Statoil and Rosneft show progress in Sea of Okhotsk

North Sea of Okhotsk Licensing Blocks

Rosneft was awarded the (shown above) Kashevarovskiy, Lisyanskiy, Magadan-1, Magadan-2, and Magadan-3 licensing blocks (5 участков в Охотском море – Кашеваровского, Лисянского, и Магадан-1, Магадан-2, и Магадан-3) in December, of 2011.  As mentioned in a post from a year back, A Potential Magadan Oil and Gas Play, Rosneft had shown interest in the area, and the government of the Russian Federation was able to award the firm with the 5 blocks without auction as these were deemed “Blocks of Federal Significance”.

Statoil and Rosneft Cooperate to Explore 3 Licenses in Sea of Okhotsk

This year has shown sizeable cooperation between Statoil and Rosneft.  Several steps have been taken toward the eventual joint implementation and exploration of the Kashevarovskiy, Lisyanskiy, and Magadan-1 licensing blocks of the Sea of Okhotsk along with the Perseevskiy block of the Barents Sea (this article focuses on the Okhotsk licenses).

  • 5th of May, 2012 – Signed a cooperation agreement allowing for the joint exploration of the 3 Sea of Okhotsk licensing blocks (along with the Barents Sea block).  Stipulations concerning Rosneft’s opportunities to participate in Norwegian continental shelf operations.
  • June, 2012 – Both companies signed onto joint bidding for Norwegian continental shelf exploration licenses.
  • 30th of August, 2012 – Shareholder and operating agreements to establish joint ventures for the 3 Sea of Okhotsk licensing blocks (also for the Barents Sea block).

According to the agreement, as it pertains to the control of the individual Russian licensing blocks, Rosneft controls 66.67% and Statoil controls 33.33%.  Statoil is required to fund 100% of the exploration phase which includes the exploration wells expected to be drilled for Magadan-1 by 2016, Lisyanskiy by 2017, and Kashevarovskiy by 2019.

The June of 2012 signing marked the beginning of Rosneft’s pre-qualification process for Norwegian shelf operations.  While Statoil operates across a diverse international platform, Rosneft has come across as more so local to Russia and needs to build on and maintain its international image.  The initiative just announced on the 23rd of November, 2012 between Rosneft and Statoil was a declaration on Russian Arctic Environmental Protection and should help the international community see Rosneft as one that reflects Statoil’s values.  Both Rosneft and Statoil seem to be taking appropriate steps in laying the groundwork for broad future cooperation.



The Northern Sea Route as a Viable Development – Russia’s Fleet of Atomic Icebreakers

The Northern Sea Route (NSR), also known as the Northeast Passage, is the shipping lane that connects the Atlantic and Pacific Oceans.  It can thus be recognized as a potential expedited transit corridor for Europe and Asia.  Vessels transitting from ports in Europe to those in Asia via the Northern Sea Route en lieu of the Suez Canal Route are able to halve transit times, reduce fuel consumption and CO2 emissions, and finally reduce the risk of piracy through the avoidance of regions prone to piracy such as those about the Horn of Africa.  The Northern Sea Route is currently overseen by the Russian authorities through the Northern Sea Route Administration (NSRA) under the Ministry of Transportation.

For a broader picture of the Arctic world and it’s navigability, read, ‘A Future of Arctic Transit – Arctic Sea Ice Record Low Extent‘.

According to Russian law, as of 2013, the Northern Sea Route will begin from the eastern coast of Novaya Zemlya (Kara Gate), and extend through to the latitude of Cape Dezhnev (the easternmost point of the Russian mainland).  Within the law, insurance requirements, shipping fees, and icebreaker assistance fees have been, to some degree, standardized.  Finally, NSR use is limited to those vessels that are of the 1A-ice class.  Many firms that would gain from NSR access do not have this requirement and new A1 class ships are being purchased as a result.

To Yield a Viable Northern Sea Route is to Outsmart the Ice

The future viability of the Northern Sea Route will be a function of several things, most important of which will be the unpredictable, unforgiving, and frozen nature of the Russian Arctic.  Russia’s ability to perform infrastructure development and maintenance within the route, and plan icebreaking operations efficiently and effectively will be correlated with the predictability of and final changes in Arctic sea ice conditions.  With the minimum yearly extent of the Arctic sea ice in yearly recession, even hitting an historic record low on Sept 16 of 2012 (according to the National Snow and Ice Data Center), the NSRA should be and has been able to make significant progress.

Much responsibility will fall upon Russia insofar as the establishment and maintenance of the communication networks, cartographic/hydrographic information databases, and emergency preparedness measures that will be necessary for efficient, and responsible leadership in Arctic conditions.  Much money has been budgeted for these purposes, and activities are already being carried out.

  • By 2015-2016, Russia plans to have sorted out all navigational blank spots, and upgraded all navigation maps with route depth data.  (Клюев. В, 2012)
  • €23.4 million is to be invested in 10 emergency / rescue centers are to open along the Northern Sea Route by 2015.  Main centers include Murmansk (2013), Naryan-Mar (in construction, operational in 2013), Dudinka (2012), and Andyr.  Other subdivisions will be built in Arkhangelsk, Vorkuta, Nadym, , and Tiksi.  (Barents Observer, 2012)
  • Russia has been deploying extra aircraft (10 helicopters, and 8 aircraft) to stations in Murmansk, Novaya Zemlya, Dikson, and Mys Shmidta. (Barents, Observer, 2012)

As Russia intends to protect it’s northern geopolitical interests, it maintains and has been maintaining a strong presence along the NSR through research work, and the pilotage of transit vessels through the use of the Russian national icebreaking fleet under the direction of Rosatomflot.

Russia’s Atomic Icebreaker Fleet

Russia’s atomic icebreaker fleet, under the direction of Rosatomflot, has the mission to;

support the intensification of Arctic [transit] as a key factor [in the] rise and development of the Russian North. (Rosatomflot, 2012)

From this, the fleet of 7 icebreakers are used to patrol the NSR, pilot (break ice for and guide) other transit ships under contract through required route segments, and assist with scientific expeditions.  1 of the 7 icebreakers (Sevmorput) is a container vessel.

A few notes related to specific vessels;

  • Taimyr (Таймыр) – Shallow drift – Designed for shallow water operations such as those in the Kara Sea and the Yenisei River.  (Icebreaking along Norilsk Nickel’s transportation routes)
  • Vaigach (Вайгач) – Shallow drift / Sister ship of Taimyr – Also designed for shallow water operations and maintains Yenisei River during the colder months.
  • Sevmorput (Севморпуть) – Russia’s only nuclear powered container vessel has a deadweight tonnage of 33,900 and is designed to carry up to 74 lighters, or 1328 twenty-foot containers (or the 40 foot container equivalent).  Equipped with cranes that allow for the independent loading and unloading of lighters and some container types.

50 let Pobedy – Russia’s Newest Nuclear Icebreaker (

The Atomic nature of the fleet allows for months of independent navigation which is beneficial in an area of the world that rarely sees ‘outside civilization’.  Inopportune ships that find themselves stuck in thick ice are often rescued by Rosatomflot’s icebreakers.  Atomic fleet vessels have tremendous horsepower and the ability to attach to other vessels, through the use of thick metal cables, to tow them free.  When contracted out, Atomic vessels lead and break ice for paying ships through the entire NSR for a journey that may last weeks.  These vessels are staffed with a variety of professionals allowing them to also serve as lifelines for remote communities or even other ships that may require urgent medical attention.  This is the type of operation that can, under correct policy, provide resonant positive externalities.

Transit in Numbers

On the subject of the development of the Northern Sea Route, the Russian Minister of Transportation, Maxim Sokolov (Максим Соколов), estimates that in the near future there could be from ‘3 to 5 million tons of cargo […] transported using the [Northern Sea] Route.’  The route, Sokolov says, is something that ‘can be used by all states and all companies’, but ‘Japan, Korea, and Singapore [would see the greatest benefits as these are] countries that have a large amount of cargo shipped by sea.  ‘These countries would see transit times of 23 days instead of 46.’  (Sokolov. M, 2012)  Transit numbers have already increased exponentially from 2010.  The following trends can be observed;

  • 2010 – 4 vessels with 111,000 tons
  • 2011 – (29 June – 18 Nov) 34 vessels with 820,000 tons
  • 2012 – (late June – current) 749,706 tons as of Sept 12, 2012

Nordic Bulk Carriers A/S – A Pioneer in Arctic Transit

In 2010, the first ever bulk carrier of a foreign flag, operated by the Danish firm Nordic Bulk Carriers A/S, transited the official Northern Sea Route with 41,000 tons of iron ore headed for China.  The MV Nordic Barents, owned by ‘Investerings Gruppen Denkark’ was escorted by two of Rosatomflot’s icebreakers.  Fuel savings amounted to roughly USD 180,000 (avoiding the Suez Canal Route).  This was an important step in the development of the Northern Sea Route as a commercially viable trade route.

In 2011, the Japanese owned MV Sanko Odyssey, under the operation of Nordic Bulk Carriers A/S, transited the Northern Sea Route with 70,000 tons of iron ore destined for China.  MV Sanko Odyssey is the largest ice class bulk carrier in the world.  Fuel savings amounted to approximately 750 tons.

In August of 2011, the SCF Group (Sovcomflot) transited the NSR with over 120,000 tonnes of gas condensate from Murmansk to Map Ta Phut, Thailand.  Vladimir Tikhonov, a 160,000 tonnes deadweight tanker, was the first of it’s size to transit the NSR, setting a speed record to boot, showing yet again that the Route is both navigable and economical.  Escorting was done by 50 Let Pobedy and Yamal.

2012 has seen the following along the NSR (starting in late June);

  • Murmansk Shipping Company – ‘Indiga’ and ‘Varzuga’ – Diesel to NSR settlements
  • Nordic Bulk Carriers A/S – ‘Nordic Odyssey’ and ‘Nordic Orion’ – Iron ore concentrate to China
  • Novatek – ‘Marilee’ and ‘Palva’ – Gas condensate to South Korea
  • ‘Stena Poseidon’ – Kerosene from South Korea to Finland
  • ‘Vengeri’ – Tugboat
  • Chinese Icebreaker ‘Xuelong’ – Arctic expedition

Concluding Remarks

The incentive to serve as a northern lifeline is both large and commensurate with Rosatomflot’s, and thus Russia’s stated mission.  The intensification of the Northern Sea Route transit will depend on Russia’s ability to portray an image of Arctic dominance.  This is meant in the sense of trust and punctuality, as opposed to that of military strength.  This has, for the most part, been satisfied.  The United States, for example, has only 2 icebreakers that will often be insufficient in accommodating the search and rescue needs of the Alaskan north.  Canada has a fleet of icebreakers, 2 of which are rated as heavy icebreakers, but none of which would be able to reliably and independently perform the type of Arctic rescue operation that may be required.  With such stark contrasts, plans to construct yet more powerful nuclear icebreakers, and ambitious development plans for NSR emergency / rescue centers Russia will, at least into the foreseeable future, continue to discover and advance the Arctic world.


  • Arctic Info. Minister of Transportation: Use of the Northern Sea Route is our Specialty.  [ONLINE] Available at:–use-of-the-northern-sea-route-is-our-speciality. [Last Accessed 28 Sept 12]
  • Barents Observer.  Northern Sea Route without Murmansk.  [ONLINE] Available at: [Last Accessed 28 Sept 12]
  • Barents Observer.  К Новому Рекорду на Севморпути.  [ONLINE] Available at:  [Last Accessed 28 Sept 12]
  • Barents Observer.  Arctic emergency center opens in Murmansk in 2013.  [ONLINE] Available at:  %5BLast Accessed 28 Sept 12]
  • Barents Observer.  Russia deploys 18 emergency aircraft to the Arctic.  [ONLINE] Available at:  [Last Accessed 28 Sept 12]
  • Canadian Coast Guard.  Icebreaking Program.  [ONLINE] Available at: [Last Accessed 28 Sept 12]
  • Единая Государственная Система Информации об Обстановке в Мировом Океане.  Морской Транспортный Флот, Зарегистрированный в Российском Международном Реестре Судов.  [ONLINE] Available at:  %5BLast Accessed 28 Sept 12]
  • National Ice Center.  Daily Ice Analysis Products.  [ONLINE] Available at:  [Last Accessed 29 Sept 12]
  • Nordic Bulk Carriers A/S.  NRS PROJECT.  [ONLINE] Available at: [Last Accessed 28 Sept 12]
  • RZD-Partner.  Slow Start on the Northern Sea Route.  [ONLINE] Available at: [Last Accessed 29 Sept 12]
  • Rosatomflot.  [ONLINE] Available at: [Last Accessed 28 Sept 12]
  • Russian Maritime Register of Shipping.  Symbols and Abbreviations Used in the Register of Ships.  [ONLINE] Available at: [Last Accessed 28 Sept 12]
  • РиаНовости.  Ледоколы Росатомфлота начинают новый цикл работ в Арктике.  [ONLINE] Available at: [Last Accessed 29 Sept 12]
  • РиаНовости.  “Белые пятна” с гидрографических карт Севморпути исчезнут к 2016 году.  [ONLINE] Available at: %5BLast Accessed 28 Sept 12]
  • Север-Наш.  Атомоход “50 лет Победы” пробудет в Финском заливе до ухода льда.  [ONLINE] Available at: %5BLast Accessed 29 Sept 12]
  • The Maritime Executive.  Tanker Vladimir Tikhonov Completes Successful Northern Sea Route Transit in a Week.  [ONLINE] Available at: [Last Accessed 28 Sept 12]


The Fiercely Contested Russian NGO Bill – Russia

On the 13th of July, 2012 a Russian draft law, setting out to label all politically affiliated NGOs with activities funded from abroad as ‘foreign agents’, passed through the State Duma with barely any opposition.  Russian activists are now in strong opposition along with foreign governments.  Said NGOs would have to register as foreign agents and include this label on all publications and web-portals.  Apart from being labelled ‘foreign agents’, NGOs would be subject to frequent audits and spot checks.

Many human rights proponents insist that such a bill would work to suppress opposition to the current Russian state of affairs.  The bill now needs to be passed through the Federation Council, and then onto the Russian president’s desk for Putin’s signature.

Those in Favor of the Bill

Putin’s party, United Russia or Единая Россия,  finds the bill to be inline with democratic standards as it forces NGOs to be open about their sources and funding.  The party advocates that such openness will be in the best interest of citizens.  Those that favor the bill also recognize the current social-network and NGO movements as forces that often override the opinions of Russian citizens.  It is quite true that much of the social-network publicity concerning the December elections has been strongly opposed to the current Russian state of affairs.  These views were also often projected as the views of the overwhelming majority whether or not that was actually true.  Coincidentally, this mechanism does not work in Putin’s favor.  It is worth adding that last year, Putin accused foreigners of funding those NGOs in Russia that were in opposition to his party.

Many in Opposition to the Bill

The General Secretary of the Council of Europe, Thorbjørn Jagland, former prime minister of Norway, found the NGO bill to be reminiscent of the Stalin era.  Jagland elaborated on the term ‘foreign agent’ and it’s historical use in defining those that were executed during the [Joseph] Stalin era.  He found the term to be ‘unfair [and] inappropriate [in that there is no use for such a term] in modern lawmaking [and that] it belongs to the past and does not belong [in] a democratic society.’  He went on to say that the term is also ‘often used in other authoritarian regimes against everybody that has different views.’  (Jagland)

From a U.S. Department of State press briefing, spokesman Patrick Ventrell spoke on the topic of the Russian NGO legislation.

[T]he United States is deeply concerned by the Russian Duma’s consideration of legislation that would potentially limit the activities of Russian nongovernmental organizations receiving foreign financing. The legislation would require NGOs engaged in civil society activities broadly defined as political to register as foreign agents. It differs from U.S. foreign agent – it differs from the U.S. Foreign Agents Registration Act, because registration would be required regardless of whether an NGO works directly on behalf of a foreign entity or not.  Unlike under US legislation, where [some US personnel] are actively working on behalf of a certain government register as foreign agents, which means that they disclose their funding source, NGOs that may be nonpartisan and receive funding from all sorts of different sources and are working in a transparent and nonpartisan manner are being asked to register all as foreign agents. … [The United States simply wants] NGOs to be allowed to ‘work in a nonpartisan fashion and work with members across the political spectrum in a number of different countries’. (Ventrell)


In an objective sense, it is true that the youth can be impressionable, if not more-so than can be the older age groups.  The youth tend to have the strongest influence over social-media.  More so, many advocate-web-portals contain purposefully subjective views with a lack of balance in terms of subject material (in either direction).  A democratic society strives to encompass the views of all age groups, but the spill-over of Russian social-media into other countries presents the world with an image that could potentially only be representative of the younger generations.  This effect then has the ability to feed-back into Russia with the support of foreign youth.  Older groups in opposition may not find this process to be economical for them, and may require alternative mechanisms (data that I do not have would be required to verify this).  The same issue is, naturally, present within other countries including the United States, for example as social media has at times been, collectively, in opposition to the views of the majority.  With this said, one can still be suspicious of any law put into place by a party that the law then serves to benefit.  This could be akin to the American ‘Super PAC’ regulations that may coincidentally benefit the party that worked to put them (said regulations) in place.

On the note of NGO funding, some Canadians could be sympathetic to Putin’s approach due to the way in which the Canadian NGOs in opposition to Canadian oil sands activities were being funded by foreign sources.  Funding was supported by those that were in opposition, but was found to be undemocratic by those that were in favor of the oil activities.

Arctic Economics does not set out to be a proponent of any particular stance, but has the intention to analyze on an objective level.


The Nord Stream Pipeline – Bringing Russian Natural Gas to Europe

Nord Stream Route Map

Nord Stream Route Map – From Nord Stream AG (

Built and operated by Nord Stream AG, the Nord Stream subsea offshore natural gas pipeline system runs 1224 kilometres from Vyborg, Russia, to Lubmin, Germany.  The twin pipeline system aims to maintain one of Russia’s long-standing objectives, which is to supply Europe with a secure and reliable source of natural gas.  On the Russian side, the Nord Stream is connected to Gazprom’s Gryazovets-Vyborg pipeline, while on the German side, the Nord Stream is connected to the OPAL and NEL pipelines.

  • The first of two parallel lines was put into operation in November, of 2011 with an annual transport capacity of 27.5 bcm of natural gas.  The second line was completed on the 28th of June, 2012, and will enter operation in Q4 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’ (“The Pipeline”).
  • ‘The Nord Stream route crosses the Exclusive Economic Zones (EEZ) of Russia, Finland, Sweden, Denmark and Germany, as well as the territorial waters of Russia, Denmark, and Germany’ (“The Pipeline”).  International law affects EEZ’s and territorial waters differently (see the “International Law” section below).
  • The Nord Stream Pipeline will be remotely monitored and controlled from the Nord Stream headquarters in Zug, Switzerland.
  • The Nord Stream consortium is owned by OAO Gazprom (51%), Wintershall Holding GmbH (15.5%), E.ON Ruhrgas AG (15.5%), N.V. Nederlandse Gasunie (9%), and GDF SUEZ (9%).

Price Economics

The western-European market is willing to pay a price that is much higher than that of the substantially subsidized natural gas that is sold to Russians on the Russian market.  In a very basic sense, to have Russian natural gas production in excess of what is currently exportable to ‘high-paying’ countries is to have a decrease in the potential revenue for Gazprom, among other firms.  The incentive is there for Russia to ensure maximum Nord Stream pipeline capacity utilization, and to build upon the Nord Stream system in the future to allow for greater capacity.

One problem that may surface stems from the domestic Russian natural gas market.  Gazprom has been pushing, for a while now, to increase prices due to the fact that the current average, per unit costs of production tower over the per unit prices that are seen domestically.  Russian exports are the sole profit-makers here.   Since the government has actually granted Gazprom the right to increase the price point by a certain percentage annually, Gazprom stands to slowly lose the incentive to prefer exports over imports assuming, naturally, that domestic prices rise at a higher rate than those in Europe.  As more natural gas is extracted from increasingly northern, Arctic-marine areas, the average costs of production are going to be on the rise as well.  These could all impact Russia’s future willingness to supply Europe with natural gas down the road.

The Nord Stream Route is Important for European Confidence

Much of the current European uneasiness toward Russian natural gas imports stems from the ongoing conflict that exists between Russia, and the pipeline-transit states of Belarus and Ukraine.  It is important to recognize that Ukraine has blocked the transit of Russian gas to Europe in the past.  The Nord Stream system thus stands to become an alternative delivery method that can be relied upon to deliver natural gas to Europe.

Gazprom CEO Aleksei Miller said it best when addressing both the Nord Stream and South Stream pipelines at the European Business Congress (EBC) in Portorož, Slovenia;

These pipelines would eliminate the dangerous dependence on transit monopoly by
Ukraine, which in 2006 and 2009 respectively blocked access to the export gas en
route from Russia to European markets. After the new pipelines come into
operation our exports will gain more reliable delivery routes and, no less important,
additional flexibility. This will enable to significantly increase the security of
supply of natural gas to European consumers, to which our company attaches
the greatest importance. Once and for all Gazprom will be relinquished of
arbitrarily imposed responsibility for the consequences of others’ decisions, which
resulted in blocking exports of our gas. (Miller, A. 2012)

The flexibility that Miller speaks of may come in the form of pipeline extensions.  The current line touches Germany where a future branch might touch both Scandinavia and Britain who have already expressed interest.

International Law

The following is a non-exhaustive list of the main articles and provisions of international law that apply to the construction, maintenance, and use of the Nord Stream pipeline system.

Pipelines within a state’s territorial waters

  • Article 76 of the United Nations Convention on the Law of the Sea (UNCLOS) defines the ‘continental shelf of a coastal State [as] the sea-bed and subsoil of the submarine areas that extend beyond its territorial sea’ (UN 1982).
  • Article 2 of the UNCLOS dictates that ‘[t]he sovereignty of a coastal State extends, beyond its land territory and internal waters and, in the case of an archipelagic State, its archipelagic waters, to an adjacent belt of sea, described as the territorial sea’ (UN 1982).

From these articles, one can see that a state has sovereignty over it’s territorial sea.  Nord Stream AG therefore requires a different legal process in dealing with Russia, Denmark, and Germany than it does in dealing with Finland, and Sweden.  As can be seen from the map above, it is very fortunate that there happens to be a space between the territorial seas of Finland and Estonia.  This will have saved Nord Stream AG a great deal of time and money.

Pipelines within a state’s EEZ

  • Article 79 of the UNCLOS grants all states the right ‘to lay submarine pipelines … on the continental shel[ves] [of other states].’  An affected (transit) ‘coastal State may not impede the laying or maintenance of … pipelines’, but is reserved the right to consent to ‘the delineation of [transit] pipeline[s]’ and to ‘take reasonable measures [for the] prevention, reduction and control of pollution from pipelines’ (UN 1982).

Service stations built within a state’s EEZ

  • Article 60 of the UNCLOS grants the coastal state ‘the exclusive right to construct and to authorize and regulate the construction and operation and use of … installations and structures’ and ‘exclusive jurisdiction over such … installations and structures’ (UN 1982).

Initially, there was to be built an intermediate service station platform within the EEZ of Sweden.  Due to Article 60 of the United Nations Convention of the Law of the Sea (UNCLOS), Sweden would have had exclusive jurisdiction over the station, along with the right to construct and operate it.  In 2008, attempting to minimize bureaucratic and legal issues, Nord Stream confirmed that specially-designed inspection tools were available that would have been able to inspect the entire pipeline span without a need for the service platform.  The intermediate service station was thus no longer needed and Article 60 needed not apply.

Environmental impact assessments

  • The Convention on Environmental Impact Assessment in a Transboundary Context dictates the requirement of an Environmental Impact Assessment (EIA) for proposed activities ‘that [are] likely to cause a significant adverse transboundary impact’ (UN 1991)


Shtokman Development AG Changes Gears … Again – Russia

The Shtokman project is currently under the direction of the aggregated Shtokman Development AG (SDAG), jointly owned by France’s Total (24%), Norway’s Statoil (25%), and Russia’s Gazprom (51%).  SDAG would have a 25 year license to explore, and operate the Shtokman Field (Штокмановское Месторождение) located within the Russian EEZ in the Barents Sea holding approximately 3.8 trillion cubic meters of natural gas and 37 million tons of gas condensate.

New information has surfaced lending to a scrapping of original project plans, and a stronger focus on LNG sea shipments.  This all likely in light of recent European turmoil, budgetary constraints, recent demand issues that stem from Ukraine, and a European movement to diversify away from Russian oil and gas.  I have done my best to highlight the old plan along with the potential new.

Shtokman Field - Russia - Barents Sea

Original Plan

  • Shtokman Field – Gas and gas condensate will be extracted from subsea wells and separated on board a floating production unit deemed to be one of the largest that will have been built.  Gas and gas condensate will then be transported to the city of Teriberka (read  The Economic Implications for Teriberka for more info) via two subsea pipelines.
  • LNG to be Shipped – From Teriberka, gas will be converted to Liquid Natural Gas (LNG) by means of a LNG Plant.  LNG will then be shipped out to markets by means of LNG tankers.
  • Gas to be Piped to Europe – Gas condensate will be treated at the onshore Gas Treatment Unit (GTU) with the resultant gas being forwarded through on to Vyborg (Russia), along the way being compressed by several compressor stations.  From there, gas will be sold to Europe by way of the Nord Stream pipeline, currently partially operational, that connects Vyborg and Greifswald (Germany).

New Developments

Industry experts have said the following concerning recent Shtokman developments;

“Shareholders are considering to scrap plans to pipe gas to Europe and to focus instead on liquifying the entire gas output to ship to global markets on tankers” – Alexander Medvedev, Deputy Chief Executive of Gazprom

“Everything is on the table now, even the possibility of Gazprom working with other foreign partners or maybe continuing the project on its own” – Industry Expert

“(Shifting to LNG) is just one of the options under discussion,” – Shtokman spokesman

EPC Engineer – Sthokman Overhaul Could Mean More LNG, New Partners

Briefly – Essentially, the “Gas to be Piped to Europe” is what would be scrapped, while the “LNG to be Shipped” would double.  This would have effects that would include but would not be limited to an increased demand for nuclear-icebreaker and LNG tanker production,  an incentive to improve current Arctic Ocean / Northern Sea Route monitoring / search-and-rescue capabilities, and a potential increase in the average cost to export each btu (not to mention CO2 / btu) of gas due to tanker-fuel requirements.

What is important, is that both Total and Statoil seem still to be committed to the project.  Albeit existing delays, a back-out from either of these massive partners would launch Gazprom into the search for new sources of funding.

Tapping Into Asian Markets – At first glance the move makes complete sense.  Original plans only stood the potential to sell a portion of production to Asia.  This new focus can be taken as a descent means to diversify into hungry Asian markets.  If the Asia of the future holds less-than-expected demand, the LNG tanker infrastructure enables sales to other growing regions as well.  Russia’s far-eastern, Sea of Okhotsk, operations are currently ill-positioned to gain from growing Asian demand, albeit a descent LNG production and shipment infrastructure, as forward contracts have mostly all been established at current production levels (Read Sakhalin Offshore Oil and Gas Reserves).  SDAG would be able to sell new LNG production on forward markets at today’s relatively higher prices.  *For our North American readers remember that our natural gas prices are low relative to those of world markets as Canada is severely handicapped in it’s ability to export LNG by sea (lessening competitive market forces), and new technologies have made available many new reserves and resources within both Canada and the United States.

 A Hedge Against Europe – It is quite clear that SDAG stands to gain from a hedge against sliding European demand for Russian oil and gas which could in turn affect Russia’s ability to control prices.  As a world leader in oil and gas exports, this potential decrease in European demand could force other Russian oil and gas producing regions to find customers elsewhere.  What can be said, however, is that it takes massive infrastructure spending plagued with time lags to get oil and gas to markets via land.  The sooner that Russia has the pipeline infrastructure built to connect with more of it’s southern (mostly) and western neighbours, the smaller the chance that price contracts will be held at lower prices due to ‘ability-to-deliver’ constraints.

Previous Posts
Arctic Economics has made several posts related to the Russian Shtokman project throughout the past year;

Nickel Mining in Russia – Norilsk Nickel & Amur Minerals

Russian Nickel Reserves and Production Map with EEZ

World Nickel Reserves and Production in 2011

Reserves – World nickel reserves, according to the latest data by the USGS, amount to 80,000,000 mt.  From the chart on the right, one can see that Russia holds currently 7% of the world’s nickel reserves amounting to 6,000,000 mt, coming in fourth place after Australia, New Caledonia, and Brazil.

Production – World nickel production in 2011 amounted to 1,800,000 mt.  From the chart on the left one can see that Russia produced 16% of the world’s nickel production at 280,000 mt.  All of the nickel producing countries increased production from 2010 to 2011.  Canada, for instance, increased their production by 26% from 158,000 to 200,000 mt, whereas Russia only increased production by 7% from 269,000 to 280,000 mt.

Russian Nickel Reserves and Production – 2010

Norilsk Nickel – Of the 269,000 mt of Russian nickel production in 2010, Norilsk Nickel Russian operations were responsible for 88% at 236,000 mt.  Norilsk Nickel is currently Russia’s largest mining company, operating Nickel mines at both their Kola MMC and Polar Division (of the Taymyr Peninsula) locations.  Russian enterprises received an average price of 21,997 USD per tonne of nickel in 2010 compared with only 15,853 USD per tonne in 2009.

Norilsk Nickel Polar Division Map –

  • Polar Division – Within the Russian Taymyr Peninsula, the Polar Division oversees three nickel-copper-sulfide ore deposites that are currently being mined.  These consists of the Oktyabrsky, Talnakh, and Norilsk-1 deposits.  Talnakh deposits are considered to be of the largest in the world.  Proven and probable nickel reserves amount to 4,700,000 tonnes.  Nickel production in 2010 amounted to 124,200 tonnes or 46% of total Russian nickel production.

Port Dudinka – The Polar Division relies almost entirely on the Yenisey River to export production to the rest of the world via Port Dudinka (shown in above map) and then via the Northern Sea Route (read more).  Norilsk’s Polar Division thus shipped 124,200 tonnes of the worlds nickel production (8.7%) through the port in 2010.  The port closes for only one month each year, during the ice thaw that occurs through May to June.  During the winter months, icebreakers are used to clear the Yenisei River that links port Dudinka with port Dikson, and thus the Northern Sea Route.  Icebreaker-like cargo ships are used as well that do not usually require any assistance from standard icebreakers.

  • Kola MMC – Within the Russian Kola Peninsula, the Kola MMC division oversees the mining of the Zhdanovskoe, Zapolyarnoe, and Kotselvaara and Semiletka deposits.  Nickel reserves amount to 1,400,000 tonnes.  Nickel production in 2010 amounted to 111,300 tonnes or 41% of total Russian nickel production.  The Kola MMC division is fully integrated into the well-developed regional transport infrastructure.

Amur Minerals (updated – July, 2012) – With operations in Russia, the firm operates and is exploring the Kun-Manie nickel-copper-sulphide ore deposit in the far east Russian province of Amur.  Joint Ore Reserves Committee (JORC) compliant probable ore reserves and resources amounted to 170,500 and 341,000 tonnes respectively, of contained nickel as of Dec, 2011.  An application for a license extension was submitted in May, 2012, as the current exploration license expires at the end of 2012.  It is probably worth looking at the reserve grades and resource % Ni content here in the 2011 Annual Report for a better idea of ore quality.

In March of 2011, the Kustakskaya license, just east of the Kun-Manie deposit in the region of Khabarovsk, was returned to Russia.


  • Norilsk Nickel – Kola MMC –
  • Norilsk Nickel – Polar Division –
  • USGS – Mineral Commodity Summaries 2012 – Nickel –
  • Amur Minerals – 2011 Annual Report –

The Economic Implications for Teriberka (Териберка) – Shtokman Project

The small remote fishing village of Teriberka (Териберка) is located 130 km’s from Murmansk and has been chosen as the operating hub for Stockman Development AG (SDAG).  *Read more about the Shtokman project here.*  As the first LNG production is to start in 2017 the following are to be built within the coming years;

Onshore Facilities – Contract awarded to Chicago Bridge & Iron (USA)

  • Product intake facilities
  • Treatment plant for export pipeline gas
  • LNG plant with 7.5 million ton/year capacity
  • LNG Storage Tanks
  • Marine Terminal for condensate and LNG export
  • Ancillary facilities
  • Power station, housing village, support vessels and tugs, heliport, etc.

Job numbers are to be as follows from the SDAG website; (take note that the current population of Teriberka is estimated at 1400)

  • 10,000 to be involved with the construction of the plant
  • 600 to become permanent field staff


From an article on, a Norwegian environmental NGO, I gathered an interview that took place with the mayor of Teriberka (Териберка).  As it turns out, Shtokman Development AG (SDAG) had correctly set up public hearings, in an effort to allow citizens to address concerns that they may have had with the proposed giant gas condensate project.  Activist groups, however, do not seem convinced.

Most activist organizations hold the position that the citizens of Teriberka are simply uninformed and uneducated to the point where they are literally being tricked into accepting a project such as this without protest.  This, however, tends to be the main activist position with regards to almost any given controversial issue.

The people of the village do have legitimate concerns.  They want jobs.  The following is an excerpt from an NPR article on Russian Arctic claims;

According to 33-year-old Andrei Udin, life in Teriberka is depressing. He has tried for years to find real work. Udin likes the tough talk from Putin, the promise to fight for Arctic territory. “What’s ours should be ours,” Udin says. But after years of delay, he’s beginning to wonder if that natural gas processing plant is really coming to Teriberka.

“If I don’t have a job, natural gas does nothing for me,” Udin says. “I can’t exactly use the gas for food.” Frustration is growing around this village. People are beginning to say that unless the oil and gas riches will be shared, maybe it’s best to leave nature alone.

Read the rest of the article here.

These are legitimate concerns.  The only jobs that have been guaranteed by SDAG have been those that are to be awarded to 10 Murmansk State Technical University students.  The other proposed 600 permanent field staff may very well come from other regions.  We know this fact due to the proposed housing village that is to be constructed to accomodate these permanent staff member.  The SDAK village is not even going to be constructed within the actual village of Teriberka, making the trickling down of benefits difficult.  It is also very well possible that hardly any of the 10,000 construction jobs will be given to Teriberka residents.

I have also written about some of the environmental concerns that groups have held with the Shtokman project in general.  See ‘NGO concerns over Shtokman‘.

What has SDAG contributed to the community of Teriberka?

Say what you wish about the project.  The truth of the matter is that many positives will come from this.  There is to be, for example, an Arctic Hotel Teriberka built by a company named “Flait Invest” that has been handling most flight, car, and hotel accommodations for the many oil executives that visit the region each year.

Among other things, Shtokman Development AG has organized the following, within the past year;

  • Held “Healthy Days in Teriberka”, where local residents were given the opportunity to have free medical and diagnostic examinations by Murmansk’s doctors in Teriberka
  • Funded an environmental excursion for the children of Teriberka
  • Funded a free Wi-Fi zone for the Murmansk State Technical University
  • Announced plans for the selection of 10 Murmansk State Technical University students to be professionally trained to work with SDAG