Category Archives: Arctic Ocean

The Arctic Ocean, located in the Northern Hemisphere and mostly in the Arctic north polar region, is the smallest and shallowest of the world’s five major oceanic divisions.

Is the Industry Ready to Drill in the Arctic? Stena Drillmax Ice Nears Delivery

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By Alexander Wardwell, Det Norske Veritas

Scheduled for delivery in March 2012, the most recent addition to Stena Drilling’s fleet will be the industry’s first ice class +1A1 dual-mast ultra deepwater drillship for arctic conditions. But is the industry ready for offshore arctic drilling?

Based in part on Stena’s proven DrillMAX design, the new drillship, now under construction at Samsung Heavy Industries in South Korea, represents the company’s most ambitious project to date. According to Tom Welo, Managing Director of Stena Drilling, the project was conceived to meet the evolving demands of the industry. “Increased global demand for oil has encouraged energy companies to focus more on exploration,” he says. “And since many of the most promising fields are increasingly found in deepwater and harsh environments, including the arctic, we saw an opportunity to build a drillship to reflect the market.”

Tom Welo Stena Drilling

Tom Welo, Managing Director, Stena Drilling. Photo: Alexander Wardwell

Welo acknowledges that DrillMAX ICE represents a significant investment for the company and so far, the drillship has not secured a contract. “Any newbuilding project built on spec is a risk, but in our view, the greater risk would be to sit still,” he says. “We anticipate continued growth in this segment, and want to strengthen our position as a leading provider of drilling units equipped to operate in harsh environments.”

Flexible operational profile
At present, Stena Drilling operates four semisubmersible drilling platforms and three drillships. While these units have been active all over the world, including the North Sea, US Gulf of Mexico, South East Asia, Mediterranean, Caribbean, South America, North America & Greenland: Atlantic Front, Australia, North Africa and West Africa, the company has earned a strong position as a leading provider of drilling services in harsh environments. While similar to the company’s existing fleet of drillships, the design of DrillMAX ICE has been optimised for ultra deepwater arctic operations.

However, Welo is quick to note that once completed, the unit will be suitable for any job. “While we expect the vessel will be active in the polar region, the design doesn’t limit the drillship to waters above the Arctic Circle,” he says. “Rather, it expands the vessel’s operating parameters to almost any depth or environment.” Welo adds that the new drillship is capable of operating in water depths up to 10,000 feet.

Managing risks in the Arctic
The unit has been optimised for Arctic conditions. Six ice-classed 5.5MW azimuth thrusters, providing maximum manoeuvrability, propel the ice-strengthened hull. Below deck escapeways port and starboard side connect the aft engine rooms with FWD accommodation. Designated moon pools port and starboard allow for installation of two separate ROV systems. Anti-icing equipment protects the unit’s anchors, deck piping, lifeboat escape exits, scuppers and drains while enhanced de-icing machines keeps decks, gangways, and handrails clear. Steam heating coils warm the ballast tanks and drill water tanks and windwalls and cladding offer enhanced protection to the drill floor and dual mast derrick. “Most accidents and near-misses are related to human error, so we have worked hard to ensure the safety and comfort of our crew.”

In total, costs related to adapting the DrillMAX unit for Arctic conditions are calculated somewhere between USD 220 to 240 million. “We did consider adding icebreaking capabilities, but were concerned that the moon pool would collect ice and the cost would be prohibitive,” says Welo. “Instead, when operating in the Arctic, the drillship will have an escort of OSVs to help manage the ice.”

A relative threat
Operating in icy seas and low temperatures, which can drop to –20°C degrees in the Arctic in summer, is challenging, but Welo notes that different environments have different threats. “Operating in the North Sea is complicated by frequent storms and heavy seas and as we saw with Hurricane Katrina, the Gulf of Mexico is hardly a benign environment,” he says. “Icebergs and extreme cold certainly represent a risk in the Arctic, but there is less of a threat from heavy seas and large waves.” Still, Welo adds, DrillMAX ICE can survive waves as high as 30 metres.

While the drillships hull form is based on Stena’s proven DrillMAX design, some topside modifications were included. The drillship is likely to operate in the environmentally sensitive Arctic region, so space was created on deck for an extra six-RAM BOP, providing critical redundancy. “The additional BOP will also help us avoid delays between drilling projects related to the BOP workovers and maintenance.”

Proven concept
While there have been drilling operators active above the Arctic Circle for decades, most notably in the North Sea and the Barents Sea, energy companies have approached exploration in the region with some caution. To help generate more confidence in the Stena DrillMAX ICE concept, the company has worked with a broad range of key suppliers, with extensive experience in harsh environments.

DNV

For example, the drillship is equipped with DP3 station-keeping and related automation systems provided by Kongsberg for operating in ice conditions, knuckleboom deck cranes rated for -30°C conditions, and six-RAM BOPs provided by Cameron. The company conducted extensive Ice Model Testing, and worked closely with DNV to achieve ICE 10 Certification, among other notations. “Stena and DNV have worked together for decades,” says Welo. “Like Stena, DNV has extensive experience in the North Sea managing risk in harsh environments. DNV were thus natural choice to class the unit.”

With the build going well at Samsung Heavy Industries, Welo is looking forward to welcoming DrillMAX ICE into the Stena fleet. In the meantime, he says the company is in dialogue with a number of energy companies that have expressed interest in the concept. “I am confident we will secure a charter soon,” he says. “After all, DrillMAX ICE is coming out of the yard during a time when energy companies are expanding their deep and ultra deepwater exploration programmes. With this unit, we can offer the flexibility to go anywhere.”

Republished with permission, (c) 2011 Det Norske Veritas

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"arctic oil" Norway mobilises for oil push into Arctic

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By Walter Gibbs and Balazs Koranyi

OSLO, Nov 18 (Reuters) – Norway unveiled a 20-year plan to unlock offshore Arctic oil and gas resources and channel them to worldwide markets, a project the foreign minister said may cost billions of dollars and bring rivalries over Arctic resources to a head.

“It is the project of a generation,” Foreign Minister Jonas Gahr Stoere said in an interview. “As the ice melts, new transport routes are opening up, resources are becoming accessible and human activity is drawn to this region.”

The 134-page white paper said massive infrastructure building, research investment, a new fighter-jet fleet and careful diplomacy will help bring “a new industrial era in the high north”, including an island group where jurisdiction is contested.

Neighbours like Russia and the United Kingdom have already begun to challenge Norway’s claim of full tax and regulatory power in the potentially oil-rich waters off the Svalbard island group, halfway between Norway and the North Pole.

Last month Russia formally protested against Norway’s temporary seizure of Russian trawlers for fishing violations in what Moscow considers international waters, and populist Duma member Vladimir Zhirinovsky likened the actions to piracy.

Diana Wallis, a European Parliament vice president and Arctic affairs specialist, said she too questioned unfettered Norwegian control in the northern Barents Sea zone and that future oil exploration would magnify the dispute.

“At the moment there are gaps in the (jurisdictional) framework, especially in the scenario of an oil and gas boom,” she told Reuters.

A 1920 treaty gives Norway sovereignty over Svalbard and a tight ring of surrounding water on condition it impose minimal taxes and give all 40-some signatory nations equal access to the area’s bounty.

But Norway has since declared a 200-mile economic zone around Svalbard and says its autonomy over oil, gas and fish beyond 12 miles is unconditional — as in the Norwegian North Sea, where oil firms pay 78-percent income tax.

“It is Norway’s sovereignty and therefore it’s Norway’s responsibility to decide the rules,” said Stoere.

“Those that argue that our interpretation is wrong are free to take this to the Hague,” he added, referring to the International Court of Justice.

Stoere played down the potential for conflict, saying exploration off Svalbard is years away. “The oil industry is busy elsewhere,” he said.

F-35 FIGHTERS

A grand slam of oil and gas discoveries in 2011, including Statoil’s big Skrugard find in the western Barents, has energised Norway’s offshore oil industry.

And Russia’s anger over Svalbard did not stop it from signing a new sea boundary with Norway in the central Barents, freeing a promising zone for oil exploration on both sides.

Norway and Russia are both among the world’s largest gas exporters and oil exporters.

The northward movement of capital, infrastructure and manpower that Stoere envisions will meet little political resistance south of Svalbard, where Norway’s economic zones are unchallenged and Statoil already produces natural gas.

Today’s earth-observation satellite stations, F-16 fighter jet bases and oil-and-gas outposts in Norway’s sparsely populated high north are “only the beginning” of decades of growth and research to come, Stoere said.

By leveraging its oil wealth in public-private partnerships, he said, Norway will consider building a 1,400-kilometre extension of its North Sea pipelines to the Russian frontier to transport Barents gas to western Europe with spurs ashore to power mining and other new industry in northern Norway.

The white paper sees heightened military activity in the far north, including more NATO exercises and the planned purchase of 48 F-35 Joint Strike Fighters from the United States to replace Norwegian F-16s now stationed above the Arctic Circle.

“The government will enforce sovereignty and exercise authority in the north in a credible, consistent and predictable way,” Norway’s white paper says.

Political analysts said they have noted a pick-up in Russian naval and air force patrols across the Barents in the past five years, though far short of what was normal in the Soviet era. (Editing by William Hardy)

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Guggenheim Partners announces Arctic investment fund

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Environmentalists fear the move by the privately held investment firm based in the US will accelerate exploitation of the region

Leo Hickman
guardian.co.uk

Guggenheim Partners, a privately held investment firm based in the US, which manages more than $125bn worth of assets on behalf of its clients, has confirmed it is setting up a new fund dedicated to making investments in the Arctic region.

The news has been criticised by environmentalists who fear that it will further accelerate the exploitation by oil and shipping companies of the region which is being made even more accessible by climate change.

The fund was first revealed over the weekend at a conference held by the Juneau World Affairs Council in the Alaskan capital on the “politics of climate change“. Alice Rogoff, the publisher of Alaska Dispatch who is married to one of America’s wealthiest men, Carlyle Group co-founder David Rubenstein, told the conference that she had learned Guggenheim Partners was planning a fund “worth billions”. She added that it might concentrate first on building a privately funded icebreaker, which could then be leased to the US coastguard.

There have been growing calls in Alaska for a $1bn “heavy” ice breaker which could be used not just to help tackle any possible oil spills and perform search and rescue duties, but also further secure new shipping routes into the area. Shell confirmed last year that it is already building two of its own icebreakers in preparation of it being granted an extended permit to drill in the Chukchi and Beaufort seas from next year onwards.

Mead Treadwell, Alaska’s lieutenant general, said the fund was a “major announcement” for the region, adding that the Alaskan Arctic also currently lacks a deepwater port. Without such a port available, he said, oil companies would incur extra costs by having to supply a “flotilla” of support vessels when drilling at sea.

The Guggenheim Partners website posted a link to an Alaska Dispatch story about the fund, but a company spokesman refused to provide any specific details. “We are in the very early planning stages for an Arctic investment fund,” said Jeffrey Kelley. “At this point in time it would be premature to comment further about potential structure or investment parameters.”

A permanently secured route through the Bering Strait up into the Arctic would be a major boon to shipping companies and resource extractors. Last month, Nordic Bulk Carriers, a Danish shipping company, said it would save a third of its usual costs and nearly half the time shipping goods if a route to China was available through the Arctic instead of via the Suez Canal and the Indian Ocean.

Ben Ayliffe, an Arctic campaigner for Greenpeace, criticized the fund: “We shouldn’t be surprised that the industry which got us into the worst global economic crisis in living memory now has the planet’s last great wilderness in its sights. But, even by its own standards, it would seem exceedingly short-sighted to pour billions of dollars into the extraction of climate-changing fossil fuels just as scientists warn that the Arctic’s summer sea ice is entering what they call a ‘death spiral’.”

Greenpeace is campaigning for the Arctic to be better protected.

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Here’s Why You Need To Watch The Burgeoning Relationship Between China And Greenland

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by Adam Taylor

Greenland‘s Premier has spoken warmly of embracing Chinese investment in an interview with Chinese news agency Xinhau.

“I think that China together with other nations is taking a huge interest in the Arctic area in general and specifically in Greenland, and we have seen quite a number of visitors from China over the last couple of years,” Prime Minister Kuupik Kleist said this week. “We don’t really have that much co-operation for the time being, but I know that Chinese companies are showing an interest in Greenland.”

“Greenland is also showing an interest in China: my minister for minerals (and industry) and labor is going to China today on an official visit. I would see a future co-operation as a very positive one and we welcome the Chinese interest,” he continued.

There’s a few reasons why this is interesting:

  1. We are already seeing a huge grab for land in the Arctic. The reason? It’s believed that there might be a huge amount of untapped natural oil and gas reserves under the surface.
  2. The key players so far have been Russia and Canada — both countries that actually border the Arctic region. Russia’s push has been particularly notable, with talks of even building an “Arctic city” to house scientists and workers in the region.
  3. Greenland gained self-rule from Denmark in 2009. Since then the country (population 56,534) has been trying to work out a new, more independent economic system. However, Denmark still controls Greenland’s foreign policy.
  4. It is thought that 10 percent of the world’s unproven oil reserves and 30 percent of its gas reserves might exist under the rapidly shrinking Greenland ice sheet.
  5. The Danish Ambassador to the United States Peter Taksoe-Jensen recently gave a talk at Dartmouth that showed Denmark would allow Greenland a lot of leway in making decisions (Foreign Affairs has a good summary of that here).
  6. China, unlike other key world powers in the debate, has no real claim to land in the Arctic circle. However, it has already performed a number of probes into the Arctic area, which are speculated to be because of interest in a new shipping route once ice melts in the area.
  7. A Chinese tycoon has already announced somewhat mysterious plans for a “hotel and golf course” on an island off the coast of Iceland. This island, of course, also has a unique strategic position.

We hadn’t really considered Russia a true player in the great Arctic land grab before — but maybe that needs reconsidering.

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USA: Environmental Groups Challenge EPA’s Permits for Shell’s Drillships

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On October 21, the U.S. Environmental Protection Agency issued an air pollution permit for the Kulluk drill ship that Shell Offshore Inc. plans to use in offshore oil drilling efforts that could begin as early as next summer.

Yesterday, on behalf of the Native Village of Point Hope, Resisting Environmental Destruction of Indigenous Lands (“REDOIL”), Alaska Wilderness League, Center for Biological Diversity, Natural Resources Defense Council (“NRDC”), Northern Alaska Environmental Center, Ocean Conservancy, Oceana, Pacific Environment, Sierra Club, and The Wilderness Society, Earthjustice filed an appeal with the EPA’s Environmental Appeals Board challenging a similar EPA permit for the Discoverer drill ship that the agency approved last month.

The following statement is from Earthjustice attorney Colin O’Brien:

“The EPA essentially is green-lighting dangerous Arctic Ocean oil drilling by approving the air permit for the Kulluk drill ship. Shell Oil​ has proposed a massive drilling operation in one of the most remote places on the planet. Each year, this fleet of ships could emit 30 tons of particulate matter, 240 tons of nitrogen oxides and 80,000 tons of carbon dioxide. Not only is oil drilling risky, these ships would double the amount of global warming pollution produced by roughly all of the North Slope Borough households.

“This permit for the Kulluk marks the beginning of a wave of potential offshore industrial activity in the Arctic. Unfortunately, on the eve of a potentially massive influx of oil company development, the EPA has turned a blind eye to the cumulative impacts that would be harmful to the health of Alaska Natives and the environment for years to come.

“The EPA unfortunately has already approved another drill ship permit, for the Discoverer. That permit ignored the impacts these drill ships will have on air quality in the region and we filed an appeal today with the EPA’s Environmental Appeals Board challenging the Discoverer permit.

“Arctic Ocean oil drilling is simply a bad idea. In an area with 20-foot sea swells, walls of ice 6 feet thick, and complete darkness two months out of every year, the thought of cleaning up an oil spill is ludicrous. The EPA’s decisions on these air permits moves us closer to the inevitable disaster that would be a large oil spill in the Arctic Ocean.”

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Scientific approach to be found for Arctic

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by Vesnovskaya Maria

The Arctic Scientific Center planned to be set up by the Russian Rosneft oil giant jointly with the US ExxonMobil Corporation will become sort of a technological core for developing the region’s ice shelf. Pursuant to the strategic partnership agreement signed earlier, the Russian and American companies will have 66.7 and 33.3 percent interests respectively in the future joint venture.

The new scientific center is meant to study the climate and geology of the Arctic, engineer icebreakers and drilling platforms, as well as engage in all shelf cooperation-related projects.

The region faces serious yearlong development, given an estimated one third of the world’s natural resources originating from the Arctic Ocean floor. The shelf is especially rich in coal, gold, copper, nickel, tin, platinum and manganese, with the region’s hydrocarbon fields holding up to 30 and 13 percent of global gas and oil reserves.

It is clear that one company cannot cover the development of all these deposits single-handedly, which requires cooperation with foreign specialists. According to partner of the RusEnergy consulting company Mikhail Krutikhin, the project has an essential economic aspect:

“ExxonMobil possesses enough shelf exploration technology and experience; it cooperated with Russia on the Sakhalin-1 project. Any opportunity to get access to new deposits and develop them appears more than attractive for any international company of this class,” says Mikhail Krutikhin.

One should realize, however, that exploration efforts on the Russian shelf will also require a specific approach, stresses oil investment expert Dmitry Alexandrov:

“In general, no one can be deemed highly experienced in carrying out geologic exploration under such conditions, given that the Russian Arctic differs much from what we observe in Alaska. Russia finds it particularly important to cooperate with a large foreign company in order to adopt its knowledge of shelf activities. We are dealing with the shared financial risks on the one hand and high-level technological solutions on the other,” Dmitry Alexandrov points out.

One should also bear in mind that the Arctic is a region attractive for all oil giants, the expert adds:

“The shelf’s resource base arouses interest of many foreign companies. Giants like ExxonMobil, Shell, BP, ConocoPhillips and Statoil have insufficient resource bases and always seek to engage in high-potential projects,” Dmitry Alexandrov says in conclusion.

The Arctic center is expected to absorb some $500 or 600 million, with overall Rosneft and ExxonMobil investment estimated at $200-300 billion. The total economic impact may reach half a billion dollars.

Partnership between the Russian and American giants is not only limited to Arctic projects. ExxonMobil may take part in exploring an area of the so-called Tuapse Trough in the Black Sea, while Rosneft is likely to get access to oil deposits in the Gulf of Mexico, Texas and Canada.

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Gazprom to Get Tax Break for Oil Exported from Arctic Offshore Field

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OAO Gazprom, Russia’s biggest company by market value, may get a 10-year tax exemption for crude oil exported from its offshore Prirazlomnoye development in the Arctic where production is set to start next year.

The government is waiting for Gazprom to provide economic forecasts before granting the break, said two government officials, who declined to be identified before the exemption is approved. The project will probably not be able to turn a profit without the tax relief, they said.

Prirazlomnoye is Russia’s first major offshore oil project in the Arctic. The project has received a temporary exemption from the mineral extraction tax.

Production drilling on the offshore project is planned for about the first quarter of next year, with output planned to peak at about 6 million to 6.5 million metric tons a year in 2019. The project’s platform and 40 wells may cost $7 billion in total, Nikolay Kabanov, a Gazprom deputy department head, said in St. Petersburg on Sept. 13.

Gazprom spokesman Sergei Kupriyanov didn’t immediately answer calls to his mobile phone.

By Alena Chechel and Stephen Bierman (Bloomberg)

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OTC 2011: Coastal governors form coalition to lobby for offshore drilling

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Posted on May 2, 2011 at 11:33 am
by jenniferdlouhy

Governors from Alaska and states bordering the Gulf of Mexico are reaching out to their counterparts along the West and East Coast today in a bid to get them more involved in decisions about energy production offshore.

The push for a new Outer Continental Shelf Governors Coalition is led by four governors who know a little something about oil and gas production offshore: Rick Perry of Texas, Bobby Jindal of Louisiana, Haley Barbour of Mississippi and Sean Parnell of Alaska.

In an invitation to other coastal state governors, the foursome said they hoped the coalition would “foster an appropriate dialogue between the coastal states and the administration” about offshore drilling. The group would give the governors a vehicle to lobby for expanded drilling offshore.

“All federal decisions regarding exploration and production must be made in consultation with affected states,” the four governors said. “In recent months, however, the federal government has taken sweeping actions regarding offshore oil and gas activities with little consultation with the states.”

And too often, they say, those decisions have conflicted with the states’ best interests.

For instance, Gulf Coast governors who signed the letter have protested the administration’s decision to halt deep-water drilling after last year’s oil spill and to postpone some sales of offshore drilling leases. And Virginia state leaders were upset by the Obama administration’s move to cancel a lease sale off their coastline.

Representatives from Louisiana, Texas and other states are set to announce the new group during a session this afternoon at the Offshore Technology Conference in Houston.

David Holt, president of the Consumer Energy Alliance and a FuelFix guest blogger, said the move would allow the governors to better communicate “the need to produce American energy offshore, not only for their individual states, but for the entire nation.”

Visit FuelFix this week for the latest news from OTC. You can also like our page on Facebook or follow @FuelFixBlog on Twitter. Look for updates from reporters @houstonfowler and @jendlouhyhc under the #OTCHouston hashtag.

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