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.

Sources

Sea of Okhotsk – Russia (Охотское Море – Россия)

It is currently estimated that 1.2 billion tons of oil and 1.5 billion cubic meters of gas lie beneath the sea.  The western, northern, and eastern sections are all believed to have sizeable hydrocarbon reserves.  Links to my separate entries pertaining to Sakhalin and Magadan are listed below.

Kamchatka Peninsula is believed to have sizeable hydrocarbon reserves.  Rosneft, from 2003 to 2005 had an operating share of the main license block measuring roughly a 15 million acre area, which was estimated to contain 13.2 billion bbl of oil and over 70.6 trillion cubic feet of natural gas.  Up until recently, Gazprom had been lobbying the Russian Federation, specifically the Ministry of Natural Resources, for the licenses not to have been extended, but rather to have been granted to Gazprom.  The latest related Gazprom press release was sent out in August of 2011, announcing preparations for drilling within the western Kamchatka Peninsula.

Peanut Hole [Sea of Okhotsk / Охотское Море]

The peanut shaped section of International water has been dubbed the “Peanut Hole” due to it’s shape.  Located within the enclave of the Sea of Okhotsk (Охотское Море), 300 miles long and 5 miles wide, the Peanut Hole lies outside of the current Russian EEZ but is still managed by Russia.

In 1995, a UN fisheries agreement on straddling fish stocks and highly migratory fish stocks opened for signing.  The agreement changed the traditional “freedom to fish on the high seas” so that governments would have to cooperate in order to regulate high seas fishing.  The Peanut Hole, had been home to large-scale harvesting by vessels of a number of foreign countries.  By the 1990’s, it was estimated that 700,000 tons of pollock per annum were being fished.  After 1995, Russia, under the agreement, was able to and therefore had imposed a moratorium on fishing within the Peanut Hole.

Rosneft acquires 5 licensing blocks near Magadan, Sea of Okhotsk

A few weeks ago, I wrote about the possibility of a licensing deal for the northern shelf of the Sea of Okhotsk, near Magadan, Russia.  (Read ‘A Potential Magadan Oil and Gas Play‘ here).  It was officially released today that Rosneft would be the operating partner for this project.  Foreign partners have yet to be confirmed.

The only interesting note to take from this would be a more than doubling of the estimated recoverable gas reserves from ~705 to 1,789 mln m^3 of gas (amongst Magadan-1, 2 and 3), and an increase in the estimated recoverable oil amount from 214 to 850 mln tonnes of oil.  The following is from Rosneft press release;

Rosneft Obtains Five New Blocks in Okhotsk Sea

By order of the government of the Russian Federation Oil Company Rosneft has been granted five blocks on the Sea of Okhotsk shelf for geological surveying, exploration and development. The five blocks are Magadan-1, 2 and 3, Lisyansky and Kashevarovsky.

According to Rosneft estimates, total recoverable resources at these deposits stand at over 1.1 billion tonnes of liquid hydrocarbons and 2 trillion cubic metres of gas, including 850 million tonnes of oil and 1.789 trillion cubic metres of gas at the Magadan-1, 2 and 3 blocks.

Rosneft has extensive experience in exploring and developing hydrocarbon deposits onshore on the island of Sakhalin and offshore on the Sea of Okhotsk shelf. This experience spans both the company’s own deposits as well as its involvement in joint projects such as Sakhalin-1, 3 and 5 with international partners.

Rosneft
Information Division,
December 19, 2011

Rosneft’s news room link here.

Kolskaya Oil Rig Sinks in Sea of Okhotsk – Буровая Платформа Кольская Затонула

Headline

 The Kolskaya floating jack-up drill (Буровая платформа Кольская) was being towed by the Neftgas-55 tugboat, along with the icebreaker ‘Magadan’ from the eastern Peninsula of Kamchatka to the city of Kholmsk of the eastern peninsula of Sakhalin Island (Sea of Okhotsk).  En route, the oil rig overturned and sank with 67 people onboard.

There were 14 reported survivors with minor injuries.  49 were reported missing.

It is assumed that the accident occurred due to towing under unsafe conditions.  During a storm, for example, an oil rig is much less stable than would be a ship, and one can easily overturn.

Damages 

Environmentally, there is little concern due to the fact that any oil onboard would have been enclosed within hermetically sealed containers.

Economically, the blow would unlikely have any sizeable impact upon the oil market.  If anything, standards in oil exploration will become stricture, as this will become a chief statistic in representing the dangers of wild waters.

This could, however, lend credibility to the environmental NGOs that currently attempt to derail offshore hydrocarbon projects amongst the Barents and Kara Seas (read about Shtokman).  The concerns among NGOs  have to do with the readiness and ability of The Russian Federation and it’s players to attend to and mend any major offshore related incidents.  The speed and success of today’s rescue efforts in the Sea of Okhotsk will lend evidence to either side.

Short Rig History

In August of 2011, the Kolskaya floating jack-up drill rig was delivered from Murmansk to the Magadan Commercial Sea Port to conduct testing on the Pervoocherednaya (Первоочередная) well, situated within the West-Kamchatka licences block of the Okhotsk Sea shelf.  The Kolskaya rig is currently owned by the Russian Arktikmorneftegazrazvedka (Арктикморнефтегазразведка).  It had been operating under a 3.5 month contract for the Gazprom subsidiary, Gazflot.  Following the Pervoocherednaya project, the rig was to be commissioned for a project by the joint Russian-Vietnamese venture “Вьетсовпетро”.

A Potential Magadan Oil and Gas Play – Sea of Okhotsk

Although information regarding the Magadan shelf of the Russian Sea of Okhotsk is not available in the English language, I have translated and summarized most of what I have found to be important.  The development of this shelf is something that may be of significance in the not-so-distant future.  *This, especially due to the apparent overwhelming willingness of several Japanese companies to jump onboard as they have in the past with the Russian Sakhalin projects.  Note that the most important issue here is that Russia finds their perfect oil & gas firm to control +50% of the shares for a consortium firm as is normally the case.  Rosneft is likely to be their guy.

The offshore oil and gas reserves of the Sea of Okhotsk, Russia, are in no way exclusive to Sakhalin island.  5 blocks can be seen on the map which are believed to contain oil and gas; Magadan-1, Magadan-2, Magadan-3, Lisianski, and Kashevarovski.  (Магадан-1, Магадан-2, Магадан-3, Лисянский, и Кашеваровский)  Recoverable oil and gas are believed to be available as follows:

Only one press release from Rosneft’s Russian website was found with information relating to the Magadan offshore blocks.

In July of 2011, Rosneft released that it was looking to apply for development licenses for the 5 blocks in September, of 2011.  Furthermore, several Japanese firms have been anxiously awaiting a consortium of Russian and foreign companies in order to explore, develop and process these 5 fields.  This is due to Japan’s proximity to the shelf along with the regular participation of Japanese firms when it comes to the hydrocarbons of the Sea of Okhotsk.  Lastly, know that Japan is ranked 4th largest consumer of natural gas at just over 100 billion m^3 annually, thus it makes sense to get involved.  It would give them a chance to influence futures-style oil and gas contracts toward Japan.  Read the press release here (Russian)

On November, 17th of 2011, the Ministry of Natural Resources and Environment of the Russian Federation (MNERF) put out a press release on the issue.  It was proposed that the 5 plots be awarded Federal status.  It acknowledged that Rosneft was actively seeking licenses to explore, develop and produce within the plots.  It further stated that under Russian law, there would need not be auctions for Federal subsea plots.  The plots would be able to be given to any state-owned company directly.  It is assumed that in any case, licenses will have been granted to Rosneft by the end of the 2011.  Read the press release here (Russian)

In an article put out the next day (17,11,11) by Komersant.ru, the issue of company partners was discussed along with the above information put out by the MNERF.  Japanese candidates thus far are assumed to be the Japanese Inpex Corp., Japan Oil, and Gas and Metals National Corp.  Some, however, believe that it would be best to involve an American partner like ExxonMobil as they have swathes of experience in virtually every energy sector.  Read this article here.

I am still slightly skeptical of Rosneft’s willingness to participate in this project, as they have hardly made available any information concerning the matter.  They must not be too eager to find an American or European partner as they have barely given any attention to an English press.

Sakhalin Offshore Oil and Gas Reserves – Sea of Okhotsk – Russia

Map of Sakhalin Offshore Oil and Gas OperationsSakhalin (Сахалин) is a Russian island located amongst the north-eastern Sakhalin shelf of the Sea of Okhotsk.  This frozen hotspot is famous for its vast quantities of oil and natural gas nestled kilometres below ground.  Among Sakhalin’s oil and gas operations are, most notably, Sakhalin-1 and Sakhalin-2.  Not so widely read is Sakhalin-3, which stands to become one of the largest regional producers in the future.  I have included company ownership structure in order to foreshadow the power-struggle that occurs, and will occur among producers of various regions.  Consider the increased Japanese consumption of LNG in light of the Fukushima event (projects have been considered on many occasions to simply join Russia and Japan by both rail and pipeline), the overwhelming power that Exxon has in a Russian territory under Sakhalin-1, the growing energy demands of the Russian far east, and more..,

Sakhalin-1

Sakhalin-1 is a jointly-owned consortium, as illustrated to the right, that works to bring oil and gas from the Chayvo, Odoptu, and Arkutun-Dagi fields to market.  (Чайво, Одопту, и Аркутун-Дагинское).  The Sakhalin-1 fields are estimated to contain 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas.  Currently, only the Chayvo and Odoptu fields are producing.  A platform at Arkutun-Dagi is under construction.

  • Odoptu – Extended reach wells into the Odoptu field were drilled by the land-based Yastreb rig from 2009 through to 2011.  Oil and gas production began in late 2010.  There are no offshore platforms in the area.  Oil and gas from the field are transported to the Chayvo onshore processing facility (OPF) via a 79km flowline.  Gas is either re-injected into the fields to maintain reservoir pressure, or piped into domestic markets.
  • Chayvo – Prior to work at the Odoptu field, the Yastreb rig was used to drill several world record setting wells into the Chayvo field.  More so, the Orlan platform sits over the Chayvo field and works to produce hydrocarbons.  Oil and gas from either source are piped to the Chayvo OPF.
  • Chayvo Onshore Processing Facility (OPF) – The facility was completed in 2006, engineered and built by the Fluor Corporation, and connects all Sakhalin-1 operations.  Sakhalin Neftegas Technology LLC (Fluor Corporation’s Russian join venture) was awarded the contract in May, 2009 to expand on the existing Chayvo OPF.

Oil and gas from either field is processed at the Chayvo OPF, from which oil is then sent via pipeline to the De-Kastri oil export terminal on the Russian mainland.  From here oil is sent to market via oil tanker.

Due to the way in which winter ice crowds the island for several months of every year, special drilling/transportation procedures have been necessary.  The land-based Yastreb rig (Ястреб) was engineered and built exclusively for the Sakhalin environment to perform horizontal Extended Reach Drilling (ERD) kilometers into the Sea of Okhotsk, all at a depth of up to 2,600 meters.  This has allowed for a substantial reduction in costs and environmental impacts since the operation is able to avoid the relatively substantial environmental implications that the construction of an ice-resistant offshore platform would incur.

Sakhalin-2

The Sakhalin-2 fields consist of Pil’tun-Astokhsk (PA), and Lunskoye (Пильтун-Астохского и Лунского).  The project includes 3 platforms, an onshore processing facility (OPF), the TransSakhalin pipeline, a LNG plant, and an oil export terminal.  The PA field consists mostly of oil, where the Lunskoe field consists of mostly gas.  All products are piped to the Sakhalin-2 onshore processing facility that is connected with the TransSakhalin pipeline system.

  • Pil’tun-Astokhsk – This field is being developed by both the PA-A (Molikpaq) platform and the PA-B platform.  The PA-A platform was towed in from Canada where it had been built to withstand the frigid ice of the Beaufort Sea.  It was modified in route, in Korea, to accommodate the depths of the Pil’tun-Astokhsk field.  Having been commissioned in 1998, it had only been able to produce during the ice-free months up until the commissioning of the TransSakhalin pipeline system that allows all Sakhalin-2 operations to operate year-round.
  • Lunskoye-A – In operation as of Jan, 2008, the platform produces primarily gas from the Lunskoye field.  Gas is sent via pipeline through to the Onshore Processing Facility.

  • TransSakhalin Pipeline System– Oil and gas pipeline system connecting the northern Sakhalin-2 operations with their onshore processing facility (OPF).  The system further connects the OPF to the Prigorodnoye Production Complex in Aniva Bay.
    • Gas to domestic/rural markets – The Northern Gas Transfer Terminal in Botasino, Sakhalin, connects the TransSakhalin Pipeline System to the Sakhalin-Khabarovsk-Vladivostok Gas Transmission System for distribution to mainland Russia.  A Southern Gas Transfer Terminal outside of Yuzhno-Sakhalinsk allows for distribution within rural Sakhalin.
  • Prigorodnoye Production Complex – Located at the southernmost point of the island on Aniva Bay, the complex consists of an oil export terminal, LNG Plant, and an LNG Jetty all used to send Sakhalin-2 oil and gas to market via LNG and oil tankers.
    • Liquid Natural Gas Plant – Developed by Shell for Sakhalin, the first LNG plant in Russia was developed to withstand the severe Sakhalin winters.  The plant converts Compressed Natural Gas into Liquid Natural Gas which is then stored in any of two massive 100,000 m^3 tanks.  LNG carriers of capacities of up to 145,000 m^3 are able to be loaded via the loading jetty.  The natural gas liquefaction process developed by Shell for Sakhalin is proprietary.
    • Oil Export Terminal – Opened in February of 2009.  Oil arriving from through the TransSakhalin Pipeline is able to be stored in any of two floating roof storage tanks each with a capacity of 95,000 m^3.  A tanker loading unit is situated offshore in water measuring 30 m in depth, and is able to load tankers of capacities of up to 150,000 m^3.

Sakhalin-3

Not included within the map, the Kirinskoye Field (Gas / Gas Condensate) south-east of the Lunskoye field will become one of the first Russian offshore operations to use subsea production techniques.

  • Drilling has been underway by either of two semi-submersible drilling rigs, the Polyarnaya Zvezda (Polar Star), and the Severnoye Siyaniye (Northern Lights).
  • An onshore processing facility is being built, and will connect with the Sakhalin Main Compressor Station via a 140 km gas pipeline.  The Sakhalin main compressor station is connected into the Sakhalin-Khabarovsk-Vladivostok Gas Transmission System.
  • Currently, Sakhalin-1 and Sakhalin-2 products feed into the Sakhalin-Khabarovsk-Vladivostok Gas Transmission System, but once Sakhalin-3’s Kirinskoye field is producing, it will take over and become the dominant supplier into the Russian mainland.

Sources