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Viking on board

NORD STREAM Landfall Germany

Arctic Futures SEARCH & RESCUE






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12 Spring 2012





Viking on board

NORD STREAM Landfall Germany

Arctic Futures SEARCH & RESCUE



IN THIS ISSUE Features 06 HIGH NORTH The use of a risk management approach is vital to increase safety in the High North, says Knut Ørbeck-Nilssen of Norwegian classification society DNV



On the cover Surveying the Arctic. As oil and gas companies move further north behind the Arctic Circle, the skills of engineers, surveyors and scientists are all being called upon

on the environmental aspects of working in the Arctic from the foreign policy research institute Chatham House and insurance market Lloyd’s of London lays bare the risk of operating in the Arctic. Includes the current environmental regulations of six key Arctic nations

12 LIFE SAVING Supplying life preserving equipment, with experience in harsh environment regions including Russia’s Sakhalin Island, Denmark-headquartered Viking Life-Saving Equipment is enhancing its product lines for Arctic conditions

14 ICE RESEARCH Research into how moving ice interacts with ships and grounded structures is now being funded by a high powered group of oil companies, classification societies, national and local government and contractors in St John’s, Newfoundland

16 ARCTIC FUTURES Search and rescue, the environment, Arctic politics, culture and scientific research projects were all topics up for discussion at the recent Arctic Futures Symposium hosted by The Polar Foundation. Here we report on the some of the highlights

18 NORTHWEST PASSAGE The great northern sea routes are now gradually being opened up to commercial shipping despite lingering sovereignty issues. Here, Lloyd’s Register take a look at the two rivals as they begin to attract trade from the dominant Suez and Panama Canals

23 NORD STREAM Billions of dollars are being spent on a twin pipeline route to bring Russian gas to energy intensive markets in western Europe. As Nord Stream’s second pipeline makes landfall in northern Germany, we look at the work behind the project

Regulars 04 NEWS Russia’s Rosneft and ExxoonMobil the US supermajor have reached a ground breaking deal on sharing assets and technology, and a new Arctic Research and Design Center for Offshore Developments is planned for St Petersburg; North Slope research; Gazprom expected gas to flow from Sakhalin-3; ice class drilling rig ordered and latest Polarcus vessel delivered

20 EVENTS Frontier Energy’s comprehensive events listing helps you plan your calendar and highlights your industries’ key upstream, shipping, scientific and research conferences, exhibitions and events

22 CULTURE In the remote areas in the Arctic nations there are many thousands of indigenous peoples living and working in challenging conditions. Development is bound to impact upon their lifestyles, cultures and traditional ways of survival. Reindeer herding is one such cultural and economic institution under threat

24 INSIGHT As Oslo casts is gaze further north, Norway’s Ola Borten Moe spoke of his country’s ambitions at the recent Arctic Frontier conference in Tromsø. The High North gives us opportunities, he says, but also important responsibilities SPRING 2012 01

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“The Arctic is now attracting the attention of industry and governments (and their militaries), all taking an interest in the region as an area of economic and strategic interest” Editor Bruce McMichael Publisher Stephen Habermel Design & Layout In The Shed Ltd Printer Circle Services Group © 2012 All material strictly copyright, all rights to editorial content are reserved. Reproduction without permission from the publisher is prohibited. The views expressed in Frontier Energy do not always represent those of the publishers. Every care is taken in compiling the contents, but the publishers assume no responsibility for any damage, loss. The publisher, Renaissance Media, assumes no responsibility, or liability for unsolicited material, nor responsibility for the content of any advertisement, particularly infringements of copyrights, trademarks, intellectual property rights and patents, nor liability for misrepresentations, false or misleading statements and illustrations. These are the sole responsibility of the advertiser. Subscriptions are free to qualified individuals or companies. For all others, contact Frontier Energy at Printed in the UK. ISSN 2047-3702 Published by Renaissance Media Ltd, c/o Eagle House, 25 Severn Street, Welshpool, Powys SY21 7AD Registered in England & Wales. Company number 5850675.

ELCOME to your new magazine, Frontier Energy, bringing you the latest news, comment and thinking about oil and gas exploration and production and shipping in the Arctic and other ice-affected regions. Awareness of the Arctic changed forever in 2007 when a Russian diver planted a titanium flag 4,200 metres below the North Pole as the world watched. This symbolic, highly controversial, move defined the ‘frontier’ character of the Arctic and how the region was not simply empty white space. The world had staked a claim on the frozen ocean. The Arctic is now attracting the attention of industry and governments (and their militaries), all taking an interest in the region as an area of economic and strategic interest. The competing national and corporate interests are focussed extracting resources; maintaining peace stability and cooperation in the region; protecting fragile ecosystems and the interests of indigenous peoples, and exploiting the potential of the Northern Sea Route. While oil and gas exploration and production is going on across Alaska, northern Russia and Sakhalin and elsewhere, the big ‘elephant’ fields further north have yet to be found. Political pressure and risk is potentially huge and the billions of dollars of investment needed to access the hydrocarbons in an environmentally sustainable way have yet to be discovered. Arctic watcher Charles Emmerson, whose current book The Future History of the Arctic is required reading, notes: “investment in oil and gas (onshore and offshore), infrastructure (both civilian and military) could reach as much as $100 billion over ten years. That’s a tiny fraction of overall investment in energy globally - but it’s a huge number for (the) many Arctic communities and countries.” There’s lots of work to be done. From basic mapping to 2- and 3D seismic gathering and understanding delicate eco-systems to developing ice-resistant materials and structures and ensuring rules and regulations are met – topics that you’ll find covered in the pages of Frontier Energy magazine. Investment in R&D and technology is growing fast to enable upstream activities to function in harsh environments while allowing maritime support services to access exploration and production hubs. But it’s not only the energy and shipping companies making an impact: iron ore and precious metal mining giants; commercial shipping companies and industrial-scale fishing fleets have also set their compasses north. Frontier Energy aims to connect you with the people and companies working towards making this new frontier a safe, environmentally sustainable place to live and work. We’ll be reporting on everything that might affect your decision making when considering whether you’re developing technologies, competing in licence rounds; commissioning, designing or bidding to build ice class vessels or working with indigenous peoples. The eyes of the world will be on all Arctic stakeholders to ensure the resources are developed sustainably and without causing unacceptable environmental damage. As Anton Vasiliev ambassador at large and senior Arctic official of the Russian Federation said at the recent Arctic Futures conference (p.16) The Arctic “is not an isolated wilderness. The region has global links. It is not a lawless jungle, but rather an area of peace, predictability, cooperation and dialogue”. We hope you enjoy this issue.

Bruce McMichael, Editor


Fram is not only the Norwegian word for ‘Forward’, it is also the name of the one of the first ice-strengthened and most famous polar exploration vessels of the late 1800s and early twentieth century. It was captained by Norwegian explorer, Fridtjof Nansen, a Norwegian explorer, scientist, diplomat, humanitarian and Nobel Peace Prize laureate. Sharing his polar travel experiences with fellow adventurers and scientists, his technology innovations in equipment and clothing influenced a generation of subsequent Arctic and Antarctic expeditions. The word encapsulates what we aim to bring you with the magazine – a forward looking guide to the future of oil, gas and shipping activities in the Arctic and other ice-affected regions while keeping environmental protection and safety at the heart of operations.

Get connected! Follow us at for the latest news and comment SPRING 2012 03





ussia’s Rosneft and ExxonMobil, the US-based oil major, have agreed to explore for and develop oil and natural gas and share technology and expertise. The companies will create joint ventures to manage an exploration program in the Kara Sea and Black Sea. The initial cost of preliminary exploration is estimated at over US $3.2 billion. In the Kara Sea, plans are under way to undertake seismic and environmental programs of East Prinovozemelsky blocks later this year in anticipation of a potential exploration well in 2014. Rosneft and ExxonMobil have also agreed to develop tight oil production technologies in Western Siberia with the aim of exploring and developing prospective areas with unconventional oil potential in Russia.

The companies are creating an Arctic Research and Design Center for Offshore Developments based in St Petersburg to provide research and design services and technical support for joint Arctic projects in areas such as in environmental monitoring, ice-class drilling and production ships and platforms. The centre will also support offshore safety. A special Offshore Accident and Emergency Warning and Prevention Service will be created to help prevent and respond to emergencies or accidents. Rosneft has also taken stakes in various US-based unconventional oil and gas plays.




* Russian police detained twodozen environmental activists from Greenpeace in Moscow protesting against Arctic drilling following the deal signing. Image: Gazprom


Sakhalin-3 gas Arctic containment system

CGGVeritas, the Paris, Francebased seismic group, has started its Tabasco 3D multi-client survey near the Kuparuk and Alpine oil fields on Alaska’s North Slope. The company is deploying two of its proprietary high-end acquisition technologies for the first time on the tundra to acquire the 133 square mile survey. The data will be imaged with anisotropic pre-stack depth migration at the CGGVeritas Calgary processing centre. The first migrated data is scheduled to be delivered in July 2012. CGGVeritas has acquired proprietary surveys on the North Slope since 2001.

The first-of-its-kind Arctic Containment System (ACS), slated for deployment in June 2012 to serve all exploration activities in the Chukchi and Beaufort seas offshore Alaska, will be classed by the American Bureau of Shipping. The non-self-propelled ice-strengthened barge will be converted to a floating offshore installation and will feature a modular oil containment system installed on its deck. The dedicated barge will remain unmanned and on standby until deployed. Oil major Shell has plans to drill up to six exploration wells in the area later this year and has contracted with Superior Energy, the operator of the ACS, for the containment system to be available during the summer drilling season. The containment system would be able to mitigate spillage in the time it takes to drill an intervention well.

Sercel vibrators at work for CGGVeritas in Alaska

North Slope search

04 SPRING 2012

Russia’s leading gas producer Gazprom is hoping to start production at the Kirinskoye field at Sakhalin-3 project, offshore eastern Russia later this year. From 2015 annual output at the field would total 4.2 billion cubic metres (bcm). Kirinskoye’s gas reserves are estimated at 137 bcm up from 75.4 bcm stated earlier, said the company.

NAD orders $650m rig North Atlantic Drilling has contracted Sembcorp Marine’s Jurong Shipyard, Singapore to build a harsh environment semi-submersible drilling rig. The new rig will be a Moss CS60 design, N-Class compliant and be fully winterised to meet the harsh and demanding weather conditions in the north Atlantic. Maximum water depth will be 10,000 feet with a maximum drilling depth of 40,000 feet. The rig will be outfitted with both DP3 dynamic positioning systems and complete anchor handling capabilities. Accommodation capacity for up to 150 people in Norway will be provided, whereas internationally the capacity will be 180. A six ram blow out preventer (BOP) stack and have the capacity for storing and handling of a second BOP will also be installed. The new rig is scheduled for delivery in the first quarter 2015. Total estimated project costs for the new rig, including a turnkey contract with the yard, project management, drilling and handling tools and operations preparations is $650 million.



The distance in miles that isotherms (bands of average temperatures) have shifted northward during the last

30 years





bpd of oil equivalent produced within Arctic Circle





TGS markets Barents Sea survey

FOGL prepares for Loligo

Norway-based seismic group TGS is marketing its 3D multiclient survey covering 1,500 km2 between the Finnmark Platform and Nordkapp Basin in the Barents Sea. The 150 km long survey follows the bended strike direction of the inverted margin between the two major structural elements in the region. “We believe the survey will be instrumental in reducing trap risk on the narrow structural trend stretching east to the border of the previously disputed zone between Norway and Russia,” said Kjell Trommestad, Senior Vice President and General Director of Europe and Russia for TGS when the work was commissioned in 2011. The new seismic data was acquired by the M/V Polar Duke. The data will be processed by TGS and will be available to clients mid-2012.

Falklands Oil & Gas, (FOGL) the junior oil and gas exploration company focused on its extensive licence areas to the south and east of the Falkland Islands, in the south Atlantic Ocean is preparing for a “significant year of activity in preparation for FOGL’s 2012 exploration drilling programme,” said the company. It plans to spud Loligo, the first well of a contracted two well programme, in June 2012 where it has completed five site surveys and a focused 2D seismic survey.

1963 First offshore well

drilled in Cook inlet,

ALASKA Source:;

Richard Liddell, chairman of FOGL, said: “We are looking forward to the 2012 exploration drilling programme. The Loligo well, with prospective resources of 4.7 billion barrels, will be one of the highest impact exploration wells to be drilled by an independent E&P company this year. Either of the likely second well targets have a resource potential of over 1 bn barrels. Any degree of success on these wells will be a transforming event for FOGL.”

Ulstein delivers Polarcus Amani Norwegian shipbuilder Ulstein has delivered the next generation seismic research vessel Polarcus Amani to marine geophysical company Polarcus. The vessel is of the SX134 design from ULSTEIN, and is vessel number seven in Polarcus’ fleet of some of the most modern and advanced seismic vessels in the world; all with the X-BOW® hull line design. “Ulstein Verft is known for its punctual and high-quality deliveries, and with the delivery of Polarcus Amani, they have once again proven their ability to handle demanding building projects,” says Polarcus chief executive, Rolf Rønningen. Polarcus Amani is the first Polarcus vessel built by Ulstein’s own shipyard in Norway. She is soon to be followed by her sister vessel, yard number 293, due for delivery in mid-2012. Polarcus Amani is an Arctic-ready vessel designed and built for operations in arctic waters. She carries the ICE-1A* and Winterized Basic notations from DNV, and can operate in first-year ice of up to 1 metre thickness without the assistance of icebreakers.

Naming ceremony (from left) Karsten Sævik, managing director Ulstein Verft; Rolf Rønningen, CEO Polarcus, lady sponsor Christine Lunde; Runar Muren, project manager Ulstein Verft and Captain Tom Reiten (Inset) 3D seismic vessel Polarcus Amani was delivered from Ulstein


Benefits rExclusive news rEvents calendar rTargetted audience


LOW RISK in the


“As a minimum we should maintain the same risk level as in the North Sea,” says DNV’s Knut Ørbeck-Nilssen

06 SPRING 2012

taking into account the likelihood for the Oil and gas producing countries have experienced several catastrophic event to occur. This approach, the so-called accidents in the past 30 years. Alexander ‘worst case scenario’ will lead to many L. Kielland in Norway, Piper Alpha in the decisions without a sound factual basis. UK, Montara in Australia and Deepwater “This is not what risk is about. Risk Horizon in the US have all claimed many management is about increasing safety lives and caused significant oil spills. by analyzing what and where something Knut Ørbeck-Nilssen, DNV chief can go wrong, minimising the probability operating officer Norway, Russia and for it to occur and ensuring that you can Finland says that a common characteristic reduce its consequences,” he clarifies. with all these tragedies is that they An oil and gas operator who embraces were completely unexpected. However, this approach within its management they have forced the development of system will be able to enhance and improved procedures, standards and manage safety levels, continuously. technologies. On the regulatory side, Authorities that base their regulations responsibilities have become clearer and on a risk based approach will also have new governmental a pragmatic tool safety agencies that enables them have been to decide on an established. acceptable level “Offshore safety of risk for their has never been so countries to harvest high on the public resources. This also agenda as in the provides the basis past year. The for regulations industry is debating that allow for how to improve technology technologies and development and safety solutions, new and better and authorities in Remote areas demand improved solutions. Risk both the US and the technologies and safety solutions analyses will EU are developing further provide a stricter requirements for oil and gas common interface for discussions between operations. There is no doubt that the stakeholders, for example regarding a rules of the game will change with more decision of whether or not to allow an focus on offshore safety, environmental industrial activity. protection and risk assessments,” he “This is indeed how many companies predicts. and countries, such as Norway and the UK, have managed their oil and gas Risk management operations for many years. Here, both “The use of a risk management regulations and operations are based on approach is vital to increase safety. risk management, and the responsibility We should not confuse the risk of a falls on the operator to obtain a certain certain event taking place with only the safety level,” says Mr Ørbeck-Nilssen. consequences it may result in. That is not It is estimated that 20% of the world’s

Photos: OED / DNV

Major oil and gas accidents in the past few decades have forced significant improvements in technology, procedures and regulations. “Now, when seeking opportunities in the Arctic areas we must ensure the same level of risk as in the North Sea, says Knut Ørbeck-Nilssen, DNV chief operating officer Norway, Russia and Finland


Survey activity in Norway’s High North

with regards to offshore safety. A great undiscovered resources may be found example of cooperation is the Barents in the Arctic regions. He points out that 2020 project between Russia and exploration has already started in the Norway. Since 2006, experts from both harsh environments found in Greenland, Shtokman and the Barents Sea, with more countries have worked closely together in order to learn, develop and harmonise to come. rules for safety in the Barents region. This “In these locations, achieving safe was initially a bilateral initiative, but it is operations is more demanding than in now developing into a significant panfor example the North Sea, where oil and Arctic project,” he states. gas has been produced since the 1970s Mr Ørbeck-Nilssen in some of the world’s believes that as the most challenging industry moves north conditions. In the high As a minimum we should into the Arctic, and north the conditions seen in the light of are much, much maintain the same risk risk management, tougher. Extremely low level as in the North Sea both policy makers temperatures and long and the industry periods of darkness must agree on an create a demanding acceptable risk level. As a minimum we working environment for personnel, but should maintain the same risk level as in it also affects the material properties and the North Sea. operation of equipment,” he explains. He explains that, since the consequences Snow, slush, fog and icing can reduce the functionality and availability of safety in these sensitive areas will be much higher in case of an accident, the emphasis must barriers. And closely linked to this is the be on developing solutions which reduce question of how emergency preparedness the probability of undesired events. and oil spill recovery can be provided in “Further, to minimise the consequences case of an accident. of an accident, the industry and the “How do you remove oil from ice, and regulators must work together to find how do you evacuate 100 people in a –50oC snowstorm 200 km from the shore appropriate mitigation measures in order to meet the agreed risk level,” he with limited infrastructure in remote underlines. locations?” he asks. “We recommend that the five Arctic “These are just a few examples of the safety challenges we must face in the years states agree on common regulations, and the industry must develop technologies to come, but I know that much research and standards adapted to the harsh and development is already in process,” Arctic conditions. I see this more as an Mr Ørbeck-Nilssen points out. opportunity than a threat, as long as we manage the new risks in a systematic, International cooperation unified and transparent manner,” He emphasises another important issue, concludes Knut Ørbeck-Nilssen. which is international cooperation. “All five Arctic coastal states must work together to implement the same This article appears courtesy of DNV, understanding, standards and regulations

MAJOR ACCIDENTS SINCE 1980 Alexander L. Kielland The collapse of the Alexander L. Kielland rig in 1980 is still fresh in the minds of the international oil and gas industry and particularly in the Norwegian community. A bracing on one of the legs broke, probably due to fatigue, and the unit had no redundancy against this eventuality. Shortly after, the leg was lost, causing a rapid list of 30–35 degrees. After twenty minutes the rig turned upside down completely. Nobody had foreseen this accident which caused 121 lives.

Piper Alpha Eight years later, on the UK continental shelf, 167 lives were lost in the Piper Alpha disaster, making this the worst offshore accident ever experienced. An explosion was caused by gas released and ignited by hot gas turbine casings or frictional sparks.

Montara In 2009, an oil and gas leak and subsequent slick took place in the Montara oil field in the Timor Sea, off the northern coast of Western Australia. Lasting for 74 days, it was one of Australia’s worst oil accidents.

Deepwater Horizon The Deepwater Horizon accident happened on April 20, 2010 when the control of the Macondo well was lost resulting in explosions and fires on the drilling rig. It was the largest oil spill in US history, and in comparison to the Exxon Valdez’ 500,000 barrels spill, the Macondo well released five million barrels into the Gulf of Mexico. Source: DNV Forum SPRING 2012 07



he Arctic can be geographically defined in many different ways, from the Arctic Ocean alone to all land and sea north of 60°, the latter being the broad definition used by the report. This includes parts of the United States, Canada, Russia, Norway, Sweden and Finland, and the whole of Greenland and Iceland. However, “there is not one Arctic, but many,” says the report, published by the insurance market Lloyd’s of London and international affairs think tank Chatham House. “Environmental conditions, geological prospectivity, physical accessibility, population levels, economic development and political salience all vary.” The report, Arctic Opening: Opportunity and Risk in the High North, was prepared by Chatham House on behalf of Lloyd’s and launched in mid-April. The pace of environmental transformation currently taking place in the Arctic is unprecedented, says Richard Ward, chief executive, Lloyd’s of London.

Investment commitments and projections The scale of potential investment in both the onshore and offshore Arctic oil and gas industry is a small fraction of overall investment in the global oil and gas industry over the next 10–20 years: the International Energy Agency has suggested that overall investment in the oil and gas sector should total $20,000bn between 2011 and 2035. Nevertheless, sustaining current and projected rates of Arctic oil and gas could transform local economies and global energy dynamics. If implemented, the Russian government’s ambitious vision for investment in its high north would establish the Arctic as a major gas-producing region, says the Arctic Opening study.

“Risk management clearly has a critical role to play in helping businesses, governments and communities to manage these uncertainties and minimise risks. “However, to do so effectively requires the most up to date information to analyse and control risks. There is a clear need for sustained investment in Arctic research.”

Climate change laboratory The Arctic climate is changing more rapidly than anywhere else on Earth, with implications for the region and the global environment, the report says. Rising temperatures are causing a retreat of sea ice and changes to seasonal length, weather patterns and eco-systems. Projections estimate that the Arctic Ocean will first be free of sea ice during the summer months within the next 25 to 40 years, while some scientists claim it could conceivably occur within the next decade. The reduction in sea ice, in particular, could extend oil and gas exploration,

Given regulatory, commercial and geological uncertainty, meaningful long-term investment projections in this sector are hard to come by and difficult to make. Each potential project faces a different set of technical, environmental and infrastructure issues: each country presents a different legal and political context that will influence investment.

United States In addition to on-going onshore oil production on the North Slope of Alaska, US companies are now also looking further offshore, beyond artificial islands which have been producing in the near offshore for some time. Shell, ConocoPhillips, Statoil, Repsol and Eni won

08 SPRING 2012

increase access to mineral wealth and open up potential new ice-free shipping routes. Estimates suggest that untapped reserves in the Arctic could account for 30% of global undiscovered natural gas and 13% of the estimated global total of undiscovered oil. The emergence of the Arctic as a large-scale shipping route – which could result in fewer days at sea and lower fuel costs – is a longer term prospect. Indeed a tanker successfully navigated the Northern Sea Route in 2011. Although it is difficult to make definite predictions on future investment in the Arctic, the report argues that such investment could potentially reach $100billion or more over the next ten years.

Winners and losers Climate change will give rise to both winners and losers. While some fish stocks have flourished in warmer waters, the accessibility of many inland areas has been reduced (and this trend is likely to

exploration leases for the Beaufort and Chukchi Seas in 2008, paying out a total of $2.66bn (Shell was by far the most substantial bidder, paying $2.1bn). Subsequent legal challenges and the 2010 post- Macondo moratorium on offshore drilling in Canada and the United States held exploration largely in check. In 2011, a report commissioned by Shell estimated “commercial production of Arctic Alaska offshore oil and gas resources would generate government revenue estimated at $97bn (in 2010 dollars) in the Beaufort Sea and $96bn in the Chukchi Sea over 50 years”. In line with an increasingly supportive approach taken by the Obama administration to Arctic development, in December 2011 Shell received conditional federal approval for six exploratory wells.

Russia Shtokman is by far the largest single potential offshore Arctic project, 550 kilometres into the Barents Sea. Overall, investment could reach $50bn However, the Shtokman project has been repeatedly delayed owing to concerns about drifting icebergs, negotiations over the tax regime with the Russian government, and concerns about export markets. (Other LNG supplies, from Australia and elsewhere, may mean that the window of opportunity for Arctic LNG exports is becoming more challenging). At the time of writing it is unclear whether the project will proceed, or to what schedule. Investments in the onshore Yamal peninsula

Photo: iStock


The Arctic region is undergoing rapid change, both in terms of climate and economic development. According to a study by Chatham House and Lloyd’s of London, strong governance and risk management, as well as urgent scientific research, are needed to mitigate the region’s many challenging and unique risks.


The environmental consequences of disasters in the Arctic arguably have the potential to be worse than in other regions. The resilience of the Arctic’s ecosystems in terms of withstanding risk events is weak, and political sensitivity to a disaster is high. As a result, companies operating in the Arctic face significant reputational risk, the report says. Vessels such as this ice breaker are under environmental scrutiny

Companies have a responsibility and interest in establishing industry-wide standards and expectations for safety and stewardship, through the Arctic Council, through the International Maritime Organisation or through industry associations. Failure by one company will have impacts for others.

– the lifeline for Gazprom’s ability to maintain and increase Russia’s overall gas production – could run to more than $100bn, in order to provide eventual production of 115–140 bcm, if not more. In October 2011, Total paid $425m for a 20% stake in Novatek’s Yamal LNG project – which is expected to require investment of $18–20bn to 2018 – while also taking a $4bn equity stake in Novatek In oil, TNK–BP plans to spend up to $10bn on developing onshore Arctic oilfields in the Yamal-Nenets Autonomous Area, with exports to Asia from 2015– 2016. Offshore, Gazprom’s Prirazlomnoye platform is expected to be in place in 2012. In August 2011, the Russian state company Rosneft signed a deal with Exxon for three offshore blocks in the Kara Sea and one in the Black

continue), making existing infrastructure more expensive to maintain as the permafrost layer across northern Alaska, Canada and Russia becomes unstable.

Unique risks While presenting substantial business opportunities, large scale economic development in the Arctic also brings a unique and complex set of risks, the report says. Oil and gas developments and shipping, in particular, face challenging conditions including extreme cold, prolonged periods of darkness in winter, and the remoteness of Arctic locations. Weather can change quickly and weather forecasts are often uncertain, and low temperatures and the length of winter Arctic nights remain a challenge for operations.

Sea, to which Exxon committed $3.2bn for the initial prospecting phase – most of this tabled for the Arctic areas. Russian Deputy Prime Minister Igor Sechin said this project would attract $200bn– $300bn in direct investment over the next 10 years, though this figure is highly speculative.

Greenland Between 2002 and 2010, hydrocarbon exploration costs in Greenland amounted to around $740m. A second licensing round for exploration acreage in the Greenland Sea will be held in 2012/2013. To date, Cairn Energy is the only company undertaking exploration; it has probably invested over $1bn in total to 2011, so far without major

Risk management The potential commercial opportunities in the Arctic – to discover and extract substantial quantities of oil and gas or to reduce shipping costs – may encourage some companies to take on greater business, operational and political risks. However, comprehensive and rigorous risk management will, the report suggests, be essential for companies seeking to invest in the Arctic. Companies that can manage their own risks, using technologies and services most adapted to Arctic conditions, are likely to be the most commercially successful in the region. www.


success. Greenland’s national oil company, Nunaoil, has suggested the potential for $10bn in investment in the exploration-to-production phase in West Disko (2011–2030) and a further $10bn in Baffin Bay (2011 to beyond 2040).

Norway Given the arguably more stable regulatory and operating environment, investment in Norway’s Arctic fields is more predictable. The Norwegian government expects the Snohvit gas field (producing gas for the Melkøya LNG plant) and the Goliat oil field (expected to produce from 2013) to attract a total of $9.2bn of investment ($2.17bn has already been spent to 2010).

The Skrugard and Havis oil and gas fields, estimated to contain 400–600 million barrels of recoverable oil equivalents, are likely to produce sustained investment, with associated economic opportunities for oil service firms able to operate in the Barents Sea.

Canada In Canada, there has been renewed interest in Arctic wells previously abandoned as unprofitable at the end of the 1980s. Several 9-year exploration leases were awarded between 2007 and 2010, subject to investment commitments of some $1.8bn. These projects have been on hold since May 2010 pending a review of offshore drilling. SPRING 2012 09

ENVIRONMENT Environmental Regulation of Arctic offshore oil and gas activities

State body

Ministry of Natural Resources and Environment (MNRE) Rosnedra (federal gency for subsoil usage) Rosprirodnadzor (federal service for supervising of the use of natural resources)



Norwegian Ministry of the Environment (MD)

Department of the Interior DoI)

National Energy Board (NEB)

Norwegian Climate and Pollution Agency (Klif)

Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE)

Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB)

Bureau of Safety and Environmental Enforcement (BSEE)

Aboriginal Affairs and Northern Development Canada (AANDC)

Norwegian Ministry of Health and Social Affairs (SHD) Norwegian Pollution Control Authority (SFT)

Regulatory approaches

Norwegian Petroleum Directorate (NPD)

Strict environmental codes; though historically irregular application. Concerns about politicisation of enforcement.

Current status

Liability regimes

Investor obligations

MNREP’s approval of project’s Environmental Impact Assessment

On-going comprehensive environmental regulation and obligatory Environmental Impact Assessments. Aims to balance interests of fisheries and oil and gas sectors. CO2 emissions tax.

Authorization of Compliance on technical and management capacities, Environmental Impact Assessment, emergency preparedness report. Seasonal restrictions may apply according to spawning and migration periods.

Unlimited liability; civil, administrative and/or criminal. Non-compliance can lead to fines or suspension of operations at the discretion of independent inspector.

Federal Law on the Russian Arctic Zone 2012 to identify Arctic territories as unique objects of state policy regarding socio-economic and environmental legislation; new Russia-Norway collaborative partnership launched in 2012, to include an environmental working group.


Denmark & Greenland BMP, GINR, NERI, DNEI Bureau of Minerals and Petrol (BMP) Greenland Institute for Natural Resources (GINR)

Ministry of Industry, Energy and Tourism (MoIET)

US Environmental Protection Agency (EPA)

Sector- and objectivespecific mandates within a ‘culture of safety’.

Case-by-case consideration of each company’s safety plan.

Incorporation of industry standards advised where regulatory requirements are imprecise.

Multidimensional, implementation and on-going revision of Safety and Environmental Management System and emergency preparedness report. Plan of Co-operation with indigenous communities,

Integrated process incorporating ‘dynamic interpretation’ of Mineral Resources Act. Burden of proof on investor to demonstrate adherence to international best practices.

Emergency preparedness report, Certificate of Fitness per installation. Proven capacity to drill same-season response well. Exemption allowed for companies that can demonstrate ability to achieve intended outcome by alternative means per 2011 NEB review.

To be awarded an exploration licence, company must have equity of at least US$10bn. Guarantee of financial responsibility in the form of bond or insurance certificate.

8% tax/barrel paid into Oil Spill Liability Trust Fund. Company must demonstrate financial capability of up to $150m

Liability capped at CAN$40m unless fault or negligence is established. Fisheries Act can also apply. Civil damages have no upper limit.

Unlimited liability, even in “accidental” cases.

30-year moratorium on oil production in the Lofoten, Vesteraalen and Senja islands in the Norwegian Sea extended until 2013.

Moratorium postMacondo eased in August 2011 as conditional approval granted to a couple of IOCs.

Governments working within the Arctic Council to support an international instrument for offshore oil exploration/exploitation liability and compensation.

Contested issue domestically.

Environmental challenges delaying and/or complicating operations in Beaufort and Chukchi Seas, including DoI’s listing of the polar bear as an endangered species.

Currently no offshore drilling; NEB conducting a post-Deepwater Horizon review of licensing requirements. New filing requirements released December 2011, which also pertain to companies already holding licences in the Beaufort Sea. New management tool (Petroleum and Environmental Management Tool) mapping ecological and social parameters introduced by AANDC in 2009 to improve future consultation process.

Next round of leases scheduled for 2015/16, pending Environmental Impact Assessments and infrastructure assessments; currently area-wide but BOEMRE developing leasing system specific to local environmental conditions.

Standards set by MoIET on a case-by-case basis. Obligatory Special Safety Zone around all offshore installations.

Certification of fitness per installation and vessel, documented management capabilities, Environmental Impact Assessment and Social Impact Assessment EIA and public announcement of their results.

Civil and criminal liability; offshore spill liability capped at $75m/incident unless fault or gross negligence established. Not applicable to regulatory violations or claims for damages brought under state law. Ascription of liability ambiguous.

10 SPRING 2012

National Energy Authority (NEA)

National Environmental Research Institute (NERI)

Unlimited liability. In event of pollution damage, licensee liable to those affected without regard to fault. Liability can be reduced if force majeure event contributed. Claims can be pursued through district courts. Special compensation allowed for Norwegian fishermen.

Greater public objections to sub-sea drilling in Arctic following sinking of offshore platform in the White Sea in May 2011.


Compensation calculated proportionate to event.

Details unclear. Operator or licensee may be held liable, regardless of whether loss or damage was caused by culpable conduct or not. Act of God or war exempted.

There are currently no companies with exploration and production licences on the Icelandic Continental Shelf. A second licensing round opened in October 2011.

Source: Lloyd’s of London & Chatham House



Bringing the international oil & gas sector to the centre of excellence for Arctic development

10 M % e V ag Fr IP azi ont Co ne ier de Di En : F sco er KA un gy 22 t – 66 FE AD


Arctic Oil & Gas

North America 3rd annual conference

Developing technologies and strategies to deliver safe and efficient operations Wednesday 23rd - Thursday 24th May 2012, Sheraton Hotel Newfoundland, St. John’s, Canada Attend the 3rd Arctic Oil & Gas North America and gain an insight into:

Join some of the leading Arctic expert speakers

 Potential oil and gas resources in the Canadian Arctic

Robert Brown, Research Lead, Offshore Safety & Survival Centre, Marine Institute, Memorial University

 Commercial, economic and political factors influencing development in the Norwegian Barents Sea

Bharat Dixit, Conservation of Resources, National Energy Board

 Socio-economic impacts of oil and gas development on indigenous communities

Brian Rogers, Engineering Manager, Subsea 7

 NEB Arctic review – what does this mean for the industry?  Emergency, response and evacuation research and development  How technology may help in unlocking Arctic resources  The logistics challenge and what can be done in advance to aid project development  Transportation considerations – best strategies for getting the oil to market  Arctic pipeline systems – understanding the drivers, challenges and knowledge gaps

Dr Ove Tobias Gudmestad, Professor of Marine Technology, University of Stavanger Dr Ken Lee, Executive Director, Centre for Offshore Oil, Gas and Energy Research, Canadian Department of Fisheries and Oceans Stephen Potter, SL Ross Environmental Research Brian Johnston, Business Development Manager, Americas, Rutter Technologies Dr Mike Paulin, Operations Director Canada, INTECSEA Jim Bruce, Director, Ice Engineering, C-CORE

PLUS – a comprehensive one-day seminar on Friday 25th May 2012 - Sheraton Hotel Newfoundland, St. John’s, Canada

FPSOs for Arctic Operation Learn about winterization, ice management and FPSO design and operation for the Arctic

“Excellent programme and presenters, really worth attending” Organised by

K.Petersen, Shell

“Excellent structure to programme, some very good and thought-provoking presentations” A. Whooley, MCS

“Very informative, good networking possibilities, worth attending” T.Corvo, Gusto Registration Hotline: +44 (0)20 7017 5518 s Email: For the latest programme or to book on line:

Scan with smartphone QR Reader App:




Developing oil and gas reserves in the Arctic and other similarly harsh environments is fraught with danger. Extreme cold, winds, months of darkness and remoteness combine to create a hugely demanding region in which to work. Viking LifeSaving Equipment’s Benny Carlsen talks with Bruce McMichael about the challenging safety and rescue issues faced by workers coming in from the cold


or the men and women working in ice-affected regions, keeping them safe and alive in the event of an emergency is a major concern for the oil companies, ice-breaker ship managers and other operators. The Arctic is not a homogeneous area of ice and harsh weather, but a very diverse range of different environments requiring a range of life saving solutions, says Benny Carlsen, vice president at Denmark-headquartered Viking Life-Saving Equipment. A year ago, The Arctic Council (Canada, Denmark, Finland, Iceland, Norway, Russia and Sweden) signed an Agreement on Cooperation on Aeronautical and Maritime Search and Rescue (SAR) in the Arctic. The 12 SPRING 2012

agreement, the first legally-binding instrument negotiated under the auspices of the Council, focuses on co-ordinating life-saving international maritime and aeronautical SAR coverage and response among the Arctic States across an area of about 13 million square miles. The accord is an important route mark in the journey to develop advice, rules and guidance for the increasing numbers of people working in the region. Severe winters can limit the scope of rescue operations and life-saving products need special features to function reliably in extremely low temperatures. In addition, dense fog can make evacuation by helicopter unsafe and winter ice makes the use of free fall lifeboats impossible. Ice conditions that vary widely by location, season and year make emergency planning for the especially challenging. For that reason, regulators, planners and people working on platforms need sophisticated help to choose the best escape option at any moment. A Russian polar research station chief, whose base was the subject of an international rescue mission several years ago, described the experience: “The break-up of the North Pole-32 base destroyed 90% of its structures in half an hour. All of a sudden a huge wall of ice appeared that kept growing and growing. First they were three metres (10 feet) high, then five, then seven and finally over 10 metres.”

Viking’s SES-2C Arctic evacuation system is designed for Arctic winter conditions is deployed directly from the deck of an offshore platform or vessel to sea

Rolling development Denmark’s Viking Life-Saving Equipment group has a rolling development programme to supply safety and rescue equipment to the upstream energy and shipping industries. With contracts already in place across the region including Arctic Russia and Sakhalin, Viking is blending real life experience with new materials and technique research, says Mr Carlsen. The company is constantly developing effective escape, evacuation and rescue (EER) technology and processes to enable people in emergency situations to survive cold, hostile water and weather environments. As the National Research Council of Canada notes: “Typical ice sheets, thrust against platform caissons by wind and currents, fold into helter-skelter solid


Viking’s Arctic packages typically consists of life rafts along with specially selected cradles, relays, cables and boxes

rubble fields sometimes measuring a kilometre long and half as wide, and towering perhaps seven metres above sea level. In spring and fall, icebreakers can maintain lifeboat escape channels in pack ice. But thicker winter ice may ground on the seabed, shielding platforms. This means it’s not possible to access icebreakers and other evacuation craft.” When designing safety and rescue clothing, it’s important that people feel comfortable wearing it, says Mr Carlsen, otherwise it’s not fit for purpose. This is one of the key design starting points

Typical Arctic evacuation and rescue problems r Very cold. Adfreezing (when cold temperatures cause objects to stick together) snow/ice obstructing mechanisms and causing slippage r No free fall or fast descent system due to ice r Ice conditions variable – dynamics and ice fraction can change quickly r Ice pressure, ride-up, adfreeze, pileup r Ice movement direction unpredictable r Visibility bad often – fog/Arctic winter r Damage to capsule greatly decreases survival chances r Arctic system must also work for open water and rough seas Source: International Association for Hydraulic Engineering and Research

for Viking: not only does the equipment have to work technically, it must also meet ergonomic standards and be suitable for engineers often working in cramp, difficult conditions. New materials and technology, including individually heated suits capable of sustaining life for several hours whilst the person is immersed in a cold-water situations awaiting rescue, or in a life-raft, are constantly being developed and refined. “Our suits must be lightweight and comfortable to wear otherwise they (the suits) won’t function as they were designed to be used,” says Mr Carlsen. Also, Viking has modified its already proven offshore chute system to cope with the special conditions encountered when evacuating by chute directly to sea or onto decks of vessels as diverse as standby support vessels and ice breakers. Viking also offers special patented Polar life raft heated containers; immersion and anti-exposure suits; thermal protective lifejackets and survival kits (for groups or individuals). However, it’s not just low temperatures that must be managed in a rescue situation: pack ice can easily crush life rafts and escape shutes. Additionally, a moving ice pack could easily overturn and crush a raft.

National Standards Viking’s Polar life rafts meet national standards of countries where they are required. The rafts are certified by DNV, USCG, TC Canada, RMRS (Russia Maritime) according to IMO Polar guidelines and Russian winter rules. Standards are being updated by the International Maritime Organisation and the various country-based jurisdictions. For example, Russian regulations now require that people be protected against air temperatures of -50°C, and from possible fire damage. Indeed, the company has delivered its Offshore Chute System SES-2C Arctic for a new offshore project in Sakhalin Island, offshore eastern Russia. The system has integrated heat tracing, can operate in -40°C temperatures and is capable of evacuating either on the deck of a ship or in open water. Arctic weather can ground helicopters and seize ships while the ocean surface can freeze solid for months at a time. For offshore workers, vessel crews and scientists to work effectively and safely in harsh environments they need to know that the clothes they wear and life rafts they hope never to use are fit for purpose, says Mr Carlsen.

Benny Carlsen, vice president, Viking LifeSaving Equipment

Benny Carlsen When it comes to understanding working life in international offshore conditions and the safety equipment required for surviving them, few people know the ropes better than 41 year-old Benny Carlsen. He has seen a bit of everything; from what the icy cold and hugely challenging Arctic climate can do to men and machine to the challenges of Asia’s warmer waters. Benny takes a keen professional interest in understanding and applying offshore safety regulations, particularly when it comes to those applicable in Norway, regarded by the international offshore industry as being the most stringent in the world. Currently heading up Viking LifeSaving Equipment’s global offshore activities, Danish-born Benny began as a marine engineer on an icebreaker/tug boat in Greenland. It was here, he says, that he gained respect for nature’s power and the challenges it presents for sailors, and oil and gas operators. Later, he swapped those icy waters for seven years in the warmth of Singapore as Sales and Marketing Director for Viking’s local subsidiary. Today Benny, his wife and two children are based in Bergen, Norway, close to a key and fast growing offshore and sub-sea industry cluster. Over the years, Benny has been a part of Viking’s rapid transformation from a life-raft business based in the cold Nordic region to a global player diversified into all types of safety equipment with a strong focus on marine evacuation. He is part of the team building Viking’s presence as a leading manufacturer and supplier of safety equipment for the offshore, maritime and emergency services. Benny has a Bachelor degree in Technology Management and Marine Engineering, supplemented with an MBA from the University of South Australia. SPRING 2012 13


Dr. Claude Daley and the large double-pendulum test units in Memorial University, St. John’s structures lab

The Sawyer Glacier, Alaska overwhelms observers in a Zodiac inflatable boat. Icebergs and ice are powerful natural forces, which need to be understood



Developing design tools that can accurately model ship-ice and ice-structure interactions under Arctic conditions is the focus of a five-year research project at Memorial University in St. John’s, Newfoundland and Labrador, writes Andrew Safer, St John’s

14 SPRING 2012

University, and the research funding agencies Natural Sciences and Engineering Research Council of Canada and Mitacs. The ice-crushing experiments conducted in the structures lab at the Faculty of Engineering and Applied Science are generating the data for Dr. Daley’s team to model. For the past 12 months, they have been modeling a ship

Things that wouldn’t have caused any difference in theoretical results, like a fairly small feature of the ice’s shape, are causing big differences in measured results. New models are definitely needed transiting in pack ice. Tests to date have involved crushing 10- and 25 cm ice cones against a small steel frame, 25 cm to 1 metre cones against a large steel frame, and 25 cm cones in a small double-pendulum apparatus at impact load levels up to 500,000 pounds. They are using artificial

multi-year ice in most of the experiments, and will be using glacial ice harvested from iceberg fragments in at least one of the large double-pendulum experiments.

Ice event mechanics Using powerful, parallel computer processing capacity boosted with Graphics Processing Units (GPU) researchers are able to develop ‘ice event mechanics modeling’, which models all of the discrete events that occur during the ice-breaking process—hundreds of ice-ship events and thousands of ice-ice events, including the numerous ice floes that are impacted by the initial event. They plan to translate this simulation into the ability to model, for example, all of the operations of a set of icebreakers managing ice to protect offshore structures in the Beaufort Sea. These calculations, which used to take months, are now completed in hours. In the 1980s, impacts were measured during major ice-loading events on platforms in the Beaufort Sea, north

Photos: Andrew Safer / iStockphoto


ow in its third year, the Sustainable Technology of Polar Ships and Structures (STePS2) project is focused on gaining a better understanding of the dynamics of these interactions and developing new numerical modeling processes. “If the risks are unknown,” says Dr. Claude Daley, principal investigator and professor of Ocean and Naval Architectural Engineering at Memorial University in St. John’s, Newfoundland and Labrador, “the level of conservatism is through the roof. Technology enables the costs to be understood and, usually, lowered.” The $7.2 million STePS2 project is supported by a group of oil companies, service companies and contractors including Husky Energy; ABS; Samsung Heavy Industries; Rolls-Royce Marine, and BMT Fleet Technology in the private sector, and the Atlantic Canada Opportunities Agency, Research & Development Corporation of Newfoundland and Labrador, key technical partner National Research Council of Canada-St. John’s, Memorial


When ice collides at a glancing angle, compared to striking the surface head on, the structure is further weakened. This tangential movement can also score the surface. “This would have occurred on the Titanic”. St John’s developing centre for upstream Arctic expertise

of Alaska but the high-pressure zones were not recorded due to the low spatial resolution technology that was available at the time. In STePS2, Dr. Daley’s team is using an advanced-technology impact module that can withstand the loads and photograph the pressure distributions at high resolution. This specialized piece of equipment consists of a high spatial resolution array of pressure sensors covered by a thin metal sheet, against which the force is applied. These patented sensors rest on an 18-inch-thick block of clear acrylic that has a high-speed camera mounted behind it to capture the pressure data. The impact module was designed by Dr. Bob Gagnon, a principal researcher in STePS2 and physicist at the National Research Council of Canada-St. John’s, located close by the Memorial University’s Ocean and Naval Architectural Engineering structures lab.

Design point In experiments scheduled for the fall, the large double-pendulum apparatus (4.5 m by 6.5 m; approximately 18 tons) will measure the force and pressure distribution when one five-ton steel pendulum collides with another equally massive one that has a 1-metre diameter ice sample attached to it, at forces up to four mega-Newtons and at speeds up to 15 knots—close to full-scale ship-ice impacts. In May, the research team will be doing full-scale tests on the structural

grillage (side shell of the hull) of a 10,000-ton PC 6 ice class ship. The 6-metre by 2-metre section will consist of nine frames plus the plating and stringers. During the quasi-static tests, a hydraulic ram will slowly push ice into the grillage. The tests will overload the design limit of 40,000 pounds by a factor of ten times. “We’re going way beyond the design point so we’ll damage the structure,” says Dr. Daley. “The object is to assess the damage tolerance, reserve capacity, and failure mechanisms so we can understand where the risk is.”

Significant effects Asked what his researchers have discovered to date, Dr. Daley says, “We’re surprised that the speed effects on ice are as significant as they are. Not only do the values change between low-, medium-, and high-speed tests, the nature of the pressures and the loads, and the failure process, change very dramatically between very low and high speeds.” He adds that in pressured pack ice, loading on an offshore structure or the midbody of a ship develops slowly, whereas in a collision scenario, it develops very rapidly. Another significant finding is that the initial shape of the ice is much more important than previously thought (for example, the nose of the ice being flattened off for a few inches). “Things that wouldn’t have caused any difference in theoretical results, like a fairly small

feature of the ice’s shape, “ he says, “are causing big differences in measured results. New models are definitely needed.” He adds that the research team is learning how to set dozens of inputs for various values. “Lots of students are getting very skilled at numerical modeling and experimental modeling,” Dr. Daley says. “Some very good educational results are occurring.” By the time STEPS2 is completed in June 2014, 32 co-op students, 24 graduate students, nine international exchange students, two post-doctoral fellows, six faculty, three staff, and three principal researchers from the National Research Council of Canada-St. John’s will have been involved in the project. Another key finding, says Dr. Daley, is that when ice collides at a glancing angle, compared to striking the surface head on, the structure is further weakened. This tangential movement can also score the surface. “This would have occurred on the Titanic,” he says. “All real collisions are glancing.” This finding points to the need for additional research that is beyond the scope of STePS2 . When the project concludes in 2014, the deliverable will be a design tool that enables Arctic ship and offshore structure designers, operators and engineers to model a range of scenarios involving ship-ice and ice-structure interactions to specify design parameters. SPRING 2012 15


Siem Ruby in Nuuk harbour, Greenland



elegates at the annual Arctic Futures Symposium take part in frank and animated debates on key issues facing those living and working in the region, touching on topics as diverse at indigenous affairs, transport and infrastructure, search and rescue to scientific research and monitoring, ecosystem stewardship and management of natural resource development. Organised by the International Polar Foundation, the symposium bringing together a wide range of Arctic stakeholders, including EU and foreign policymakers, scientists, industry representatives, indigenous peoples and academics. It is held annually in Brussels. “With global warming driving change throughout the region, Arctic Futures continues to provide a platform for dialogue amongst stakeholders,” says International Polar Foundation (IPF) president and co-founder, Alain Hubert. “International co-operation is key to achieving sustainable policies for the Arctic that benefit the people that live 16 SPRING 2012

and work there, protecting the region’s fragile ecosystem and exploring the way forward for scientific research and the development of natural resources.” Arctic Futures is an initiative of the IPF in partnership with the Prince Albert II of Monaco Foundation, under the themes of cooperation, science, economy and peoples in the Arctic. As interest in resource development in the region grows, the key findings of the Arctic Futures Symposium 2011 include: UÊÀV̈VÊ-Ì>ÌiÃÊÀiˆÌiÀ>Ìi`Ê̅iˆÀÊ«œÃˆÌˆœ˜Ê that no additional treaties or legal frameworks are necessary for Arctic governance and that decisions should be made within existing legal frameworks such the Arctic Council and other multilateral agreements, which can be further developed to address future issues. UÊ/…iÀiʈÃÊVi>Àʘii`ÊvœÀʈ“«ÀœÛi“i˜ÌÃÊ in Arctic transport infrastructure and search and rescue (SAR) capabilities before there can be any increase of maritime traffic and other commercial activities in the region.

UÊ/…iÊ ÕÀœ«i>˜Ê1˜ˆœ˜ÊˆÃÊÃiÌÊÌœÊ continue its “constructive and dynamic” role in the Arctic’s future, including “preservation of the Arctic”, “sustainable exploitation of natural resources” and its commitment to align its activities in accordance with the priorities of the Arctic Council member states. UÊ7…ˆiʓ>˜ÞÊ«iœ«iʏˆÛˆ˜}Ê>˜`Ê working in the Arctic are unopposed, or even welcome development of Arctic resources, many feel that this should take place under the strictest environmental standards, while respecting the concerns and rights of indigenous Arctic inhabitants, and including them in ongoing dialogue. UÊ-Vˆi˜ÌˆwVÊÀiÃi>ÀV…Ê«ÀœiVÌÃÊ>VÀœÃÃÊ>Ê wide range of disciplines in the Arctic – in particular long-term observation campaigns – must be supported, as it makes it possible to identify clear trends and provides policymakers with a sound basis for decision making. UÊ >À̅Ê"LÃiÀÛ>̈œ˜Ê>˜`ÊÀi“œÌiÊ sensing technologies play an increasing

Photos: Cairn Energy

The need for enhanced Arctic search and rescue (SAR) capabilities and environmental protection measures are among the main messages of the proceedings of the 2011 Arctic Futures Symposium, which also highlights cooperation and dialogue among Arctic States, inhabitants and other stakeholders of the unique and environmentally fragile region


role in observing the Arctic for scientific research and providing essential information for safeguarding commercial and local activities in the region. They also provide a step change in our appreciation of the rate of change largescale mechanisms. “The Arctic urgently needs 21st century solutions for the issues it faces, not the tired approaches of the past,” says Nighat Admin, International Polar Foundation vice-president. “This means resolutely looking forward to deliver the best outcomes for the people and environment of the Arctic.” Speaking at the event, Maria Damanaki, European Commissioner for maritime affairs and fisheries, said: “What happens in the Arctic affects the rest of the world, including the European Union. The EU’s CLAMER project showed that seas in Europe are being subject to quick, unprecedented changes due to Arctic sea ice melt. This change accelerates the rise of the sea temperature and sea life migration and increases erosion of European coastlines. At the same time, human activity in the Arctic is increasing as Exxon and Rosneft have signed a joint agreement to carry out hydrocarbon exploration in the Arctic. She says: “these issues are a common concern. It is our responsibility to tackle the risks and opportunities to ensure a sustainable development of the Arctic”. The EU will continue to be a constructive and dynamic player in carrying out EU objectives agreed in the EU Commission’s Communication on the Arctic in November 2008, which outlined three key goals: 1) Contribute to preserving the Arctic in conjunction with the people of the region. 2) Promote the sustainable exploitation of natural resources, following the highest environmental and safety standards. 3) Contribute to enhanced governance through the implementation of relevant agreements, frameworks and arrangements. Commissioner Damanaki said the EU is currently supporting various activities in the Arctic including the EU 7th Framework Programme for research (2007- 2013) funding 46 projects directly related to the Arctic, giving !20 million

Seismic acquisition offshore Greenland

($26.3m) per year, studying issues including Arctic ecosystems, glaciers, icebreaker designs, and the impacts of human activity on the region. She also highlighted a new EU-funded project known as ACCESS (Arctic Climate Change Economy and Society), whose main objective is to assess climatic change impacts on shipping (including tourism), fisheries, marine mammals and upstream oil and gas activities in the Arctic Ocean. Meanwhile, Anton Vasiliev, ambassador at large and senior Arctic official of the Russian Federation, said that in 2008 Russia became the first country to adopt a new national Arctic strategy in response to the new realities of the Arctic. The Russian strategy outlines fundamental interests in the North: extracting resources; maintaining peace stability and cooperation in the region; protecting fragile ecosystems and the interests of indigenous peoples, and exploiting the potential of the Northern Sea Route. “The other seven Arctic States have

since devised their own strategies. While there are similarities in all eight, the most common point is that each country’s national interests can only be met through close cooperation with the other Arctic States,” said Mr Vasiliev. He mentioned that experts from the five nations that border the Arctic Ocean are in regular contact with each other: “There is very little ground for conflict, as there is very little left to divide: 95% of the Arctic’s resources have already been allocated.” He said that “doomsday scenarios for the Arctic come from a lack of knowledge about the realities of the region, or from self-serving interests. These scenarios are not coming from the Arctic but from those outside the Arctic”. The Arctic is “our home”, said the Ambassador. “It is not an isolated wilderness. The region has global links. It is not a lawless jungle, but rather an area of peace, predictability, cooperation and dialogue.” SPRING 2012 17


Arctic transit:

Northern Sea Route The appeal of a regular trade route from Europe to Asia crossing the Arctic Ocean has been recognised since the fifteenth century. But it is only in the past few decades that this tantalising prospect has become realistic

The last two years have seen moves to explore the potential of the Northern Sea Route (NSR) as a summer season trade lane to and from the booming Asia markets. Russia’s NSR is a set of sea routes from the Kara Gate to the Bering Strait. The NSR is navigable along its entire length during the summer and early autumn, depending on the ice conditions. As the sailing distance from a north European port to the Far East using the NSR is approximately 40% shorter than using the Suez Canal, it is no surprise that the commercial potential for this route is in the spotlight.

What about the Northwest Passage? The Northwest Passage (NWP) has not seen the same development as the busier NSR (Northern Sea Route or Northeast Passage). There is seasonal traffic on the NWP; one operator is Northern Transportation Company Limited (NTCL) and a reduction in ice conditions would no doubt lengthen its operating season. For transit traffic, although the route has been opened up by the retreat of the sea ice, the conditions are different. Large areas of the NSR had no, or very little sea ice, in the summer of 2011. But hazardous multi-year ice‚ 3–6 metres thick, was still found in the NWP. The contested sovereignty claims over the waters complicates transit shipping through the NWP and the considerable investment needed in escort vessels and infrastructure needs to make economic sense for government. Interest is growing however. Quebec’s government in particular, is looking to exploit mineral resources in Northern Quebec. Under its Plan Nord programme it is investigating transhipment, ice-classed vessels, and icebreaking capacities.

18 SPRING 2012

During the Soviet Union era the NSR was a very important national waterway and powerful icebreakers were built to assist merchant ships to reach the various ports in the region. The Russian government opened the route to foreign vessels in 1991 and the first non-Russian flagged vessel used it that summer. However, after 1993, volumes of domestic and transit traffic plummeted, partly because government subsidies dried up. By 1998, transit traffic had stopped altogether. It was not commercially viable under the economic and climatic conditions of the time according to a joint

Image: Lloyd’s Register

Open to foreign shipping


Russian-Norwegian-Japanese research report (INSROP) in 1999. In 2009, with near record low levels of sea ice in the Arctic, two German vessels were the first foreign flagged ships to sail the NSR from east to west. The voyage sparked renewed international interest in the route. In 2010, Russian nuclear-powered icebreakers enabled four transit voyages, moving 111,000 tonnes of goods to the Asia-Pacific region. And 2011 saw a huge rise in transit traffic. Some 34 vessels and 820,000 tonnes of cargo travelled the route as the further retreat of sea ice doubled the summer transit period to a record 20 weeks, compared to 2009.

Demonstrating the advantages “Various shipping and charter companies are pushing the boundaries on the NSR to achieve faster transit times with larger vessels, demonstrating the potential of using the route,” says Boris Ozerov, Lloyd’s Register’s Russia Marine Manager. “One driver is the future development of Russia’s Arctic hydrocarbon resources that will need transport to global markets.” In 2010, the Norwegian company Tschudi Shipping and Denmark’s Nordic Bulk Carriers transported 41,000 tonnes of iron ore concentrate from northern Norway to China on the MV Nordic Barents. Based on this, Tschudi Arctic Transit publicised possible savings of 20.5 days to Yokohama, Japan and 16 days to Shanghai, China using the NSR compared to the Suez Canal, for a vessel sailing from Kirkenes in Norway or the Russian port of Murmansk. “The 2011 transit season began unusually early,” says Desmond Upcraft, Ice & Cold Operations Manager, Lloyd’s Register. “In late June Russia’s largest independent gas producer, Novatek, chartered the ice-classed panamax tanker Perseverance to carry 60,000 tonnes of gas condensate from northwest Russia to China. Conditions allowed the tanker to sail north of the New Siberian Islands. This route is deeper which allows larger ships to use the NSR. Two months later, using this deeper northern route, Sovcomflot’s suezmax tanker Vladimir Tikhonov became the largest vessel to complete the NSR, taking 120,000 tonnes of gas condensate from northern Norway to Thailand.” Nordic Bulk Carriers used the NSR again in 2011, when it chartered the

bulk carrier Sanko Odyssey to take the largest iron ore shipment yet, some 72,000 tonnes from Russia to China. At the time the company proclaimed: “This historic sea route has got it all; it is safer, shorter and thereby more ecofriendly. Said in another way – it is good business. The fuel savings alone add up to approximately 750 tons. There is no doubt in our minds that the opening of the NSR has great commercial potential for both cargo and shipowners.”

Cost benefit calculation

need for comprehensive economic studies of the Arctic sea routes, including the NSR, and this is still the case.

Russia’s plans The Russian government has announced its intention to transform the NSR into a commercially viable route from Europe to Asia. It is improving safety and communication by building 10 new bases for search, rescue and communication along the route. A new law on the NSR is in the pipeline, part of which will clarify tariffs for icebreaker assistance and other services. Investment is also needed in the ageing nuclear icebreaker fleet. In October 2011, it was reported that construction would begin in 2012 on four new icebreakers, worth !1.8 billion, and two others are planned. Three of the six will be nuclear powered.

A lot has changed since the INSROP study in the 1990s. Reductions in voyage times and some dues – let alone in greenhouse gas emissions – have shifted the economics of the NSR, though the equation is still finely balanced. “You will need a transit permit,” says Upcraft, “and pay qualified ice pilots, additional insurance premiums Key global transport route of the and Russian icebreaker fees. Some of future? these direct costs could be offset, as One key influence on the future transit if the voyage was via the Suez Canal, use of the NSR is the perceived hurdle of there would be canal transit fees, piracy complying with Russian requirements and insurance and possibly the cost of uncertainty on icebreaker fees and other installing anti-piracy equipment.” dues. Companies will want assurance on But there are indirect costs too. “Vessels operating on the NSR during the these before they invest in the route. The demands faced by the maritime shipping summer season need to have an ice class industry to reduce carbon emissions acceptable to Russia’s Administration may yet emerge as one of the drivers for of the NSR (ANSR) and meet other developing the route: Russian regulatory but the environmental requirements,” says consequences of Ozerov. ”The issue of “This historic sea route increased shipping in a permit is not routine the region also need to has got it all; it is safer, – in practice a survey be considered. may need to be carried shorter and thereby The AMSA 2009 out by an ANSR more eco-friendly”. Report concluded that inspector.” “the uncertainties and The type of cargo complex interactions of shipped will also have many driving forces of a bearing on the transit trans-Arctic navigation require significant viability of the route. Only 22 of the 34 research. While it may be technically vessels that transited in 2011 carried feasible to cross the Arctic Ocean today cargo and 15 of these transported liquid ... the operational, environmental and cargo, mainly gas condensate. A 2005 study funded by the Institute of the North economic implications and challenges for routine trans-Arctic voyages are not yet concluded it is technically possible for fully understood”. container traffic to use the NSR but did The competitiveness of the NSR will not look at the economic feasibility of the concept. If Russia continues to develop its increase as the Arctic ice recedes and the Arctic hydrocarbon resources, we may see summer transit period lengthens – and liquefied natural gas (LNG) being shipped forecasts for this retreat are constantly being revised. But its future as a viable along the NSR. To achieve this, the transit route is less clear cut. industry will need to develop dedicated high-tech Arctic LNG carriers. The Arctic Marine Shipping Assessment This article appears courtesy of Lloyd’s Register, (AMSA) 2009 Report highlighted the SPRING 2012 19


OTC 2012 30 April – 3 May, Houston Texas Houston, Texas once again plays host to the huge global oil and gas conference the Offshore Technology Conference, now simply referred to as OTC. This year’s event features hundreds of stands from over 30 countries marketing their expertise for work in Arctic and ice-affected regions. There is a special presentation from David Moles, vice president development & operations at ENI about the Italian group’s work on the Nikaitchuq field, offshore the Alaska North Slope. Conference presentations titled ‘UK Atlantic Margin Exploration: petroleum geology and associated technological challenges’ from the British Geological Survey and a talk by ExxonMobil Exploration titled ‘New opportunities from 4D seismic and lithology prediction at Ringhorne field, Norwegian North Sea’ will also feature. Arctic Oil & Gas North America 23 – 25 May St John’s, Canada IBC Energy’s 3rd Annual Arctic Oil & Gas North America Conference. A popular event with a full programme about the effects of climate change on oil and gas development in Arctic regions and the benefits of cylindrical floaters for Arctic and sub-Arctic environments. event/arcticnorthamerica 3rd Polar Shipping Summit 30 -31 May London, UK This two-day event will discuss in depth, business developments in the Arctic and the opportunities created for the shipping industry. Issues on the agenda include operational efficiency, safety, insurance and risk-management in the region. ISOPE 2012 17 - 22 June Rhodes, Greece The International Society of Offshore and Polar Engineers annual conference covers a huge range of topics ranging from new materials to subsea technology and corrosion control. www.isope2012 International Symposium on Seasonal Snow and Ice 28 June – 6 July Lahti, Finland Despite new technologies, thin ice and seasonal snow covers close to the climatological ice margin remain difficult to model. The goal of the symposium, organised by the International Glaciological Society (IGS) is to progress further in understanding how seasonal snow

and ice is responding to changes in the environment and climate, and what changes can be expected in the future. The aim is to address these problems by bringing together scientists from diverse communities engaged in research on snow, sea ice, freshwater lake and river ice and frozen ground. Posidonia 2012 4-8 June 2012 Athens, Greece The Posidonia conference is a global marketplace for ship builders, suppliers of ships’ equipment and shipping-related services. 22nd International Ocean and Polar Engineering Conference 17 – 22 June Rhodes, Greece The conference program will include a symposium on Polar Science and Technology, with sessions on the following subjects: rIce management, safety and risk, icing rIce loads and engineering: data and modeling rPolar ice, oceanography and meteorology rPolar surveys, ice-ocean climate forecasting The conference is being organized by Technical Program Committee (TPC) of the International Society of Offshore and Polar Engineers (ISOPE) with 27 cooperating organizations. Its objective is to provide a timely international forum for researchers and engineers. Neftegaz 25 – 29 June Moscow, Russia Important, biennial conference and

20 SPRING 2012

exhibition showcasing Russian oil and gas equipment and technology. 10th International Conference on Permafrost 25 – 30 June Tyumen, Russia The conference, held every four years, is the premier venue for all research related to permafrost with a focus on Arctic, Antarctic, and alpine permafrost research. The theme of the conference, ‘Resources and Risks in permafrost regions in a changing world’, refers to both the impacts of a changing world on permafrost and the impact of permafrost on a changing world. 15th International Congress on Circumpolar Health 5 - 10 August Fairbanks, Alaska Health professionals will be gathering to share health-related research findings and program successes that will improve the quality of life for those living in circumpolar regions. ONS 2012 28 – 31 August Stavanger, Norway ONS is one of the world’s leading meeting places for the global energy industry. For almost 40 years ONS has been a broad-based international energy event, and a unique meeting place for everyone involved in the entire energy sector. Since its launch in 1974, the biennial event has been staged in Stavanger, Norway. Speakers at this year’s event include Helge Lund. President & CEO, Statoil and Ola Borten Moe, Norwegian Minister of Petroleum and Energy. Icetech 2012 17 -20 September Banff, Canada Exhibition and conference themed around the ‘Performance of Ships and Structures in Ice’, including the hot topics of global warming, geopolitics, and future expectations for the Arctic.

The 2012 Arctic Futures Symposium 4 – 5 October Brussels, Belgium Organised by the International Polar Foundation. To register your interest, contact SPE Russian Oil and Gas Exploration 16 – 18 October Moscow, Russia This important event aims to brings together senior executives, engineers and industry professionals with leading national and international E&P companies to the Russian market to debate and invest in transfer technology. Deep Offshore Technology International 27 - 29 November Perth, Australia DOT showcases the most innovative technologies in the deepwater oil and gas industry, and provides a forum to discuss the specific challenges associated with hostile and ultra deepwater environments. Arctic Technology Conference 3 – 5 December Houston, Texas OTC’s Arctic Technology Conference is returning to Houston for ATC 2012. This highly focused, international conference will address the latest technologies and innovative practices needed for exploration and production in the Arctic.

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Wherever a company or government invests in the energy, shipping, mining, fisheries or tourism industries in remote polar areas of the world, it is vital that they understand how their work will affect the local population, wildlife and environment. Non-governmental organisations (NGOs), shareholders and voters will demand that the environment is protected and respected. Here, speaking at a recent Arctic Futures conference organised by The International Polar Foundation, Mikhail Pogodaev, executive chair of the Association of World Reindeer Herders, highlights the challenges facing indigenous nomadic communities in a fast changing developing Arctic

Reindeer herder from Russia’s Komi Republic

REINDEER HERDING eindeer herding is common from Scandinavia to Alaska through Russia and Mongolia, and it has a strong element of cultural identity, as herding is a choice to live in a certain way. The main challenges affecting the sustainability of circumpolar herding communities are climate change, globalisation and land use change, says Mikhail Pogodaev, executive chair of the Association of World Reindeer Herders. Global and regional weather projections show dramatic changes in temperature, precipitation and snow conditions in key areas for reindeer herding, and socialeconomic changes for reindeer herding communities in the Arctic. Additionally, globalisation and land use change is a major challenge for reindeer herders as the Arctic becomes more accessible and economic opportunities open up, said Mr Pogodaev. In Russia, the Yamal gas field in northern Russia is the principal gas production province, with western Europe being the most important market. Russian leader Vladimir Putin has promised to fund his ambitious social programmes by increasing oil and gas extraction in the Arctic, specifically Yamal, home to the largest single area of reindeer husbandry in the world. Migration routes for reindeer herders are blocked by roads and pipelines criss-crossing the Yamal, and pastureland has become degraded, says Mr Pogodaev. But, on a positive note, he says that recently in Yamal local government and the gas companies are starting to understand the issues. 22 SPRING 2012

Value chain Social and economic changes are also a challenge to reindeer herding communities, said Dr. Pogodaev. In Russia’s Neryungri Region in the eastern republic of Sakha, the average annual wages paid in the coal industry are ten times what state farms can pay reindeer herders. Young reindeer herders move to cities to try to find work, but face issues such as unemployment, alcoholism and even suicide. One solution is privatising reindeer husbandry and its value chain. During the Soviet-era, herders were banned from owning their own reindeer; they could only go to a state-owned farm to herd. Mr Pogodaev said: “Interestingly, not much has changed today. Many indigenous people know what it is to own reindeer. Herders have no possibility to create their own market or have an influence over prices; they merely deliver meat to the big monopolies. On top of this, there is limited access to markets.”

Local markets Ironically, reindeer herders in Russia can buy beef from Argentina, but not reindeer meat from their own communities due to a lack of marketing experience, says Mr Pogodaev. He encouraged local engagement to educate reindeer herders so they can understand the changes taking place. “National policies should support traditional cultures and education,” Dr

Reindeer herders are active in nine countries including Norway, Finland, Sweden, Russia, Greenland, Alaska, Mongolia, China and Canada. A small herd is also kept in Scotland. There are about 30 reindeer herding peoples (e.g. the Sámi, Nenets, Komi, Khanti, Dolgan, Nganasan, Yukagir, Even, Evenk, Sakha (Yakut), Chukchi, Koryak, and Chuvan) in the world looking after some 3.4 million semi-domesticated reindeer.

Pogodaev argued, “as there is an urgent need to educate herders and industrial leaders about ongoing changes in the Arctic. The protection of grazing lands is the main issue indigenous reindeer herders face.” Having herding skills is not enough anymore because the mainstream society is making its way into indigenous societies, and native peoples must be able to deal with it. Reindeer herding can be a profitable enterprise under the right conditions. Dr Pogodaev says that indigenous peoples would like to develop their own future. He said herders are ready to cooperate, but questions whether mainstream society is ready to fully engage.

Photo: Shutterstock





Photo: Nord Stream AG


he huge Euro7.4 billion ($9.7bn) Nord Stream project has completion the offshore pipelay of the second of its twin 1,224-kilometre gas pipelines through the Baltic Sea ahead of schedule. Following extensive precommissioning and commissioning, Line 2 is scheduled to begin transporting gas towards the end of 2012 as part of a fully automated twin-pipeline gas transport system capable of transporting 55 billion cubic metres (bcm) of gas per year from Russia to the European Union, for at least 50 years. Nord Stream is the most direct connection between the vast gas reserves in Russia and energy markets in the European Union. The last of the 99,953 steel pipes for Line 2 was made in Germany by Europipe, concrete-weight-coated at EUPEC’s plant in Mukran, shipped to the Slite marshalling yard on the coast of the Swedish Island of Gotland and transported by a pipe-carrying vessel to Saipem’s Castoro Sei laybarge, where it was welded onto the pipeline and lowered to the seabed on April 18, 2012. In total, the two completed pipelines consist of 199,755, 12-metre concreteweight-coated steel pipes each weighing about 24 tonnes. The pipelines were laid along an agreed, carefully-planned route on the seabed of the Baltic Sea by three pipelay vessels – Saipem’s Castoro Sei and Castoro Dieci, and the Allseas’ Solitaire. Altogether, some 138,850 welds were performed for both lines to join together the pipes laid by the Castoro Sei (C6), which has been working on the Nord Stream project since April 2010. Nord Stream’s deputy project director construction, Ruurd Hoekstra commented: “Saipem’s Castoro Sei … has been working 24/7 on this project for two years with its crew of 330 with only a one month planned maintenance break in May 2011. Her average layrate has been significantly faster than expected, the quality of welds has been exceptionally high and the safety record is outstanding. We are very pleased to have

completed pipelay for Line 2 well in advance of the planned schedule. It is another major milestone for Nord Stream.” At any one time, a minimum of 12 ships worked on the project in different parts of the Baltic Sea. Nord Stream’s construction plans proved to be resilient enough to cope with PIG launcher welded to periods of enforced last pipe of Line 2 downtime due to some very adverse weather conditions in the Baltic Sea. The twin pipelines were laid in three sections, with Nord Stream designing its offshore pipelines to operate without an intermediate compressor station. The pipelines were developed with three different design pressures and pipe wall thicknesses as the gas pressure drops over the long journey from Russia to landfall in Germany. Pre-commissioning activities for Line 2 have already started. Each of the three sections will be flooded with seawater, cleaned and gauged and thoroughly pressure tested. Following the completion of the pressure tests, these three sections will be connected by underwater hyperbaric tie-ins in May and June off the coasts of Finland and Sweden where the design pressure changes from 220 to 200 bar and from 200 to 177.5 bar respectively. After de-watering and drying, the completed pipeline will then be linked to the landfalls in Russia and Germany and put into operation towards the end of the year as part of Nord Stream’s fully-automated twin pipeline system. Line 1 started transporting gas in November, 2011.

What is Nord Stream? The Nord Stream twin pipeline system through the Baltic Sea runs from Vyborg, Russia to Lubmin near Greifswald, Germany. The pipelines are built and operated by Nord Stream AG. The Nord Stream route crosses the Exclusive Economic Zones of Russia, Finland, Sweden, Denmark and Germany, as well as the territorial waters of Russia, Denmark, and Germany. The two 1,224-kilometre offshore pipelines are the most direct connection between the vast gas reserves in Russia and energy markets in the European Union. When fully operational in the last quarter of 2012, the twin pipelines will have the capacity to transport a combined total of 55 billion cubic metres (bcm) of gas a year to businesses and households in the EU for at least 50 years. As the project strengthens the EU energy market and reinforces security of supply, the project has been designated as being of ‘European interest’ by the European Parliament and Council. Construction of Line 1 of the twin pipeline system began in April 2010, and was completed in June 2011. Transportation of gas through Line 1 began in mid November 2011. Construction of Line 2, which runs parallel to Line 1, began in May 2011. The second line is planned to come on stream in the last quarter of 2012. Each line has a transport capacity of roughly 27.5 bcm of natural gas per annum. SPRING 2012 23

Ola Borten Moe

INSIGHT The High North is a focal point of this government

Norway’s minister of petroleum and energy Ola Borten Moe spoke at the recent Arctic Frontier conference in Tromso, Norway covering a wide range of energy issues affecting his country. Here, we report his comments about oil and gas developments in the Barents Sea, the country’s High North and in the Arctic in general


orway is providing the world with energy by being the second largest gas exporter and the sixth largest oil exporter in the world. This gives us opportunities, but also responsibilities on the world’s energy markets. Looking at the Arctic at large, my opinion is that sustainable petroleum activities already are – and will continue to be – increasingly important to the future of this region. Last year, Norway increased its Continental Shelf by 87,000 square kilometres through the new delimitation agreement with Russia in the Barents Sea. The agreement includes specific provisions for cooperation between Norway and Russia in case an oil and gas discovery is made that could extend across the delimitation line. At the moment geological mapping is taking place here. We are also carrying out an impact assessment. These are the two elements in the process of opening this area for petroleum activities. Norway’s parliament, the Storting will take the decision to open it or not. My ambition is to submit a proposal on the issue to the Storting in the spring of 2013. This is concrete follow-up of the High North being a focal point of this Government. It has taken a long time to develop the Barents Sea into our third petroleum province. Thirty-two years have passed since acreage in the Barents Sea first was opened for petroleum activities. Thirty years have gone by since the discovery of the Snøhvit gas field. A lot has happened since then; the number of students at the University of Tromsø has for instance increased from 2000 to 10,000. The Goliat oil field was the second significant discovery in the Barents Sea. It was made in the year 2000 – nearly twenty years after the Snøhvit discovery. We expect production to start next year. Recently, the Skrugard and Havis discoveries were made and will constitute the third profitable development here. This illustrates the time span it could take to develop a new petroleum province. But the important thing is that we now, for the first time, have activities in the whole value chain in the Barents Sea – from the opening of new areas, many exploration wells to be drilled, developments in progress and under way and last – but not least - ongoing production. We also look at other regions of the High North. The opening process for the continental shelf around Jan Mayen is going ahead as planned. My plan is to also submit the question of opening of this area for petroleum activities to the Storting in the spring of 2013. 24 SPRING 2012

The ministry is also gathering additional knowledge on the effects of petroleum activities in unopened areas in the northeastern part of the Norwegian Sea. The program for the work was decided in late 2011, and it will go on through 2012. After thirty years we see the prospects of long term and significant petroleum activities in the Barents Sea. This implies large possibilities for Finnmark and northern Norway. Northern Norway has become the land of opportunities in oil and gas! I have been challenged to be even clearer when it comes to new opportunities in the north of Norway. I have been very clear. The White Paper we put forward last June had development and opportunities going north as a main message. We have reached an agreement with Russia. The plan we put forward in March meant new areas and the start of impact assessments in the Barents Sea and around Jan Mayen. We have followed up with money for geological mapping. When it comes to whether or not to increase export capacity for gas from the Barents Sea, the development is interesting. The owners are now working to see whether there is a basis for further development of the Snøhvit field. The solution will also depend on what is needed to promote the Barents Sea. The main question will remain as it always does in relation to these issues: Whether or not there are sufficient gas volumes available for transportation that can carry the cost of building new infrastructure? This is a “chicken and egg” issue. No export capacity – no gas. No gas – no export capacity. Another prerequisite is that there has to be a market on the European continent demanding more natural gas. In Norway we have to parallel licensing rounds. The so-called APA rounds held yearly in mature part of the Shelf. And the numbered rounds, normally held every second year, in the more frontier parts. (In early 2012, Norway) awarded sixty new production licences in APA round of 2011 – of which four were in the Barents Sea and twenty-two in the Norwegian Sea. We awarded twenty-four licenses last year in the twenty-first licensing round – twelve in the Barents Sea and twelve in the Norwegian Sea. Last autumn I invited all oil companies active in Norway to nominate the areas they recommend for inclusion in the upcoming twenty-second licensing round. We see a high interest for new licences in the Barents Sea as 181 blocks have been nominated here. (The twenty-second licensing round was launched in March, 2012, with awards early in 2013). Mr Moe concluded that he hoped Northern Norway will become an even more important part of our energy future – a future I hope to see emerging at large in the Arctic as a vital part of a sustainable development. The resources, political will and opportunities are here. Now we need to work together to achieve common goals.

Photo: Berti Roald, Scanpix


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Frontier Energy is all about oil, gas and shipping in harsh, ice-affected Conditions both on and offshore, with a focus on the Arctic region...

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Frontier Energy is all about oil, gas and shipping in harsh, ice-affected Conditions both on and offshore, with a focus on the Arctic region...