The SPE Foundation through member donations and …2000-2015 Prirazlomnoe, RU Yurkharovskoye, RU Sakhalin-1, RU Sakhalin-2,3, RU Snohvit, NO White Rose, CA Terra Nova, CA Hibernia,

Primary funding is provided by

The SPE Foundation through member donations

and a contribution from Offshore Europe

The Society is grateful to those companies that allow their professionals to serve as lecturers

Additional support provided by AIME

Society of Petroleum Engineers Distinguished Lecturer Program www.spe.org/dl

Prof. Anatoly Zolotukhin

Arctic Oil and Gas Resources:

Society of Petroleum Engineers Distinguished Lecturer 2013-14 Lecture Season

Basis for petroleum activities in the 21st century

Gubkin Russian State University of Oil and Gas National Research University

3 3

Definition of the Arctic

Petroleum/energy resources of the Arctic

Challenges and opportunities associated with the development of the Arctic HC resources

Exploration status and development cost

Future of the Arctic

Agenda

Выступающий

Заметки для презентации

Important questions, however, are: Where these resources can be found, and How rich with resources is the Arctic region?

4

Definition of the Arctic

The Arctic is defined by:

Arctic marine boundary

The Arctic circle

Temperature (100C July isotherm)

Source: Arctic Monitoring and Assessment Program (AMAP)

AMAP area

Arctic Circle

100C July isotherm

Arctic marine boundary

Arctic states

5

Petroleum resources in a modern world

5



We are all aware how important and big role play oil and gas in a modern world Petroleum can be either blessing or curse or both at the same time.

World Primary Energy Consumption

6

Source: INES RAS report, May 2013

Total: 12,8 BTOE (~ 92 Bboe)

Total: 18,0 BTOE (~ 130 Bboe)

6

http://www.eriras.ru/files/Global_and_Russian_energy_outlook_up_to_2040.pdf



In today’s global energy consumption mineral resources takes almost 90%, and oil and gas – 60%.

http://www.eriras.ru/files/Global_and_Russian_energy_outlook_up_to_2040.pdf

7

Why Arctic is so important?

Arctic is believed to be an area with the highest unexplored HC potential in the world

By 2035 the demand for oil and gas will grow globally by 18% and 44%, respectively

60% of planned oil and gas production in 2035 will be from fields, not yet found and discovered

Ref.: DNV Summer project 2011, World Energy Outlook, Oil & Gas Journal, USGS

7



Here is World Ocean HC resources estimates made by the RAS with the ML value of 264 BTOE, Of which 54% are located in the Arctic Ocean, i.e. belong to the Arctic.

8

Arctic Petroleum Resources

8



Important questions, however, are: Where these resources can be found, and How rich with resources is the Arctic region?

9

World Ocean HC Resources

Ref.: A. Kontorovich, RAO-2009

9

BTOE – billion ton of oil equivalent



Here is World Ocean HC resources estimates made by the RAS with the ML value of 264 BTOE, Of which 54% are located in the Arctic Ocean, i.e. belong to the Arctic.

Source: O.A. Lindseth; 2011

10

Energy Resources in the Arctic

Source: O.A. Lindseth; 2011

11

Assessment of Undiscovered Oil and Gas in the Arctic Donald L. Gautier, et al. Science 324, 1175 (2009); DOI: 10.1126/science.1169467

Undiscovered Oil

11



Assessment of undiscovered oil made by USGS (Donald Gautier with colleagues) shows that most prolific areas for oil are: Alaska North Slope, Offshore Canada, North Sea, Norwegian Sea, Barents Sea and The other Russian northern seas

12

Undiscovered Gas

12

Assessment of Undiscovered Oil and Gas in the Arctic Donald L. Gautier, et al. Science 324, 1175 (2009); DOI: 10.1126/science.1169467



Assessment of the undiscovered gas indicates similar areas with the highest potential for gas discoveries in the Russian Arctic seas.

13

Arctic Offshore – HC Potential

Arctic resources and technically recoverable reserves, BTOE

020406080

100120140160180

R-AR-R

A

R-RAO

TRR-A

TRR-RA

TRR-RAO

Ministry ofNaturalResourcesRussianAcademy ofSciencesVNIGRI

USGS

Zapivalov

Petrologica

13

Legend: First letters: R – resources; TRR– technically recoverable resources (reserves); Second letters: A – the whole Arctic; RA – Russian Arctic; RAO – Russian Arctic Offshore

HC Resource Potential of the Arctic shelves: USA, Canada, Greenland (Denmark), Norway, Russia

Producing, under development, discovered and undiscovered fields

Liquid / gas

Source: Diagrams built by using UCube software (Rystad Energy)

Arctic offshore global oil and gas production forecast, 2000–2040

2020-2025 Dolginskoye Yuzhnoe, RU Kamennomysskoye Sev., RU Rakushechnoye, RU Khvalynskoye, RU Sakhalin, RU Tsentralnaya, RU Sarmatskaya, RU Johan Castberg (Skrugard), NO Snohvit, ph.2, NO Mizzen, CA Kuvlum, US Kaktovik, US

2030++ Leningradskoye, RU Rusanovskoye, RU Shtokman, RU EPNZ Blocks, RU Lisyanskiy Block, RU Barents Sea Structures, RU Magadan Basin, RU Sakhalin Anticlinorium, RU East-Siberian Sea, RU Issungnak, CA Point Thomson, ph.2, US

2000-2015 Prirazlomnoe, RU Yurkharovskoye, RU Sakhalin-1, RU Sakhalin-2,3, RU Snohvit, NO White Rose, CA Terra Nova, CA Hibernia, CA Sable, CA Prudhoe Bay, US Northstar, US

2015-2020 Vl.Filanovsky, RU Sakhalin-2,3, RU Goliath, NO Hebron, CA Amauligak, CA Point Thomson, ph.1, US

2025-2030 Kamennomysskoe-more, RU Medyn-more, RU Obskoe, RU Sakhalin-4, 5, 6, RU Kashevarovsky block, RU South Barents Sea Basin, RU East Sakhalin Anticlinor., RU Finnmark Platform, NO Pactoa, CA Bjarni, CA

Color = country


5.3% of total HC production

16

Summary on Russian and European Arctic conventional petroleum resources



Important questions are: Where these resources can be found, and What is the role of the Arctic region here?

17

HC Resources of the Norwegian Arctic

Source: NPD, Facts book, 2010



This plot is based on a previous slide but reconstructed in terms of TOE instead of SCM. This is done for the purpose of making Norwegian estimates compatible with the Russian estimates of the northern seas resources. Interesting to note the following: Total NCS resources amounts to ca. 12 BTOE, of which 7.2 BTOE are accessible. This is for 4.5 million population of Norway. As follows from the next slide, Russian Arctic resources (ML estimate) are equal to 141.5 BTOE for 140 million people living in Russia. This means that remaining HC resources on NCS for Norway have ca. 50% more value than the Russian arctic offshore resources for Russia!

HC Resources of the Norwegian Arctic

Source: NPD, Facts book, 2010

18

and as of 01.04.2014



Here we placed all the discovered resources on NCS in a log-log plot where the rank of a field is given according to its size. This technique is based on the Benua Mandelbrot’s approach on a so-called Paretian distribution of HC resources. I will not go into details of this technique and will concentrate only on the result: As follows from this plot, there are quite a lot of chances left for medium and small size discoveries on NCS.

Oil production in Norway 1978 to 2033

19



Here we placed all the discovered resources on NCS in a log-log plot where the rank of a field is given according to its size. This technique is based on the Benua Mandelbrot’s approach on a so-called Paretian distribution of HC resources. I will not go into details of this technique and will concentrate only on the result: As follows from this plot, there are quite a lot of chances left for medium and small size discoveries on NCS.

Europe Arctic Offshore – HC Potential

41,7 BTOE – Europe Arctic resources

Ref.: A.N. Dmitrievsky, RAO-2009

20

Добыча УВ на российском шельфе

0

50

100

150

200

250

300

350

2010 2015 2020 2030

Млн

ТН

Э в

год Каспийское

море

Сахалин

Арктическиеморя

Oil and gas production forecast from the Russian shelves

Caspian Sea

Offshore Sakhalin

Arctic seas

Mill

ion

TOE

per y

ear

Gubkin University



Looking at the diagram we can state that approximately 42 BTOE of HC resources belong to the Europe Arctic seas. Even if we (together!) manage to boost annual production by 2030 to 140 million TOE there will be enough resources for more than 100 years of their non-stop production. Again, we are not making any forecasts, we are only stating that there are plenty of resources in this area to be produced to the benefits of all European countries.

HC Resource Potential of the Russian Arctic shelves

Kara Sea (w/o Ob & Tazov bays)

Barents Sea

Laptev, East-Siberian & Chukchi seas

Sea of Okhotsk

Producing, under development, discovered and undiscovered fields

Liquid / gas


Global Arctic offshore oil and gas production + Yamal onshore

Yamal

By 2040 – 8,2% of the global O&G production

Yamal onshore

Global Arctic Offshore

HC Resource Potential of the Russian Arctic shelves

Recoverable Petroleum Resources of the Russian Arctic

By 2040

Recoverable Petroleum Resources of the Russian Arctic

By 2040

Challenges associated with the Arctic resources development

25




New regions – new challenges …

Arctic offshore fields

Severe climate conditions Presence of ice High cost Long distance export of oil and

gas – additional heavy cost Lack of technology, competence

and experience in offshore field development

Deficit of qualified personnel Environmental risks, not yet fully

understood Emergency response time Logistical issues

26

Наличие технологий для выполнения работ на арктическом шельфе РФ

Technology is developed and available for commercial use

Technology is partially existing and require further engineering study

Multiple technical/technological uncertainties and risks

Technical availability analysis of the fields in the Arctic (2011, VNIIGAZ, CKBN) has shown that for nearly 90% of prospective fields tested and approved technology does not exist.

Source: V. Petrenko. “Shalf of Russia and CIS” conf, Moscow, May 23 2014

Technical accessibility of the Arctic

27

For ice covered waters reduced drilling season is one of the main show stoppers. Everything takes 2-3 times longer to complete if season is limited by access to free water. Such constrain often has a detrimental impact on cash flow and project costs

Working in ice require use of ice resistant and winterized units, which requiring higher CAPEX for their modification or construction

Working in ice require use of icebreakers, which depending on the type of activity can increase operational cost by more than 50%

Working in ice

Ref.: I. Kopsov, Arctic Regions Oil & Gas conf, Stavanger, March 04-05, 2014

28

Gubkin University

Logistics challenges in Arctic are very much the same as for other remote parts of the world

Mobilization cost by far exceed “usual” figures. In regards to installation vessels, time required for their transit to/from site can easily exceed duration of operations

Operation effectiveness of installation vessels is significantly reduced due to long transit for reloading of materials/equipment and crew changes. Depending on location vessel utilization can drop down from typical 80% to 40% or lower

Logistics in Arctic

Ref.: I. Kopsov, Arctic Regions Oil & Gas conf, Stavanger, March 04-05, 2014

29

Gubkin University

The Human Factor in the High North

Mandatory requirements to avoid human mistakes during maritime operations

Procedures and cold climate equipment/clothing to be optimized

Harmonization of training requirements in all arctic nations

Source: SMSC

Ref: North Energy, Presentation at AROG conf, March 04, 2014

30

Gubkin University

31

Indigenous people – equally important participants and stake holders in the development of Arctic resources

There is a lot to learn from these people how to exist and co-exist in this hostile and yet very gragile environment

Indigenous people in the High North

Source: http://maps.grida.no/go/graphic/

Global warming in the Arctic region

32

http://maps.grida.no/go/graphic/

Ice conditions in the Arctic and the northern transportation routes

Source: http://maps.grida.no/go/graphic/

33

Ref: V. Bashkin, R. Galiulin, Neftegaz.ru, No. 8, 2012

Agenda: A – end of the Ice Age; B – climate maxima; C – Rome climate maximum; D – human migration; E – medieval warm period; F – Little Ice Age; G – current warming

34

Years from now (x 1000)

Te

mpe

ratu

re, 0 C

A

B C

D

E

F

G

Cooling and warming periods in the Northern hemisphere: shipment opportunities

In August 2013 a Chinese tanker The Yong Sheng went through the Northern Sea Route Savings: 2 weeks and $US 180 000

35

Arctic conventional oil and gas resources

in a global production portfolio




SPE DL Program 36

Long term oil-supply cost curve

30.05.2014

Ref.: IEA World Energy Outlook 2008 http://www.worldenergyoutlook.org/publications/weo-2008/

Resources

Billion tons 0 140 280 420 560 700 840 980 1 120 1 260 1 400

Billion barrels

36

http://www.worldenergyoutlook.org/publications/weo-2008/

SPE DL Program 37

Long term gas-supply cost curve

30.05.2014

Source: IEA World Energy Outlook 2009 http://www.worldenergyoutlook.org/publications/weo-2009/

Prod

uctio

n co

st ($

2008

per

1000

m3 )

100

200

300

400

Arc

tic

Deep

water

37

http://www.worldenergyoutlook.org/publications/weo-2009

http://www.worldenergyoutlook.org/publications/weo-2009/

Shtokman

Snøhvit Skrugard-Havis (Johan Castberg)

Goliat Snøhvit LNG

The Barents Sea: An area of international energy cooperation

Fedyn swell

Gazprom

Rosneft

Lukoil

Statoil

ENI

ExxonMobil

38

Novatek

Total

Shell

BP

RN Nordic Oil AS

Free economic zone?



In the Barents Sea there will be exciting opportunities for collaboration. Statoil has already developed the Snøhvit and Goliat fields in the Norwegian sector, and recently made the Skrugard discovery (meant to be renamed Sverdrup). The delineation agreement opens up additional arenas for cross-border cooperation and the sharing of expertise, knowledge and experience. We have been working on Shtokman for 20 years. In 2007 we reached an agreement with Gazprom and Total to jointly develop phase 1 of this field. One of the most striking features of this strategic project is its sheer magnitude. It has 3 trillion cubic meters of gas reserves and will produce around 80-100 billion cubic meter per year. The field is located approximately 600 km offshore and at water depths of 300 m. Shtokman comprises volumes in the same order of magnitude as all known gas resources on the Norwegian continental shelf. The Norwegian-Russian agreement on delimitation of the Barents Sea can spur a new round of active cooperation between two countries on the development of Arctic resources. New agreement opens the new opportunities for active cooperation in developing this strategically important region. Most attractive resources in the resolved zone are located closer to the shoreline than the Shtokman field, and this may facilitate a new concept of the whole Barents region development...

Concluding remarks

39




http://gallerix.ru/pic/200-Russian/glrx-927160644.jpg

40

Opportunities associated with the development of Arctic resources:

Concluding remarks

Collaboration in technology development

New HSE standards Security of supply:

‒ Infrastructure development ‒ Pan Arctic transshipment

Education and culture ‒ Joint international

programs

We can have a safe, secure and reliable development of arctic resources… only through cooperation, not competition, among arctic nations.

Any other way of doing this… will not benefit any nation in the long run.

Assistant Secretary of State Daniel S. Sullivan, Oct. 15, 2007

41

Concluding remarks

42

In the second part of XXI century production of HC in the Arctic petroleum mega basin will be as important in energy supply as Persian Gulf and West Siberia basins today



To conclude my presentation I’d like to cite statement made by our academician Alexey Kontorovich about the importance of the Arctic seas in the global energy supply: In the second part of XXI century production of HC in the Arctic petroleum mega basin will be as important in energy supply as Persian Gulf and West Siberia basins today

Thank you!

Prof. Anatoly Zolotukhin E-mail: [email protected] Phone/Fax: +7 499 135 75 16

43

Society of Petroleum Engineers Distinguished Lecturer Program www.spe.org/dl

Your Feedback is Important

Enter your section in the DL Evaluation Contest by completing the evaluation form for this presentation

http://www.spe.org/dl/

45

Documents

The SPE Foundation through member donations and …2000-2015 Prirazlomnoe, RU Yurkharovskoye, RU Sakhalin-1, RU Sakhalin-2,3, RU Snohvit, NO White Rose, CA Terra Nova, CA Hibernia,