The Shtokman gas field

by Milan on March 9, 2010

in Climate change, International relations, Offshore oil and gas, Power plants, Security

The Shtokman gas field, located in the Barents Sea, 600km off the Arctic coast, is the embodiment of unconventional gas. Russia’s Gazprom, Norway’s StatoilHydro, and France’s Total are planning to collaborate to access the field, which is the farthest offshore and most ice-exposed of any ever slated for exploitation. The prize they are after is an estimated four trillion cubic metres of natural gas, the second largest field in the world, and enough to provide for Europe’s current level of gas usage for fifty years.

The plan to extract it is to use a ship-shaped floating platform capable of facing towards incoming ice, which will also be broken up by accompanying icebreakers. In the event of ice too heavy to manage, the platform will be able to disconnect from the undersea well and move out of the way. From the platform, a 600km pipeline would have to run to shore. If you want confirmation that the world is running out of cheap and easily-accessible fossil fuels, you need look no further than projects like this. The risk and capital costs they involve are tremendous, and evidence that companies are now attracted by reserves that would once have been written off as too remote and technically difficult to access.

Of course, when it comes to climate change, it is the total quantity of fossil fuels burned that matters. Giving Europe another fifty years of gas will inevitably add to those cumulative emissions. Indirectly, it will also perpetuate the fossil-fuel-powered status quo, delaying the deployment of renewable low-carbon options. Finally, continued dependence on Russian-controlled gas deepens Europe’s geopolitical vulnerability. As long as Europe depends on Russia to keep people from freezing in the winter, they will be unable to effectively criticize its increasing authoritarianism or aspirations for regional control over former Warsaw Pact states. Those Eastern European states, in turn, face an increased risk of Russian dominance.

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. March 9, 2010 at 11:57 am

Russia’s Expanding Influence (Part 1): The Necessities

As Russia seeks to expand its influence outside its borders, it has identified four countries that are crucial to its plan to become a major power again. Of those four countries — Ukraine, Belarus, Kazakhstan and Georgia — the first three are already under Russian control. The last one, Georgia, will be the center of Russia’s very focused attention until it too is back in the Russian fold.

. March 9, 2010 at 12:07 pm

New twists in an old saga
Europe struggles to free itself from dependence on Russian energy

Nov 13th 2009 | From The World in 2010 print edition

“But the Kremlin will not have it all its own way. Russia’s gas production, crippled by corruption and bad management, is falling. As domestic and export demand recovers, it will be painfully clear that Russia does not have enough gas to satisfy all its customers. This will result in rapid price rises for countries with no alternative to Russian supplies, and more embarrassing announcements about delays to prestige projects such as the underwater Shtokman field off Russia’s north-western coast. Russia’s clumsy use of energy blackmail in past years has spurred many European countries to diversify, albeit belatedly. Refineries that once took only Russian oil, such as Lithuania’s Mazeikiai Nafta, will start experimenting with supplies from other countries. It may be expensive and technologically more difficult. But it increases these customers’ bargaining power.”

The High North
The Arctic contest heats up
What is Russia up to in the seas above Europe?

Oct 9th 2008 | OSLO | From The Economist print edition

“How to deal with Russia after its war with Georgia in August has become a key issue for NATO, whose defence ministers met in Budapest on October 9th. America wants the alliance to drop its taboo on making contingency plans to defend members that feel threatened by Russia, such as Estonia. Norway plays down the threat of real conflict. “Unlike some ex-communist countries, we are not hysterical,” an official insists. Indeed, neighbourly relations on border controls and sea safety have survived Russia’s freeze on military contacts with NATO. A Norwegian firm is weighing whether to help exploit the Shtokman offshore gasfield, a showcase investment project for the Kremlin. But even the most sanguine Norwegian officials admit that the “trajectory” in Russia is worrying.”

Face value
Totally different
Christophe de Margerie, the boss of Total, thinks that the world’s oil production may be nearing its peak

Jan 10th 2008 | From The Economist print edition

“Arguably, Total’s problems in this respect are more severe than those of most of its rivals, since it derives a relatively high part of its output from geologically promising but politically inauspicious spots. That is a plus, insofar as it brings more opportunity for growth. In the third quarter of last year Total was the only one of the “majors” that saw its output rise. It was recently picked to help Gazprom, Russia’s state-controlled gas giant, develop Shtokman, a massive offshore gasfield. Total is also involved in big projects in Iran, Kazakhstan and Venezuela. Thanks to such investments, the firm expects its output to grow by 4% a year for the next three years.”

Science
The great melt
For scientists, nowhere will be hotter than the Arctic

“Meanwhile other scientists will seek a global-warming silver lining. In 2008 data from the United States Geological Survey will boost estimates that 25% of the world’s undiscovered hydrocarbon reserves are in the Arctic. Exploitation has already begun. Norway will start shipments of gas from its “Snow White” field in the Barents Sea in early 2008. Gazprom of Russia and France’s Total will start work on a daunting new frontier for the oil industry: the Shtokman gas field, 600km (370 miles) out into the Arctic from Russia’s northern coast.”

Russian energy
Behind the Gazprom-Total deal
Beware Russians bearing gifts

Jul 13th 2007 | MOSCOW | From The Economist online

“There is little doubt that the deal was struck personally between Mr Putin and Mr Sarkozy. A day before it was announced the two presidents discussed it by phone. Mr Sarkozy must understand that it was not a gift made lightly. For the past five years Gazprom had pondered what to do with the $20 billion Shtokman project, rich enough to supply the entire world’s demand for gas for a year. It negotiated with several foreign firms and made them supply detailed bids; it announced a shortlist of companies which included Norway’s Statoil and Norsk Hydro and America’s Chevron, then last autumn, in a fit of energy nationalism, rejected them all in favour of working alone.”

European energy security
A bear at the throat
The European Union is belatedly grasping the riskiness of its dependence on Russian gas, but it is disunited and short of ideas for how to reduce it

“Most European governments have been careful not to alienate Russia. As long as Gazprom plays by the rules, they say, it should be allowed to invest in their markets. Belgium recently said it had no problems with Gazprom owning parts of its infrastructure. Russia, in contrast, has a big problem with foreign companies owning, let alone controlling, any of its natural resources. It has bullied Royal Dutch Shell into ceding control of the Sakhalin-2 project in the far east of the country; it has blocked BP’s plan to develop a gas field in eastern Siberia; and it has kept foreign companies out of the development of the giant Shtokman field in the Barents Sea, saying that it will go it alone.”

BP’s Russia worries
BP is struggling to tackle problems at the giant Kovykta field

Mar 12th 2007 | From the Economist Intelligence Unit ViewsWire

“These factors could just as easily point to Gazprom entering the Kovykta project on highly preferential terms. The major constraint on the ambitions of Russia’s energy nationalists is presumed to be the fear of an international backlash. However, six months ago most observers would have been shocked at the extent of the concessions wrung from the foreign consortium operating Sakhalin-2. Nor has there been much of a downside for Russia as a result of this behaviour: Shell’s bruising experience seems not to have deterred others from seeking greater exposure to the energy sector, as ConocoPhillips’ recent bid to participate in the Shtokman project with Gazprom demonstrates. In this climate, it should not be a surprise if sooner or later one foreign company with a coveted asset loses everything. BP must hope that day has not yet arrived.”

A gas OPEC
Don’t worry, there won’t be an effective gas cartel

Feb 5th 2007 | From the Economist Intelligence Unit ViewsWire

“For Gazprom, there is no alternative, in the short-to-medium term, to selling its gas to Europe and Turkey. Those states consume about one-third of Gazprom’s output, but provide over 70% of its revenue. Russia has neither the pipeline connections, nor the LNG facilities, to export to other major consumers. It is thus stuck with Europe. Although Mr Putin spoke on February 2nd about plans to diversify export routes to Asian customers such as China, a gas pipeline to China would be very expensive to build—and, most importantly, China has so far been unwilling to agree to a gas price that would make the project worthwhile for Gazprom. Most Russian gas at present is located in Western Siberia, which is thousands of miles from any major market and only has pipeline connections to Europe. Because of this infrastructure, and in the absence of large-scale LNG development, Europe will also be the most cost-effective market for gas from Russia’s two most promising future gas regions, Yamal and Shtokman.”

Green.view
Comrade Climate-change
Global warming is good for Russia

Dec 18th 2006 | From The Economist online

“According to the United States Geological Service, about one-quarter of the world’s undiscovered energy reserves may be in the Arctic. Earlier this year Russia announced a project to exploit the world’s biggest offshore gas field, Shtokman, 300 miles off its northern coast. Russia had been expected to pick partners from among the world’s big energy companies, but instead it let Gazprom, its energy giant, go it alone.”

Europe.view
Paying the piper
What if Russian gas runs low?

Nov 23rd 2006 | From The Economist online

“In theory Gazprom can develop new fields. In practice it needs foreign help, but it hates to see the foreigners sharing ownership, which bogs down negotiations. The rich Shtokman field beneath the Barents sea was discovered in 1988, but exploitation has been slowed by technical challenges formidable enough even before Russia’s capricious and xenophobic investment regime takes its toll. Foreign companies might risk a billion dollars here or there in Russia, but in the present climate of uncertain property rights they are not going to commit the tens of billions needed to develop a whole new gas field.”

Milan March 9, 2010 at 1:57 pm

This STRATFOR article demonstrates a rather shortsighted notion of energy independence: not developing domestic renewable capacity to diminish reliance on fossil fuels but, rather, just setting yourself to be able to buy fossil fuels from more people.

EU: Funding Energy Independence

The European Commission announced it is funding 43 projects to reinforce energy infrastructure in Europe. The projects are intended to help EU countries, specifically those in Central Europe, become less dependent upon energy imports from Russia. While the projects will not fully replace Russian exports, they will make it more difficult for Moscow to target individual countries.

The funds include 1.3 billion euros ($1.8 billion) for natural gas pipelines and interconnections, around 80 million euros ($108.5 million) for enabling the reversing of lines currently operational in Central Europe and 900 million euros ($1.2 billion) for connecting electricity grids of various EU member states. The only caveats for the use of the funds, imposed by Germany, are that the money be used up within the next 18 months and that it cannot fund more than 50 percent of any one project.

The four main pipelines — Skanled, Baltic Pipe, GALSI, ITGI — all will tap non-Russian natural gas sources. The Polish Swinoujscie liquefied natural gas (LNG) regasification terminal will do the same, bringing in LNG via tanker from various international exporters to Europe; Qatari LNG exports already have been contracted to Swinoujscie. These five projects will make around 26 billion cubic meters (bcm) of non-Russian natural gas available to the European market by approximately 2014, a significant number considering Russia exported 71.85 bcm to Central Europe in 2008, not counting exports to Germany, which has a more nuanced relationship with Russia than Central Europe does. A sixth project, the Nabucco pipeline, also is being funded, but it still has no actual gas source, which makes it less than viable as an alternative to Russian gas.

. March 14, 2010 at 6:59 pm

Technology Quarterly

Inside story
Plumbing the depths
Inside story: A recent wave of advances is enabling oil companies to detect and recover offshore oil in ever more difficult places

Mar 4th 2010 | From The Economist print edition

“In 2005 the company installed its Constitution platform 300km south-west of New Orleans. Moored to the ocean floor 1,500 metres below the surface, the $600m structure comprises a 13,600-tonne cylindrical floating “spar” supporting a 9,800-tonne upper section or “topside”. Constitution, which is now owned and operated by Anadarko Petroleum, an independent oil producer that acquired Kerr-McGee in 2006, has plenty of company. In 2007 BP finished work on Atlantis, a 58,700-tonne semisubmersible platform, which is tethered to the seabed over 2,150 metres below. Upon completion, the platform was the deepest-moored oil-and-gas production facility in the world.”

. March 31, 2010 at 5:29 pm

Qatar’s low production costs mean it can still make money, even in North America. Others cannot. In February, for example, Gazprom postponed its Shtokman gasfield project by three years because of the change in the market. Some of the gas from that field, in the Barents Sea, was to be exported to America. But Shtokman’s gas will be costly, because the field is complex and its location makes it one of the world’s most difficult energy projects to execute. Some analysts now wonder whether gas will ever flow from Shtokman.

. June 23, 2010 at 4:43 pm

“Approximately 190 miles off the coast of Newfoundland in what locals call “Iceberg Alley” sits the Hibernia oil platform, the world’s largest offshore drilling facility. Built at a cost of some $5 billion, Hibernia consists of a 37,000-ton “topsides” facility mounted on a 600,000-ton steel-and-concrete gravity base structure (GBS) resting on the ocean floor, some 260 feet below the surface. This mammoth facility, normally manned by 185 crew members, produces about 135,000 barrels of oil per day. Four companies (ExxonMobil, Chevron, Murphy Oil, and Statoil) plus the government of Canada participate in the joint venture established to operate the platform.

The Hibernia platform is reinforced to withstand a direct impact by one of the icebergs that regularly sail through this stretch of water, located just a few hundred miles from where the Titanic infamously hit an iceberg and sank in 1912. Sixteen giant steel ribs protrude from the GBS, positioned in such a way as to absorb the blow of an iceberg and distribute it over the entire structure. However, the GBS itself is hollow, and contains a storage container for 1.3 million barrels of crude oil — about five times the amount released in the 1989 Exxon Valdez spill.

The owners of the Hibernia platform insist that the design will withstand a blow from even the largest iceberg. As global warming advances and the Greenland glaciers melt, however, massive chunks of ice will be sent floating into the North Atlantic on a path past Hibernia. Add increased storm activity (another effect of global warming) to an increase in iceberg frequency and you have a formula for overwhelming the Hibernia’s defenses.

Here’s the scenario: It’s the stormy winter of 2018, not an uncommon situation in the North Atlantic at that time of year. Winds exceed 80 miles per hour, visibility is zilch, and iceberg-spotter planes are grounded. Towering waves rise to heights of 50 feet or more, leaving harbor-bound the giant tugs the Hibernia’s owners use to nudge icebergs from the platform’s path. Evacuation of the crew by ship or helicopter is impossible.”

. August 24, 2012 at 3:30 pm

The shock waves of America’s gas boom are being felt elsewhere. Development of Russia’s vast Shtokman gasfield, in the Barents Sea—a $40 billion project which was intended to supply America with LNG—has stalled. Qatari LNG, once earmarked for America, is going to energy-starved Japan. Yet a bigger change is expected, with large-scale shale-gas production possible in China, Australia, Argentina and several European countries, including Poland and Ukraine.

. September 22, 2012 at 8:48 pm

Russia’s Gazprom confirmed it was pulling the plug on developing the huge Shtokman gasfield because of the cost. The Arctic project’s original aim of supplying liquefied natural gas to America was thrown off course by the abundance of shale gas there.

. October 30, 2014 at 2:05 pm

Standing in the middle of a historic district of Moscow, the offices of Shtokman Development AG look massive, modern–and completely abandoned.

What was supposed to be the largest and most expensive gas project in the world–with enough reserves to supply the planet for a year–today employs just 30 people. In the highly interwoven global market for energy, the setback in the Shtokman field could ultimately spell good news for Canada’s oil sands industry.

The remaining Shtokman employees are busy winding down what was once one of President Vladimir Putin’s most cherished projects. Putin wanted the giant Arctic field to boost the Kremlin’s energy dominance by supplying North America with gas.

“The North American shale killed us,” says a former employee. Shtokman has already closed down offices in Paris and the Arctic port city of Murmansk, sacked most of the 700 employees and is writing down more than $1.5-billion in investments (all currency in U.S. dollars).

http://www.theglobeandmail.com/report-on-business/rob-magazine/putins-play-in-jeopardy/article21352173/

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