of a framework agreement on cooperation in implementing the first phase of the project to develop the Shtokman gas condensate field. It was agreed that the Norwegian corporation would receive 24% of the shares in the authorized equity capital of the vehicle company set up for developing Shtokman. In the opinion of the Gazprom management, the partners from Norway have excellent experience in the sphere of production and transportation of gas under the harsh conditions of the North. The alliance between the Russian gas monopoly and Total and StatoilHydro will promote further development of the hydrocarbon resources of the Russian Polar regions, where the resource base is appraised at 45-50 trillion m³.

“The game is worth the candle,” noted Senior Deputy CEO of the company JSC Sevmorneftegaz, Dr. Rudolf Ter-Sarkisov. He also focused attention of the audience on the significance of the Shtokman project for ensuring the security of energy resource supplies to the world market. Today, expansion of the production of liquefied natural gas (LNG) leads to the formation of a new order on the world market for energy resources. This is why Gazprom is gradually expanding its presence in the given sector. It is anticipated that the demand for LNG in Europe will reach 116 billion m³ a year by 2015, and 90 billion m³ in the United States. These two regions have been chosen by the Russian gas monopoly as the priority spheres for deliveries of LNG from the Shtokman field.

The first phase in developing the “Arctic giant” envisages production of 23.7 billion m³ a year, 50% of which will be transported by gas pipeline and the remaining 50% in liquefied form. Commercial production of LNG will begin in 2014, and the third phase of the project will be fully orientated on production of LNG.

Gazprom is taking a long time to choose the site for building the liquefied gas plant. There were two options – Vidyaevo and Teriberka (coastal villages in the Murmansk Region). Gazprom is currently inclined toward the second of these, since Teriberka is located further from the Russian-Norwegian border and military facilities.

New horizons for cooperation

At StatoilHydro, they believe that the Shtokman project might be the catalyst to creating new and adapting old technologies with the help of which it will be possible to operate effectively and without damage to the environment under cold and harsh conditions. During the conference, the head of the Norwegian company’s Russian office, Bengt Lie Hansen stated: “Russian companies have accumulated tremendous experience of developing fields in Western Siberia. Our corporation has, for almost 40 years, been developing the Norwegian continental shelf. I believe that a large part of our know-how is applicable in Russia, which is today initiating development of its arctic resources. We hope to be able to share this know-how with our Russian partners.”

The Russian colleagues, in turn, demonstrated a readiness to introduce their own original technical solutions in joint projects. “In order to provide electric power for the Shtokman field during the development and production stages, nuclear reactors might be used,” according to Yevgeny Apollonov, head of the Center for research and design of methods for developing the resources of the seas and oceans, TsNII for shipbuilding named after Academician A.N. Krylov, participating in the development of technological solutions for the Shtokman project. The electric power for the project could be provided by a submarine nuclear power station created on the basis of a written-off submarine or built specially for the given project. The Shtokman field could also be powered by a floating electric power station currently being built in Russia.

Worth noting among the other advanced Russian technologies for shelf and continental oil and gas projects is the use of titanium alloys in producing equipment for oil and gas production facilities proposed by the corporation VSMPO-AVISMA.

The forum heard speeches on both the technical aspects of developing the shelf and on the problems of engaging local contractors. The latter is particularly pressing on the eve of Russia joining the WTO, when the quotas for mandatory participation by national enterprises in shelf projects will have to be lifted. For instance, during the conference, the Chairman of the Board of the company Reinertsen AS, Torkild Reinertsen, told of his firm’s experience in fulfilling turn-key contracts on the Norwegian continental shelf, as well as in the Northwest of Russia, in cooperation with local contractors.

The Regional Director of INTSOK, Hakon Skretting, presented the results of the project entitled “Russia’s and Norway’s oil and gas suppliers’ partnership for promotion of production on the shelf,” implemented by the Norwegian association. He also told of INTSOK’s further plans. The foreign partners showed an interest in the latest Russian solutions in developing marine fields and, in particular, the best practices of LUKOIL-Kaliningradmorneft, which produces structures for ice-resistant oil rigs. Within the framework of the conference program, the participants visited the Kaliningradmorneft plant.

The conference provided a unique opportunity for the representatives of the Norwegian and Russian oil and gas industry to hold working meetings and discuss the prospects for cooperation. The Russian-Norwegian forum also, in the participants’ opinion, convincingly demonstrated that the Kaliningrad Region has a good chance of becoming one of the major European centers for production of oil and gas equipment for shelf operations.